Ideas and insights to take your marketing to the highest level
The Value of Social Currency
Wrapping up my series of posts on the “secrets” that I attribute to my success in marketing, here’s the third installment:
3. It’s All Math. “Social currency” is a relatively common concept in marketing and business these days, but I think about the concept in mathematical terms.
Social currency refers to the pull or influence that a consumer has among his peers, and social currency strategies are arguably the most critical point of leverage for a marketer. The mathematical context and understanding behind what really powers effective word of mouth is what can allow you to manage WOM as strategic, not as some nebulous or gimmicky aspect of marketing that sits outside of any scientific foundation. If you understand the mathematical power behind WOM and connectivity between people, WOM activities will be jealously protected in budget discussions as the single most important investment that any marketer can make in his brand.
I first began placing WOM into a mathematical context in 1998 when studying at Harvard Business School. At that time, I was bantering with David Yoffie, the Max and Doris Starr Professor of International Business Administration at HBS and an expert on strategy (Yoffie authored an excellent book, Judo Strategy), over my belief that Michael Porter’s strategic theory of “network externalities” had a “soft side” to it. “Network externalities” is what I prefer to refer to as “Metcalfe’s Law,” which you may prefer to refer to as the law of utilities. It simply means that a device connected to a network increases in value as more and more devices are added to that network. If you are the only owner of a telephone in the world, your telephone is worthless, but when your phone is connected to a network of millions of other phones, obviously, your phone is substantially more valuable to you.
This is what I call a “hard” example of network externalities, and one “soft” example is the concept of social currency. Social currency is how I describe WOM that has value to a user but then increases in value as that currency is passed along from one to another or, in the most powerful cases, from one to many. There’s a great piece on the power of networks by Manuel Lima, senior UX design lead at Microsoft’s Bing, which really dramatizes Leonardo DaVinci’s belief, “Everything is connected to everything else.”
I believe that another soft example of network externalities operates with brand image, but I’ll save that discussion for another time. What’s important to articulate here is that, first, there is a social dimension to virtually everything in the world of commerce: products and services, B-to-C, and B-to-B. Because they ultimately interact with human beings, all of these transactions can and do take on social value. Certainly, some are more valuable and others less so.
Second, relevance and regard are the drivers of the respective valuation of the currency that these products and services generate. Third, ever since the advent of the iPod, consumers forever more have insisted on having their entire lives accessible at their fingertips like a playlist.
Fourth, the so-called new media landscape has created real-time connectivity that has transformed old-fashioned WOM, which often used to be essentially a few gadflies exchanging misinformation with virtually no reconciliation of factual accuracy, into now what is a rich, deep and collective conversation that is going on 24/7/365. This collective conversation is powered by more than 40 million blogs via Facebook, Google, You Tube and Twitter. The “Internet of everything,” blogs, DVRs, iPods, text and instant messaging, and smartphones have permanently shifted the center of gravity into the hands and heads of consumers.
Enabling social connectivity between individuals is a means of empowerment, and at its most basic level, it’s about putting the customer in charge, but in a socially connected way. Content can become currency. If you “do” content well, it will become social currency that can “pay your brand’s way” into pop culture. Look no further than the late-night talk show circuit for examples of the power of enabling social connectivity. The NewsCred blog team recently outlined what brands can learn from Jimmy Fallon’s viral successes.
If you do happen to fire up the printing press of social currency and it is both highly relevant and viewed with high regard, you will unlock the power of Metcalfe’s Law. You will tap into the mathematical tidal wave that swells larger and moves faster due to the power of network connectivity.
One of my favorite quotes is from a Hollywood favorite, Jack Nicholson: “Lots of people like to give advice. I tend to listen when the person isn’t the advice-giving type.” I believe increasingly that consumers are feeling something similar. Lots of companies like to advertise, but I tend to listen when the company isn’t the advertising type. That doesn’t mean that you should stop advertising, nor does it mean that reconstituting or simply re-labeling advertising as “content” will change how brands are valued.
Social currency stems from an earnest and honest desire to inform, entertain and even inspire our customers while enabling them to make connections with others. Further, as the new economy evolves and structural shifts in consumer behavior continue, there will continue to be downward forces on monetizing content. I believe that the expectation that more and more content becomes increasingly close to “free” comes with consumers’ acceptance that content is “brought to them” by someone. This is where there is, indeed, an intersection between best practices in content marketing and social currency—that is, the implicit transaction and trust between the marketer and the consumer. Always be honest and don’t waste people’s time. Informing, entertaining and inspiring them creates social currency that they can spend elsewhere in their connected world. This will build brand value. Remind your CFO that, by a wide margin, the intangible asset of brand value accounts for the lion’s share of goodwill on your firm’s balance sheet.
The last, but not least, mathematical dynamic that figures critically into the concept of social currency is the “butterfly effect.” The idea is that the trajectory of something, whatever the context, can be almost invisibly altered by a tiny event that creates an extremely divergent outcome as the slightly altered trajectory plays out. In social currency, one never knows the power of the butterfly effect because we never know which alteration, which token of currency, will prove to be the profound force that triggers a change in the narrative around our brand, inside that collective conversation. Understanding this dynamic helps a manager understand the power of patience and persistence with a social currency strategy.
How would you value the social currency of your brand? Do you have a social currency strategy in place? Does placing WOM into a mathematical framework help you to better manage it, or to appreciate it as a strategic tool?
Russ Klein, CEO