No Game, No Gain: Realizing the ROI of Your Facebook Fans
Michael Wu, Ph.D. is Lithium's Principal Scientist of Analytics, digging into the complex dynamics of social interaction and group behavior in online communities and social networks.
Michael was voted a 2010 Influential Leader by CRM Magazine for his work on predictive social analytics and its application to Social CRM.He's a regular blogger on the Lithosphere's Building Community blog and previously wrote in the Analytic Science blog. You can follow him on Twitter at mich8elwu.
Hello and welcome back. I must apologize that I’ve been a little behind on my blogging. I was at SugarCon last week and didn’t have much time to blog in the last week or two while dealing with my engineering responsibilities. By the way, my SugarCon presentation on The Physics of Influence has been uploaded here. Feel free to view and share.
In my last post, I finished the theoretical analysis of gamification via Fogg’s Behavior Model (FBM), examining the three factors in FBM: Motivation, Ability, and Trigger, and showing how they manifest themselves in various game mechanics and game dynamics. So, what’s the big deal? The deal is that well designed games are able to solve complementary (and relatively much harder) problems than social networks do. If used properly, gamification is able to drive long term engagement and persistent actions reliably.
Connection vs. Interaction
Social networks connect people. In other words, social networks determine who can potentially interact with whom. However, social networks do not determine the level of interaction (how deep, how frequent, etc.) between any pair of connected individuals. Clearly, if two persons are not connected, there won’t be any interaction; but simply because two people are connected, it doesn’t automatically imply they will interact. A connection on the social network can only guarantee the potential to interact, but not the actual level of interaction.
Take a look at your own social network (e.g. Facebook, LinkedIn, etc.); do you interact with every one of your friends (connections) with an equally high frequency? My guess is probably not (I know I certainly don’t). The question is why not, even though you are connected? The reason is, although interaction implies connection, the reverse is not true. A connection between two people tells you nothing about their level of interaction. If two persons are connected, they may have very high level of interactions, or have absolutely no interaction at all.
It is easy to create a connection, since it only required a simple initial action to connect (or accept your friend’s invitation to connect). Therefore, according to the FBM, people will create connections. The social networking platform then automatically maintains these connections for us indefinitely, no further action is required. A high level of interaction is much harder to maintain, because it requires many subsequent actions to persist over time, long after the initial action of connecting.
This is where gamification comes in. A good game not only drives the initial action, it can reliably and predictably drive persistent actions (or interaction) in the future. That is something that connections on social networks cannot offer. Why is this important for enterprises? Primarily because the value comes from subsequent actions and interactions are much greater than the value initial connection.
When you acquire fans on your fan page, they simply establish a connection with your brand. This connection has a lot of latent value waiting to be realized. Otherwise, investors and analysts wouldn’t peg Facebook’s valuation at $40 billion. So what precisely are these latent values, and how can they be realized?
Think about all the different reasons why you would maintain a connection with someone, say Bob, who you don’t communicate or interact with regularly. Maybe Bob can help you get a job in the future, or perhaps he could accommodate you when you are stuck in his home town due to a canceled flight. The potential value is limitless. However, none of these values can be realized until you start communicating and interacting with Bob. In other words, if there is no interaction, then the latent value of the connection cannot and will not be realized.
Value through Influence
The same can be said for enterprises. A fan can potentially bring many values to an enterprise. For example, he can influence other fans, customers, or consumers through word of mouth (WOM). If you browsed through my SugarCon slides, you would find that our research showed that WOM influence can bring value to an organization through two different mechanisms:
- Acquisition of new customers: This is what Dr. V. Kumar calls customer referral value.
- Acceleration of adoption (or, early adoption): The value of money is discounted over time, so early adoption can very profitable to an enterprise over the lifetime of the customer. Businesses often realize the value of early adoption by faster time to market, and WOM influence can accelerate this even further.
The caveat is that without interaction, there can be no influence. If you get a fan that never interacts with others, then there is no way he can influence others. Although interaction does not guarantee influence, it is required. This is manifested in my influence model as one of the six necessary factors - high bandwidth. Whether the interaction is direct (e.g. communication through various social channels) or indirect (e.g. through recommendations, or other user generated contents), it requires your fan to take some actions after connecting to your brand by clicking the “Like” button. A fan that never takes any action to interact is actually useless to you, because the latent value in the connection can never be realized.
Value through Loyalty
Another way that fans can be valuable to an enterprise is by being loyal to the brand. Aside from having greater customer lifetime value (CLV) through persistent consumption, loyal customers also offer greater opportunities for up-selling and cross-selling. But does being a fan on your Facebook fan page make him loyal? Maybe, maybe not.
To ensure loyalty, enterprises need to convert a connection (a fan on your Facebook fan page) into a real fan. Facebook fans are not necessarily true fans in real life, because it is too easy to become a Facebook fan. Since all it takes is a single click to be a Facebook fan, virtually anyone can be your Facebook fan. So fandom on Facebook loses its meaning and no longer has any reliable association to the fans’ actual level of loyalty.
To turn your Facebook fans into real fans (or superfans), enterprises need to build deeper and stronger relationships with them. This requires interaction between your fans and your brand. It would be very difficult to build any relationship with someone who never interacts with you.
So what did we learn today?
1. Social networks build connections that give people the potential to interact, but these connections are not indicative of subsequent actions and interactions.
2. The latent value of a connection is the potential to interact, and when people actually interact they can realize this value.
a). Interacting with other consumers enables WOM influence
- Increases the acquisition of new customers
- Accelerates adoption of new products for existing customers
b). Interacting with brands builds deeper and stronger customer relationship
- Increase customer loyalty and CLV
- Offer greater opportunities for up-selling and cross-selling
3. If you think the connections established by social networks (e.g. fans on your Facebook fan page) are valuable, then gamification is even more valuable due to its ability to drive subsequent actions/interactions.
Finally, I must emphasize again that a connection does have intrinsic value, since it is a prerequisite for subsequent interactions. Interactions simply create greater value. The social gaming industry (e.g. Zynga) would not have gained such a huge market if it weren’t for the existing connections on Facebook. However, just having the connections on Facebook is by themselves is insufficient to drive the level of interactions you see on social gaming platforms.
Connections are easy to establish, because it only requires an initial action to connect. Subsequent interactions are much harder to facilitate. Many fan pages are collecting thousands of dead fans who never take any action to interact, either with the brands or with other consumers. However, well designed games are able to drive interactions reliably on the social graph. So you should start embracing gamification. Without games, the latent value of your connections (e.g. Facebook fans) may never be realized to its full potential.
Alright, next time let’s look at another application of gamification in the e2.0 and productivity context. In the mean time, I welcome any discussion as usual. Stay tuned for more applications of gamification.
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