Every once and a while serendipitously surfing CGM venues I'll stumble into a forum, board, or "group" that forces a double-take. Yesterday I noticed the Facebook Addicted to Starbucks" group, which as of press time features 53,395 members. This immediately got me thinking...what's the "marketing value" of this group? After all, isn't this the type of free advertising (loyalty + word-of-mouth effect) that every brand seeks?
Expresso Numbers: Here's a back of the envelop calculation, and I'll err on the side of
conservatism to protect myself from an attack of the calculators. If one is truly addicted to Starbucks, he or she is probably spending no less than $8 bucks a day (which assumes at least two trips a day, and perhaps an occasional high-carb treat...who can resist?) Assuming 250 days of purchasing power (again, conservative), we're looking a net contribution of about $10,670,000 from these self-proclaimed "addicts," which isn't a bad starting point. But we can't stop there.
These folks are engaged, therefore we'd be remiss not to factor in the "word of mouth" effect.
There's no question that folks who have deeper bond (dare I say "addiction") with the brand are more likely to let others about their, well, brand "love." A safe and conservative bet is that folks who fall into the "addict" category are probably telling no fewer than four NEW folks about Starbucks every month. By NEW I mean folks that have yet to either try Starbucks or yet to enter the sweet spot of Starbucks loyalty zone. That's close to 50 new folks a year, which, if we factor in a conversion rate of 25% (meaning only 25% of those introduced to the brand become regular buyers), means the "addiction multiplier" (I couldn't resist) puts the real sales value of the advocacy over $100 million.
Conservative Drawdown: But in the spirit of being super convervative, let's assume these folks bring only five new regular Starbucks customers a year. That still more than doubles the current sales number. Now, you may want to show some pity and compassion for the "addicts," but never under-estimate the power of word-of-mouth. (More tips on running your own WOM ROI analysis on the Word-of-Mouth Marketing Association, or WOMMA, site.)
Awesome analysis Peter. Many marketers are allocating such small dollars to developing conversation,loyalty and advocacy because they don't want to sacrifice reaching a critical mass of awareness. A view based in the antiquated model of the purchase funnel. I think you're calculations support flipping that existing model and looking at the funnel completely upside down. I recently wrote a post on that topic on my blog http://thecword.typepad.com/thecword/2007/08/turn-the-funnel.html
Agencies, marketers and media should start looking at communications planning like this.
Brandon Murphy
Posted by: Brandon | August 24, 2007 at 01:35 PM