The ROI of Awareness

There are two types of people in the world, those who are our customers, and those who are not. Typically, the difference is gigantic. It’s like looking at one of those models that really shows the difference between, say, the size of the sun as opposed to the earth’s moon – or about 2.6 million to one. For Coca Cola, the ratio might be 10 to one – for every ten people in the world, one drinks Coke. For DragonSearch, the ratio might be more like 33 million to 1. Simply put, there is an ocean of potential customers out there.

Many marketers maintain that there is a funnel, taking that ocean of potential customers from total strangers, to awareness, making a purchase, to even advocating for the brand.

Hardcore data people complain that the funnel chart is misleading, in that the sizes, or position in the funnel is not relative to the data. The detractors make a good point – but the chart is still a handy reminder that there are ‘stages’ that people must pass through before they are Tweeting our glory to their friends.

If we really wanted to make the Customer Funnel accurate, we would have to fill in the numbers specific to our organization, or at least our vertical and edit the sizes or placement of each section. If we are able to do that, we can also see that a specific value could be attributed to a person going from being unaware of our brand, to becoming aware. And if we could do that, we could go forth and make an ROI calculation for Brand Awareness!

Out of the pool of individuals aware of your brand, what percentage is positively inclined to your brand? What percentage of those intend to purchase? And then finally, what percentage of those that intend to purchase go on to make the purchase. Then, what is the unit profit per customer. We could throw Lifetime Value of Customer into the mix, but for now, let’s keep it simple.

For the sake of this blog post, I’m using this calculation for Awareness Value.

Awareness Value =(Market Size) X (Awareness Change) X (Purchase Intent) X (Sales Conversion) X (Unit Profits)

By using the Awareness ROI calculator, I’m able to test some different assumptions, and see the outcomes. For instance,

If we consider the role of social media in awareness creation, we’re well on our way to establishing some solid ground for Social Media ROI. Of course, Social Media also has impact on the other stages in the funnel: consideration; loyalty; and advocacy. Those are subjects for another post.

Big TIP of the HAT to Hamid Ghanadan of theLinusGroup.com

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This entry was posted on Tuesday, April 13th, 2010 at 8:47 pm and is filed under Ric's Corner, Social Networking Media. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.

Kevin von Duuglas-Ittu

Ric, Love the thoughts that dovetail out of this. What comes to my mind is not the Awareness level of the funnel, it is Consideration. What Social Media allows - and of course this depends on the company and product - is kind of para-space where potential consumers can move into a place of greater emotional investment without feeling that they are entering into a buying decision (and tripping whatever critical defense mechanisms that govern those decisions). Social Media spaces - and let's face it, they are elaborate expansions on the the human handshake, the smile at the store front - are holding pens for Consideration. Okay, that is a rough way of putting it. They are places where your product and company can create a parallel path of investment, and more importantly reinvestment. Your company may have an awareness reach through social media, a meme that gets out there in the ether, but the real traction is the socially imbued exchanges that deepen the possibility of moving down buying funnel. Social Media is the place where people can safely oscillate between Consideration and Conversion, where roots for Loyalty already are growing. For me this is the true value of Social Media. Treating it as mere reach and Awareness reduces it to broadcast. At minimum it is broadcast, but bare minimum. I'm sure you agree, but these are the thoughts that come to me.

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Ric Dragon

Kevin; I agree, the true value of social media lies in a deeper connection that can be formed between companies and their customers. BUT, there is nothing wrong with talking about awareness. And if we can talk about the value of awareness, then see the role that Social Media can have in moving that needle, that's a discussion worth having - at least between the marketer and the CFO. The AIDA funnel has been under a lot of assault lately, but the component of awareness still has legs. There is a finite population of potential customers for any company. In that population, there is going to be a segment that is unaware, and one that is aware, and we're only going to get customers from the aware.

Ric,

Love the thoughts that dovetail out of this. What comes to my mind is not the Awareness level of the funnel, it is Consideration. What Social Media allows - and of course this depends on the company and product - is kind of para-space where potential consumers can move into a place of greater emotional investment without feeling that they are entering into a buying decision (and tripping whatever critical defense mechanisms that govern those decisions).

Social Media spaces - and let's face it, they are elaborate expansions on the the human handshake, the smile at the store front - are holding pens for Consideration. Okay, that is a rough way of putting it. They are places where your product and company can create a parallel path of investment, and more importantly reinvestment. Your company may have an awareness reach through social media, a meme that gets out there in the ether, but the real traction is the socially imbued exchanges that deepen the possibility of moving down buying funnel. Social Media is the place where people can safely oscillate between Consideration and Conversion, where roots for Loyalty already are growing.

For me this is the true value of Social Media. Treating it as mere reach and Awareness reduces it to broadcast. At minimum it is broadcast, but bare minimum. I'm sure you agree, but these are the thoughts that come to me.

Social Media ROI, Vituperation, and Revenge | DragonSearch Marketing; Internet Marketing Services & Consultants says:

March 4, 2011 at 1:17 pm

[...] in my experience, can be a tremendous basis for discussion. For instance, in our piece on the ROI of Awareness: a user would need to provide some numbers for sales conversion and marketing size. Pretty [...]

The Social Media Tower of Babel | DragonSearch Marketing; Internet Marketing Services & Consultants says:

April 26, 2011 at 3:00 pm

[...] the value of improving the movement through that funnel 1% be? For instance, we could discuss the ROI of awareness or advocacy. We could discuss total lifetime value and retention. We could even consider it in [...]

The ROI of Awareness

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