• What potential does Facebook commerce hold?
• Who do online shoppers engage with brands on Facebook?
• How can retailers and brands leverage Facebook commerce?

eMarketer responds to those questions by espousing its own point of view.

• Facebook commerce is about more than just sales conversions.
• F-commerce is more about discovery and sharing than duplicating an exhaustive catalog online.
• Millennials are the prime audience for Facebook commerce.
• Brands need to understand why they are “liked” and what to do with that information.
• New advertising-friendly developments hold promise for Facebook commerce.
• Privacy concerns will have to be addressed before Facebook commerce can see mainstream adoption.

Retailers are all over the map when it comes to using Facebook for commerce. Options range from product links being posted on the retailer’s Facebook page Wall to the inclusion of interactive catalogs or storefronts. On their own websites retailers are integrating Facebook’s Open Graph and social plug-ins to allow customers to login using Facebook to shop with friends, receive product recommendations or read reviews.

Though most major retailers have some type of presence on Facebook, a consensus has yet to be reached as to the social network’s viability as a sales channel.

The Potential of Facebook Commerce

The report states plainly that Facebook has yet to factor significantly into product sales and cites a Coremetrics survey of retailers that said only 1.6% of sales were driven by social media. However, it also suggests that F-commerce is in a nascent stage and that it is “too soon to predict” any outcomes at this juncture.

As can be seen from the following graph, the report does suggest that people are warming up to the idea of using Facebook for more than just social networking, especially where commerce is concerned. Finding special offers and discounts is the clear leader, followed by sharing experiences with products, seeking product advice and sharing product knowledge.

Facebook and Shopping Behavior

When it comes to Facebook users and shopping behavior eMarketer found this to be true:

• Fans “like” brands primarily for one reason – special discounts and sales promotions.
• Likes influence purchase likelihood among friends of fans.
• Liking a brand’s page or product is often a post-purchase activity.
• Demographic differences play a role, with Millennials being the generation most open to shopping on Facebook.

How Retailers and Brands Can Use Facebook

Facebook commerce takes two forms: on Facebook and off Facebook (i.e.. the retailer’s own website).  Specific approaches by brands include:

• Fan Exclusives – Deals offered only on Facebook and nowhere else; examples of companies that tried this tactic include Diane von Furstenberg and Oscar de la Renta.
• Sampling – “Tryvertising” of CGP products offered on Facebook pages; Burberry and Aveda are examples of retailers who experimented with this approach.
• Gift Recommendations – Wal-Mart’s new Facebook app Shopycat shows products friends have purchased and makes recommendations based on interests.
• Events – Pinning a campaign around an event, celebrity appearance or holiday works well on Facebook to quickly build excitement states the report.
• Shopping with Friends – Levi’s and makeup brand MAC used the social graph as a way to encourage friend-with-friend shopping activity.

Facebook Commerce and Privacy

Privacy concerns related to shopping, particularly when it comes to a brand using personal information, is still on the minds of Facebook users. Yet not all shoppers are resistant to sharing personal information. The report cites an eight-month survey of 42 apps by Sociable Labs, which found that on average a majority (56%) of social media users granted permission when asked to connect to online retailers using their Facebook ID.

Facebook Commerce Best Practices

Based on its research, eMarketer shares what it finds to be Facebook commerce best practices.

• Reproducing an ecommerce site on Facebook is not inherently engaging.
• Igniting passions fosters community naturally.
• Retailers should consider their style of communication.
• Listening is important and brands are encouraged to hear what fans have to say rather than pushing an agenda.
• Brands should match their strategy to the end goal.
• Multi-channel marketing is still essential even with Facebook at the center of the campaign.

The report concludes with these predictions and recommendations.

• Facebook commerce will not see mass adoption overnight.
• Brands of all size can employ select social commerce techniques.
• Give fans what they want, but do not lose sight of strategy.
• Privacy concerns are valid and need to be addressed.

(Note: SCT’s executive editor Dr. Paul Marsden was interviewed for this report.)

This second article is about social shopping communities and modelling behaviour with clickstream data from Rainer Olbrich and Christian Holsing from the marketing department of the German University of Hagen

Speed Summary

Olbrich, Rainer and Holsing, Christian (2011) Modeling Consumer Purchasing Behavior in Social Shopping Communities with Clickstream Data International Journal of Electronic Commerce, Volume 16 Number 2, Winter 2011-12, pp. 15-40.

• Social shopping is about connecting consumers and shopping together Parallel to the increasing importance of the Internet as a shopping channel, the advent of Web 2.0 is rapidly moving the online landscape into a truly consumer-driven era. In the area of e-commerce, this results in a linkage of online shopping and social networking, initiating a new form of e-commerce, that of social shopping that connects consumers and lets them discover, share, recommend, rate, and purchase products.
• Third-party infomediary sites such as Polyvore, host social shopping communities (SSCs) [a “virtual community of consumption”] offering  social shopping features such as user generated ratings, recommendation lists, tags, styles (pinboard collages) and user profiles that can initiate or simplify purchase decisions. These user benefits have lead to a high user growth rate for SSCs (Polyvore attracts more than 6 million unique visitors per month). For brands, such as Nike and Coach SSCs, this means are a solution for increasing product awareness (e.g. through style contests)
• Key features of Social Shopping Communities
• First launched about five years ago
• Target mainly women and focus on hard-to-compare soft-goods such as fashion and lifestyle product
• Include direct shopping features such as search and filter (category, gender, brand, price, and shop) as well social shopping features (recommendation lists, ratings, tagging, and ‘styles’ – pin boarded  collages, and critically user profiles allowing people to follow fellow shoppers with similar tastes)
• User content (UGC) is a key part of the business model for SSC services, because users add value to the service with their own content.
• Affiliate business model, receive fees from the participating online shops for each click-out (pay per click) and actual sales (pay per sale).
• Effective social shopping features include (measured using clickstream data (web logging software output) of 2.73 million sessions);
• Social shopping features such as user ratings and tagging are positively correlated to click-outs (from a product page to purchase page – either onsite or on infomediaries such as Polyvore). Retailers delivering a good experience should therefore actively encourage shoppers to rate and tag them, as should manufacturers and brands onsite and on infomediaries
• However social shopping features such as lists and styles (pinboard collages) are negatively correlated to click-outs – but they do increase site stickiness. This may be due to information overload, psychological reactance (being turned off by being forced to use them), and the fact that these social features are attract casual browsers rather than goal-oriented shoppers.
• Although some social features do not drive e-commerce traffic, they may help reach and retain a new shopper profile, people (mostly women) who ‘shop for fun’ and use shopping for entertainment. These social shoppers have high economic value – registered social shoppers are more likely to click-out than average
• Sticky social features may therefor be useful for customer acquisition and customer loyalty, even if they don’t drive transactions. Moreover, these sticky social features may enhance advertising revenue on social shopping communities due to increased time on site (exposure to ads). Retailers and manufacturers should consider running style contests for new products pre-launch to gauge potential demand
• Overall social shopping features should be combined with price filtering, ordering and comparison as this is correlated to click-outs
• The following social shopping hypotheses were confirmed
• Hypothesis 1: the longer the view time [a proxy for consumer involvement - perceived personal relevance], the greater the likelihood of a click-out. TRUE
• Hypothesis 2: the longer the average view time per page, the lower the likelihood of a click-out [due to goal-oriented as opposed to exploratory shopping] TRUE
• Hypothesis 3: the more frequently product-detail sites are visited, the lower the likelihood of a click-out. TRUE
• Hypothesis 4: the longer the average view time per product-detail site, the greater the likelihood of a click-out. TRUE
• Hypothesis 5: the more frequently each direct shopping feature (brand, category, search field, gender, price, sales, and shop) is used, the lower the likelihood of a click-out (indicative of exploratory shopping). TRUE (except price)
• Hypothesis 6: the more frequently the home page is visited, the lower the likelihood of a click-out (indicative of exploratory shopping). TRUE
• Hypothesis 7a: the higher the overall average product rating, the greater the likelihood of a click-out. TRUE
• Hypothesis 7b: the higher the overall average shop rating, the greater the likelihood of a click-out. TRUE
• Hypothesis 8a: the more frequently lists are used, the lower the likelihood of a click-out (indicative of exploratory shopping). TRUE
• Hypothesis 8b: the more frequently styles are used, the lower the likelihood of a click-out (indicative of exploratory shopping). TRUE
• Hypothesis 9: the more frequently tags are used, the greater the likelihood of a click-out (useful for goal-oriented shopping). TRUE
• Hypothesis 10: the more frequently user profiles are used, the lower the likelihood of a click-out (indicative of exploratory shopping). TRUE

Commentary: We love the concept of social shopping sites as infomediaries – providing trustworthy information and guidance (often user generated) to inform exploratory shopping and shopping decisions (see McKinsey book ‘Net Worth‘ for more on infomediaries), and their utility in driving brand awareness, gauging demand as well as attracting and retaining ‘social shoppers’ (customer acquisition and loyalty) people, usually women, who shop for fun and entertainment.

ABSTRACT

Modeling Consumer Purchasing Behavior in Social Shopping Communities with Clickstream Data

Rainer Olbrich and Christian Holsing

ABSTRACT: Social shopping communities (SSCs) evolve from a linkage of social networking and online shopping. Apart from direct shopping features in shopbots (e.g., search fields), SSCs additionally offer user-generated social shopping features. These include recommendation lists, ratings, styles (i.e., assortments arranged by users), tags, and user profiles. Purchases can be made by following a link to a participating online shop (“click- out”). SSCs are experiencing high growth rates in consumer popularity (e.g., Polyvore attracts more than 6 million unique visitors per month). Thus, this business model has received considerable venture capital in recent years. By analyzing clickstream data, we investigate which factors, especially social shopping features, are significant for predicting purchasing behavior within SSCs. Our logit model includes about 2.73 million visiting sessions and shows that social shopping features exert a significant impact, both positive and negative. Tags and high ratings have a positive impact on a click-out. In contrast, the more lists and styles used, the less likely the user is to make a click-out. Yet, lists and styles seem to enhance site stickiness and browsing. Moreover, the more direct shopping features that are used, the less likely the user is to conduct a click-out. Increasing trans- action costs and information overload could be potential reasons. We also found that community members are more likely to make a click-out than ordinary users. This implies that community members are more profitable.

KEY WORDS AND PHRASES: Clickstream data, online consumer purchasing behavior, social shopping, user-generated content, virtual community.

So don’t throw out all those industry white papers, but balance them with IJEC critical thinking and objective evidence-based academic analysis – or at least with our speed summaries (the first of six today) covering what you need now know.  The first introductory article, summarised today, from Ting-Pen Liang (National Cheng-Chi University, Tiawan) and Efraim Turban (University of Hawaii), covers the key basics – what social commerce is, how it works, and how to measure it.

Speed Summary

Liang, Ting-Peng and Turban, Efraim (2011) Introduction to the Special Issue: Social Commerce: A Research Framework for Social Commerce, International Journal of Electronic Commerce, Volume 16 Number 2, Winter 2011-12, pp. 5-13.

• The increased popularity of social networking sites, such as LinkedIn, Facebook, and Twitter, has opened opportunities for new business models for electronic commerce, often referred to as social commerce. Startups in social commerce are moving rapidly along the technology life cycle from “buzz” to “experimentation,” and then to “adoption” and “maturity”

• What is social commerce? Social commerce generally refers to refers to the delivery of e-commerce activities and transactions via the social media environment, mostly in social networks and by using Web 2.0 software. Thus, SC can be considered a subset of e-commerce that involves using social media to assist in e-commerce transactions and activities. Since social media is a word of mouth channel, social commerce can be most simply defined as the concept of word of mouth applied to e-commerce (IBM definition).
• There are two basic types of social commerce
• e-commerce apps on social networking [media] sites
• social networking apps or plugins on e-commerce sites
• At it’s most broad, social commerce can also refer to any commercial activity on social networking [media] media site [or social activity on e-commerce sites]. Any social networking activity that leads to commercial benefits can be thought of as social commerce – including transactions, word of mouth (including ratings and reviews), referrals and recommendations (also word of mouth), information sourcing, marketing, advertising, customer service, HR recruitment, knowledge management and collaboration
• How social commerce works
• Social commerce success is not simply about technology, it requires an basic understanding of the social phenomena that drive social commerce activity – in other words, effective social commerce will be theoretically informed. Social commerce practitioners need a basic grasp of the following
• Social bonding [grooming] theory
• Social capital theory
• Social exchange theory
• Social identity theory
• Social [symbolic] interactionism
• Social learning theory
• Social support theory
• Social trust theory
• [Social/extrinsic] motivation theory
• Social communication theory
• How to measure social commerce success Social commerce success can be measured through
• Case studies
• Experimental approach (e.g. A/B testing)
• Longitudinal research (e.g. correlational)
• Opinion surveys
• Key Performance Indicators (outcomes) of social commerce that can be measured are;
• Customer Loyalty
• Financial Gains
• Market/Revenue Growth
• Purchase Intentions
• Consumer Attitudes
• User Perceptions
• Customer Satisfaction
• Web site usage
• Click through rate

Commentary: Our key takeout is we like the social commerce framework proposed by Liang and Turban, especially the breakdown into two basic types of social commerce; social activity on e-commerce sites, and e-commerce on social sites.  However, we think that social applications used in traditional shopping environments (check-in rewards, augmented reality reviews, and shop and share apps etc) also constitute a third important area of social commerce.  On the other hand, whilst Liang and Turban bundle all forms of social business with a commercial intent into social commerce (advertising, marketing, customer service and HR recruitment), we’d say social commerce is a subset of social commerce that necessarily involves a transaction.

Article Abstract

Ting-Peng Liang and Efraim Turban

Liang, Ting-Peng and Turban, Efraim (2011) Introduction to the Special Issue: Social Commerce: A Research Framework for Social Commerce, International Journal of Electronic Commerce, Volume 16 Number 2, Winter 2011-12, pp. 5-13.

KEY WORDS AND PHRASES: Research frameworks, social commerce, social media, social networking.

The accompanying Booz & Co report suggests that you need to do two things – enhance the shopping experience with e-commerce apps, and enhance the social media experience with shopping apps.

But is it working? To be fair, I admit social commerce has had relatively little impact on sales thus far. Practically every industry player I’ve talked to says the medium is still young and companies are in the experimental stage in terms of its use. According to the report Booz&Co report, that is about to change.

“Consumers will transact commerce— from selecting products to completing purchases through payment with credit cards and points—inside social networks,” states the report.

It’s a “frog in the kettle” effect. People are spending more time on social networks and, invariably, some of their posts will relate to products they purchased or are considering purchasing. Some of their friends will weigh in on the decision, expressing their opinion, and others will be influenced enough by the “follow the crowd” or “follow those you Like” social commerce heuristics, they will make a purchase themselves.

It’s only logical to believe that the more people use social media combined with their innate willingness to share this aspect of their lives will ultimately lead to social commerce becoming a commonplace occurrence. In fact, it already is. The report says that sales via social commerce should nearly double in 2012 to $9 billion (as compared to 2011), with nearly a third of that coming from the US market.

So, what should your perspective be at this stage?

1. Take an optimistic, yet pragmatic view. Borrowing a line from the movie ‘The Grapes of Wrath‘ voiced by ex-preacher Jim Casy, “There’s something going on out there in the west and I’d like to try and learn what it is.”

If Booz & Co is correct in its assertion, there’s something going on at the intersectino of social and commerce, so you might want to pay attention and “learn what it is.” I’m not suggesting that you eat the entire elephant – at least not all at one sitting – but take some time to get informed.

2. Realize social commerce is in an experimental stage. As one industry pundit I interviewed recently said, “the medium is still young most of the companies I know are experimenting with different ways to use it.” There is no uniform template that will work for everyone. Like everything else we learn in life, it’s trial-and-error, at least for now.

3. Understand that consumers will drive adoption. This is not going to come in a top-down direction. Quite the opposite. A polarity shift has occurred in who people trust regarding purchase decisions. (One clue: It’s not marketers or advertisers.) Getting someone to Like your brand’s Facebook fan page won’t be the harbinger of change. Neither will interruptive ads showing up in your newsfeed or timeline. Getting fans to like your products well enough to recommend and share them with friends will.

Let’s not attempt to force social media to be something it’s not – a channel for the use of traditional marketing tactics. Understand the it’s a new paradigm altogether. The more we learn about what causes  a person to share stuff, the better we can leverage that understanding to more naturally assimilate this medium into our marketing mix.

Whilst the book contained a wealth of practical recommendations for creating more promoters (customers who would recommend you) and fewer detractors (customer who wouldn’t), it only briefly touched on the role of social media. Fortunately Bain has published a parallel report on just this topic; Putting Social Media to Work. Here’s the speed summary.

Smart investment in social media can pay off because social media attracts your most loyal customers, who spend 20% to 40% more with you than other customers; customers choosing to connect with you over social media score on average 33 points higher on the Net Promoter scale (-100 to +100) – the industry-standard proxy for customer loyalty.

The opportunity is to use social media not only as a channel for customer service, talent recruitment, advertising and PR but also a value delivery channel to drive customer loyalty (including activating the advocacy of your super-promoters – customer who not only would recommend, but do recommend). Companies that understand that social media is a powerful self-selecting customer loyalty platform for driving total customer value (lifetime purchase value and referral value) invest considerably more in social media than the $750,000 a year spent by the average billion dollar company.

The key to success is to make an outcomes-based business case for social media investment. Smart companies adopt a two-pronged approach for doing this

Comparing differential effectiveness and efficiency of social media to achieve established business objectives with established solutions and their established metrics (e.g. generate leads, recruit talent, deliver service)

Demonstrating the broader value of social media as a value-delivery channel for delighting (and thereby retaining) the company’s best customers (loyal ‘promoters’)

Pioneers in smart social media investment include Dell, Walmart, Starbucks, JetBlue and American Express); winners base their investment on 5 key principles

1. Link social media efforts to concrete business objectives – (such as increasing lifetime value and referral value of customers – or driving trial, or increasing awareness)
2. Focus and tailor your efforts to target your key customers – your loyal ‘promoters’ your referring ‘super-promoters’, opinion-leading ‘influencers’ and even your bad mouthing ‘detractors’; JetBlue has a real-time Twitter customer service recovery force, that monitors social media for shared bad experiences with a view to putting it right
3. Build a social media organisation to deliver results – this requires a decentralised cross-functional team with its own command and control structure that is empowered to act
4. Monitor and measure the results, then close the loop – the real value of social media is to ‘close the loop’, extracting insights from social media to enhance the value proposition – not ‘social media analytics’ (social media analytics companies score on average -60 (cf 30 for average for other sectors) on the would you recommend NPS question – sentiment analytics are particularly dubious). Social media should be measured against its cost-effective and efficient ability to deliver on key business objectives, i.e. it’s competitive ROI vs alternative solutions
5. Be flexible and adaptive – it’s still early days – companies are learning in real time and need to continuously experiment to determine how social media can add value (benefit-cost) to companies and customers. Realtime, location-aware and personalisation are three promising areas for value delivery by social media

Social Powered Sales

• Find your social forums – Empower your sales teams to find out where your prospects spend time – forums, blogs, social sites & groups, etc
• Tune in – Listen to the conversations. Set up Google alerts, join groups and forums, use LinkedIn, follow Twitter conversations
• Socialise your CRM – Integrate social profiles and activities into your customer relationship management system – including most recent tweets, posts & forum comments
• Social-power your collaboration – focus your company knowledge and experts around each open opportunity using internal social networks
• Track social-driven sales – measure the return on your social investment

Social Powered Marketing

• Listen and monitor – Track the online conversations around your brand, your market and your competition
• Start dialogues – Don’t hide behind the brand; come out and meet people where they’re already gathering
• Identify influencers – And build bridges to keep them on side Share your stories – let people inside, through blog posts, tweets and social pages
• Make it easy for people to share your content – and encourage them to do so Inject social commerce trust – by inviting ratings, reviews and comments
• Social-power marketing teams – with social collaboration tools that share best practice and encourage innovation

Social Powered Customer Service

• Engage with customers where they are – and encourage them to use the right support channel for their issue
• Encourage ‘one and done’ support – with rapid response to tweets and Facebook posts
• Automate social listening – with a system that grabs social posts and assigns them to an agent
• Maximise your knowledge assets – make it easy for customer-facing people to access your expertise
• Social-enable your online support portal – rewarding users who help other users Integrate all channels – so agents see traditional and social channels together in one view

It would seem that a few bad reviews give consumers a reason to believe all your good reviews.  Moreover, consumers spend four times as long on site when they interact with bad reviews and convert 67% more highly than the average consumers.

Sixty-eight per cent of consumers trust reviews more when they see both good and bad scores, while 30% suspect censorship or faked reviews when they don’t see bad scores. Shoppers who go out of their way to read bad reviews.

The first study by ThreatMetrix and The Ponemon Institute found that consumers believe Google is more effective than Facebook when it comes to shopping security; 53% of consumers do not believe Facebook storefronts are committed to protecting them against fraudsters and a quarter of respondents (23%) were unsure about Facebook’s fraud prevention tactics.

The second study by The Media Kitchen looked at online retailers’ willingness to integrate with Facebook  or Google +1 social plugins, and found that Google +1 appears to be winning the hearts, minds and tech departments of these brands (45% vs 35%).

Wrapping the studies up in an interesting narrative, Forbes magazine suggests that whilst Google is better placed than Facebook to win in the social shopping wars, the big winner this holiday season – after so many false dawns – is neither f-commerce or g-commerce (selling with Facebook or Google), but m-commerce (mobile e-commerce). Shopping via mobile handsets has tipped  this holiday season from Silicon Valley hype to Main St. reality, whilst that the younger f-commerce – that Forbes defines narrowly as” making Facebook fan-pages shoppable” – has yet to go mainstream.

With more news and innovation in t-commerce (e-commerce with Twitter “Twitter is going to be huge for e-commerce, probably even more so than Facebook,” says Christian Taylor, CEO and co-founder of Payvment) what’s our take on all this alphabet soup commerce comparison?

Comparing shopping with Facebook or Google to shopping on a mobile handset is like comparing apple and pears, software platforms vs hardware platforms – like Intel with Windows.  On the race between g-commerce and f-commerce, we think different niches will evolve – f-commerce, like TV shopping, will remain a niche channel, albeit – in our view – an important one for fan-commerce that locks in fan-loyalty and activates fan-advocacy, whilst shopping with Google will evolve towards transactional advertising.

What do you think – which would you invest in – f-commerce, g-commerce, m-commerce or t-commerce?

Citing the “Variance in the Social Brand Experience” study from the CMO Council and social CRM firm Lithium, a post from digital intelligence firm eMarketer stated that:

• 57 percent of marketers thought a ‘like’ meant the content on the site was agreeable;
• 41% thought it meant customers wanted to be heard;
• 33% of marketers said they thought customers were looking for incentives or rewards for their ‘like.’

From the consumers’ perspective, the study says they engage with brands through social channels primarily to:

• Be eligible for exclusive offers (67 percent);
• Interact with other consumers and compare experiences (60 percent);
• Find games, contests, and other unique experiences (57 percent);
• Find service and support from their social networking site (50 percent);
• Share ideas for new products and features (41 percent).

There was also a difference between the two groups in terms of perception of customer loyalty. Of the 132 marketers surveyed in the study, only 24 percent thought a ‘like’ meant the consumer was also a loyal customer. Conversely, 49 percent of the 1300 consumers surveyed said they liked a brand because they were already loyal customers.

Most damning was the revelation that, though brands are seeing benefit to the use of social media, less than one-fifth (17 percent) have yet to fully align social channels into the marketing mix.

Social Consumers Expect More from Brands

“The bottom line is that consumers want more – more experiences, more engagement, more rewards, and more reasons to connect with each other and brands through social media,” said the CMO Council study, which concluded that “brands are missing the boat.”

Though socially-connected consumers demand more, the study found they will go out of their way to reward brands with greater loyalty and advocacy. “When they are acknowledged, rewarded, and offered relevant information and special experiences, they become exceedingly loyal and go out of their way to help the brand meet key business drivers – like better customer support, faster innovation, and increased demand and awareness,” the study found.

Advice for Brands

These findings gave way to some advice, as well. Brands who wish to gain social business advantage in 2012 will be those who feed unmet consumer appetites for:

1. Deeper engagement with each other and the brand;
2. Purposeful engagement with social support and ideation;
3. More rewards with special offers, greater privilege, rank, and reputation;
4. Better experiences with games, contests, and other online engagement apps.

The complimentary 31-page study can be downloaded here.

The management consulting firm created a simple formula that compares the number of Facebook “likes” a brand has and adjusts it based on company revenue, something it refers to a “Likes Per Million” (LPM).

Booz defines brand value as the “proportion of consumers who are actively engaged with a group of products or services” – brand zealots, in other words – but suggests that measuring such engagement has long been a difficult process.

The company hypothesized that Facebook fan pages are uniquely positioned to identify those who fit that category. “A company’s (or brand’s) Facebook page is an Internet destination tailored for those zealots,” says the article. “It’s where people come to get information about the brand and to engage in dialogue with the producers and others who care.”

However, Facebook “likes” alone are insufficient to measure true brand value Booz concluded. (After all, larger companies are more likely to have more fans.) So, it added a modifier based on revenue. “[W]e hypothesized that a true indication of brand value would be the popularity of the brand’s Facebook page indexed to the size of its revenue stream,” the article states.

To test the hypothesis, Booz collected Facebook “like” numbers for a range of leading consumer-facing companies, then divided that by the companies’ revenue. The result can be seen in the graph below.

Topping the list are some of the usual suspects such as Starbucks and Coca-Cola, but others are dark horse surprises. For example, who would have guessed that Subway would outpace social media savvy brands like BestBuy, Target and Amazon.

The article also suggested that buying fans through “artificial” means such as Facebook ads or coupon giveaways do not factor as heavily as “likes” that come through organic means and, therefore, should be discounted.

Whether this LPM formula will become a de facto standard for determining brand value is anyone’s guess. It does, however, add weight to the argument that the influence of social media (and social commerce) will play an increasingly important role.

The research provided a number of interesting conclusions, so the post is well worth reading.