Facebook and its investors depend on advertising to generate 85% of the social platform’s $3.7 billion annual revenue. That made GM’s retreat from Facebook last month particularly poignant for marketers and investors alike. The New York Times reported that “GM, the third-largest advertiser in the country, shut down its Facebook budget, about $10 million, saying that those ads were simply not doing enough to sell automobiles.” This has caused a lot of speculation over Facebook’s usefulness to marketers. I think it’s good that people question the role of online networking in their marketing efforts, but I feel that a lot of the current speculation is missing the point.
Some have blamed GM’s lack of online marketing competence as one reason for their failing on Facebook. Most notably, rival Ford responded to the news with the tweet, “It’s all about the execution. Our Facebook ads are effective when strategically combined with engaging content and innovation.” But competitive bravado aside, GM is by no means alone in their conclusion. In fact, just days before the GM decision, Nate Elliot of Forrester Research panned Facebook as an ad medium on the Forrester blog stating that many Forrester clients felt the same.
But GM didn’t pull out of Facebook altogether. They simply decided it wasn’t a good advertising medium for them. They plan to maintain their networking activity on Facebook. And for me, that’s the main takeaway from the GM decision: not that Facebook is lousy marketing tool, but that marketing is about building long-term brand equity as well as building short-term sales. While both are necessary, they may not always be suited for the same communication channels.
Networking platforms, like Facebook, that do not deliver short-term sales for some brands may still have immense marketing value if they can deliver long-term brand equity. For a category with an average purchase cycle of 6.5 years, like U.S. automobiles, that’s got to be important.
Even ad folks like WPP’s chief executive Martin Sorrell get that much. In the Times article mentioned above, Sorrell gave his take on Facebook: “It’s one of the most powerful branding mechanisms in the world, but it’s not an advertising mechanism.”
As you know, the moment the discussion enters the realm of “brands” and “branding mechanisms,” things can get quite ethereal. What marketers need is a concrete definition of the business outcome that this “powerful branding mechanism” can deliver. And beyond that, they need to know how they can measure and put a dollar value on it. Right now the outcome meter used by most marketers is calibrated against sales in a very tight cause-and-effect loop. By that measurement, online networking can often look like a flop.
I’ll leave it to the more financially inclined to ascribe a dollar value, but I can share two thoughts that I’ve found operationally useful in defining and measuring brand equity from a target lifecycle perspective.
First, make a clear distinction between sales development activity and brand development activity. Sales activities are meant to generate income in the short term by triggering a purchase. Branding is meant to generate profits over the long term by reinforcing a highly relevant and differentiated position that converts prospects and customers into advocates. This type of brand loyalty makes selling easier, provides barriers of entry for competitors, and ensures that the brand will never have to compete on price alone.
Second, toss out the AIDA sales funnel. It has been a useful model for the past century, but today, if you want to practice strategic marketing with networked consumers, you’ll need a more refined view of the journey they take with your brand.
Our international branding agency has modeled this journey as a staircase of ten steps between inertia and advocacy (here is our model of customer-based brand equity). The staircase is intended to illustrate how consumers create brand equity for companies over time. The activity of “branding” is simply to facilitate the consumers’ journey from inertia to advocacy. How consumers contribute to earnings is another matter. In fact, in this model, a sale is not the end of the process but just the halfway point in the journey. The same steps apply to both BtoB and BtoC purchases.
The presence of a relevant want or need (either latent or expressed) among a defined market segment, but no movement towards the desired state of brand advocacy. I.E. “I want my little Jimmy to draw, but my problem is that he scribbles all over the walls.”
I see you. I.E. “I read about your new product on a mommy blog.”
I understand what you offer in relation to my needs and my product categories. I.E. “You sell crayons for kids, like my little Jimmy, to draw with.”
Your offer is relevant, believable, and different from other options that are available to me. I.E. “Your crayons are water soluble so they wash off easily, especially walls.”
I trust you. I.E. “But will the crayons still be fun to draw with? Wait, you’re Crayola. I’ve known you all my life. You know about kids and crayons.”
I’ll try your product. I.E. “They cost about the same as normal crayons. I’m going to buy a pack for little Jimmy.”
I believe you. I.E. “Wow, they really work as promised!”
You reflect the beliefs, values, and convictions that I stand for. I.E. “You really get me. We have a lot in common.”
I want to stay with you. I.E. “From now on, these are the crayons for me.”
I want to let others know about you. I.E. “I’m posting little Jimmy’s drawings on your gallery site and sharing them with my friends on Twitter and Facebook.”
These are ten measurable stages you can use to track prospects from awareness to advocacy. Each step is a necessary precursor, not only to a sale, but beyond that to multiple sales by the prospect and by the people they influence. As you might imagine, online networking platforms are particularly well suited to facilitate this type of brand journey even if those platforms are not well suited for driving immediate sales.
Facebook has been fumbling from one approach to the next in an effort to find the right ad model. GM’s departure may be an indicator that they have yet to hit the mark. But just because Facebook and other social sites may not produce “now sales” for your brand doesn’t render them useless. They may provide even greater value in their ability to ensure sales and preserve margins tomorrow. If you adopt a brand equity development model like the one outlined here, this value becomes all the more apparent. Facebook’s real challenge will be to find a way to monetize all of the above in a way that will work both for brands and for users. I think the answer to that is staring Mark Zuckerberg in the face, but that is the topic of a new post (or, perhaps, a new start-up ;)).
Sean Duffy spent 18 years with ad agencies in Boston, San Francisco, Copenhagen, and Stockholm before founding The Duffy Agency, an international ad agency, in 2001. Sean is director of TAAN Europe and a regular guest lecturer at the Lund University School of Economics. He is also a blogger, Twitterer and is on LinkedIn.