February 19th, 2015 | Analysis, Analytics

How to properly measure future value

Companies are systems, a set of interacting or interdependent components forming an integrated whole with a common objective. That common objective is earning money. Earning money can be split in two if we add the “t” variable. When we add the time variable to “making money” you get:

1. Making money today: money that is in our bank account or that someone is owing us.

2. Making money tomorrow: here is where one of the biggest problems for decision makers today resides. How can I measure future money?

  • Brand awareness? Companies that measure Brand Awareness as future value tend to invest a lot in “branding”. However, just because people remember your brand, it does not mean that they will buy your products or services.
  • Engagement? This is a very dangerous way. If you measure your future value based on how engaged are your customers, you can fall into the trap of measuring fans in facebook and their likes or comments as an asset. Or the followers in Twitter and their tweets or retweets (or favorites) as an asset. When you invest in the future (making money tomorrow, improving the growing vector) you have, at the beginning, a liability because there’s no money related to that expenditure, until you can confirm that the invested money will become (with an acceptable level of certainty) a future revenue. Mostly, if not all, engagement metrics are not related with (current or future) revenues.

If you don’t set the objective in a very clear way, it can harm the interactions between the component parts of your system towards the achievement of your objective.

If you say that you want to improve brand awareness or engagement, don’t complain when your marketing department becomes a money pit that brings performance metrics like 20% increase in fans, or 15% climb in brand mentions in twitter.

If someone brings a report that says that he or she invested 200k dollars in Facebook fans, my answer would be “ok my company has 200k less dollars, what are you going to do to get that money back plus a benefit?”

Why companies add their brand or the Goodwill as assets in their annual reports? Because a brand or Goodwill has an associated capacity of generating future income and revenue. So one correct way to measure future value is “Purchase Intention”.

Now, how can you “track” purchase intention evolution? Simple. Market research has been doing this for decades (sorry for not saying that Big Data is the answer). The technology simplified and shortened the working time.

A good practice is implementing two different processes in parallel.

1. Panel: once you define a target market, you carry on a monthly or quarterly purchasing intention research. A survey based on a sample of your target population (not your clients, or the visitors of your site). In this case, methodology is all what matters.

2. Social Media Research: once you’ve implemented your panel, you can gain immediacy by converting your questions in queries in Social Media Analytics Platforms. You have tons of them out there, free, paid, easy to use, very complex but flexible. This kind of research is not very reliable since is not based on a commonly accepted methodology (in the market research field), but that’s not a big problem because you already have your panel research as a benchmark.

The Panel gives you certainty while the Social Media Tracking gives you the immediacy that today’s marketers require.

If you need more information on this, contact us here.

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