Plenty says a report from Booz and company and especially if the “Likes” are for a brand page.
In a new report Booz and Company argues that in the interconnected digital world, Facebook likes can be the new measure of brand value. After all brands depend on their consumers and a consumer like on social media should be a good indicator for the health of the brand.
I was intrigued as I read about this report and brand valuations and its interpretation has been the subject of many academic and non-academic marketing discussions.
So how does the system work?
Well it is simple, every like on a brand page is an indication of the core value of its brand equity. As many of the brand pages on Facebook are meticulously managed by marketing teams, it is a good indication of the current equity of the brand.
But the author of the report Nicholas Hodson a Booz partner, realized that there was a flaw. If a larger brand just by the sheer number of its customers, would have many more likes than a smaller brand. For example a Maruti in India would have more customers and hence more likes than say Volkswagen. So to counterbalance this, the report introduces the concept of “Likes per Million”(LPM). That is the number if “Likes” are divided by the revenue of the firm to give a more accurate indication of the brand value. So if you have 100 customers or 1000 the LPM would provide a level playing field.
This idea though breakthrough, is not without it’s flaws and I want to highlight some of them.
1. Brand value of equity is calculated by many parameters like the number of customers, revenue, shares outlying, share price, Customer surveys, Industry ratings etc. Bringing such a complex business task to something as flimsy as a Facebook “ Like” is like selecting the Indian team based on gully cricket match, though given the current performance the gully cricketers have a better chance.
2. Secondly there is still a vast population of consumers who contribute revenue for a brand and drive its brand equity that are not internet savvy forget about being social media literate. Hence this method excludes many of those from the process which will give a false sense of brand equity.
3. From the Indian context Facebook and its clones is a very urban concept. With a vast majority of our population living in the 6 lakh Indian villages, what we have is a Urban Indian brand equity which is grossly misleading.
4. Facebook again attracts only Business to Consumers (B2C) segment. The Business to Business (B2B) segment which is the vast chunk of all financial transactions. Again a very misleading indicator of brand equity.
There can be other flaws, but I would really like to you your views on the same.
How can social media be used to calculate brand equity? What are the other flaws in this system?