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