Why Social Media Measurement Is A Competitive Advantage

We are about to embark on a new era of social media, where marketers can now monitor and measure the influence of consumers and fans directly on their business performance.

competitive advantage


Editor’s Note: Michael Wolfe is an analytics guru and is doing much to push the boundaries of how to apply advanced modelling and technology to solve critical business issues, especially in the arena of social media and big data. If you know Michael, you’ll also understand that he is a “No B.S.” guy; he tells it like it is.  That’s why he’ll be one of our panelists in the first GreenBook Insight Innovation webinar next week:



Wednesday, January 30, 2013 11:00:00 AM EST – 12:00:00 PM EST

Michael will be joined by three other brilliant folks who don’t get taken in by hype either:
  • David Johnson, Decooda (the tech side)
  • Greg Pharo, AT&T (the client side)
  • David Weinberger, Customer Centric Strategy, LLC (the strategy side)

So, since this is a hype-free zone today, Michael’s work on social media measurement in delivering real competitive advantage should be taken very seriously indeed. The man knows of what he speaks, and we’d do well to listen.


By Michael Wolfe

We hear a lot today about social media ROI and measurement.  Some marketers seem to hesitate about making major investments in social media unless they can determine what kind of returns they get for their efforts.  Nevertheless, all the social media experts, gurus and pseudo-gurus (so many claimed experts in the space really aren’t) have yet to come up with a formula or agreed approach for measuring the impact of social media brand conversations on brand sales and performance.

One of the key misperceptions that people have about social media is the failure to correctly understand what it is and what it is not.

  • First, social media is really not media at all, as we know it.   It does not have “inventory” and it is not meant to deliver ads like traditional media.
  • Unlike traditional media, to succeed in using social media as a marketing tool, a marketer cannot rely solely on one-way conversations to customers.   In order to make social media work for them, marketers need to become proficient in the two way and collaborative conversations with their customers.
  • When it comes to brands and the marketing of brands, social media is a form of “word-of-mouth”.  Customer conversations about brands on social media are, in fact, a form of word-of-mouth and actually a representation of the greater phenomena of word-of-mouth that has been around since the very first commercial transaction.  The fact that these conversations and reviews are broadcast across the social landscape makes their impact even more powerful.
  • Therefore, for any business enterprise whose sales depend on word-of-mouth, social media measurement is a critical issue and, in fact, understanding, tracking and monetizing its impact on their business is a fundamental matter of competitive advantage.  Putting it another way, in the future, not doing so will most certainly become a fundamental competitive disadvantage.

In a recent survey of top CMOs throughout the world, IBM reports that “word-of-mouth” is rated as the top business driver across over 1500 of the top commercial enterprises in the world.   This rates even higher than advertising, promotion,  price and other common drivers.    McKinsey has gone so far as to call word of mouth “the most disruptive force in marketing”.   It certainly can be disruptive in the sense that bad reviews about a brand, if they spread and go viral, have the power to bring a company to its knees.

While the state of social media measurement seems to be uncertain and in flux, Bottom-Line Analytics has developed a pioneering approach to measuring the impact of social media.  Working with a partner firm in North Carolina called Next Generation Marketing Insights, a new metric has been developed called the Social Engagement Index or SEI.   SEI is a measure of consumer engagement towards a brand.   It uses linguistic principles and rules in order to quantify or score social brand conversations from social media channels.  The underlying principle behind this engagement metric is to use language and context  in order to translate textual conversations into a sentiment-like metric called the SEI.  This metric is based on the principle that words, semantics and language matter when it comes to the persuasive power and effect from social media brand conversations.

Once this is done, we then evaluate the SEI metric for its fitness as a predictor of sales.   To date and across businesses with total sales exceeding $70 billion, the SEI metric has shown to have a statistical correlation to sales of no less than 75% across some diverse industry verticals.   When all of this is done, we then use the SEI inside of a predictive marketing-response model, which ultimately enables us to quantify the impact and monetize the effects of social media brand conversations.  As shown below, our modeled effects from the social media engagement are large and significant, which is an indication to us that this is representative of the larger phenomena of “word-of-mouth” as it occurs across all domains,

Category/Brand % Impact
Food & Beverage Retailer


Softdrink Brand


Business Services




Hospitality Brand



In sum, we are about to embark on a new era of social media, where marketers can now monitor and measure the influence of consumers and fans directly on their business performance.   This measurement is most likely going to drive the importance of social media marketing to new levels because of the fundamental but timeless understanding that social media really represents the age-old phenomena of word-of-mouth.   Unlike times in the past, when marketers could only guess as to the influence of word-of-mouth on their business, they will now be able to see it and measure it first- hand.


If you would like to learn more about Bottom-Line Analytics efforts and validation of our social media measurement and modeling, please contact Michael Wolfe at mjw@bottomlineanalytics.com to receive a free white paper.

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4 Responses to “Why Social Media Measurement Is A Competitive Advantage”

  1. Duncan Stuart says:

    January 28th, 2013 at 10:30 pm

    Fascinating that Word of Mouth should suddenly be so important! (I thought Paul Lazarsfeld nailed it in 1951 when he measured (with Elihu Katz) the process of product adoption.

    But since then, the shaemeful reality is that it has seldom been measured, and marketers through their ad-agencies have generally invested most if not all of their interest (and dollars) in paid mass media. As we discover in the age of social media – WOM is a fundamental human activity, and clearly considered more reliable than are other media. I would trust my mother more than I would trust a TVC.

    The challenge is that social media don’t necessarily gauge the level or dynamics of WOM. My FB page may score a million likes – but this might translate very poorly in terms of WOM compared to the 10,000 Likes on your FB page. So likes, retweets, visits and other online metrics may only be telling some of the story and it is dangerous to rely solely on these.

    In my view nobody has quite succeeded in nailing WOM metrics.

  2. Universal Information Services says:

    January 30th, 2013 at 1:34 am

    Great one. Thanks for for the info.

  3. Jeffrey Henning's #MRX Top 10: An $800 Million Gorilla, Yet Surveys Still Make Us Go Bananas | GreenBook says:

    February 5th, 2013 at 4:01 pm

    […] Why Social Media Measurement is a Competitive Advantage – Michael Wolfe of Bottom-Line Analytics places social media measurement in the wider context of Word Of Mouth marketing. […]

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