Useful study from Forrester Research’s Gina Sverdlov on Facebook fan-economics.  Using regression techniques, the study provided evidence to support the insight that your Facebook fans are more your most valuable customers (customer value = purchase value + referral value).  Specifically, the study found that fans of a range of brands (the study focused Coca-Cola, Blackberry, Best Buy, Walmart) on are significantly more likely than non-fans to

  • a) consider buying
  • b) purchase (79% vs. 41%)
  • c) recommend (74% vs. 38%)

For those versed in customer loyalty, particularly the Net Promoter System, this will come as no surprise – your fans (‘promoters’) are more likely to come back more often, buy additional products and services, refer their friends, provide valuable feedback, cost less to serve and are less price sensitive.

But what’s interesting about the study is the weight that being a fan has on customer value.  For example, being a Facebook fan of Best Buy increases the odds that a customer will purchase by 5.3 times; the next closest influence factor is conducting pre-purchase research, which only increases the odds of purchase by 1.4 times.  Similarly, whilst having a Walmart nearby doubles the odds that you’ll consider buying there, but being a Facebook fan of Walmart increases those odds by more than a factor of four.

Being a Facebook fan is a powerful proxy for customer value.

Again this insight into fan-economics should not be surprising; research by Bain consulting shows that an Apple fan is worth about 90% more to Apple than a regular customer ($4,400 vs. $2300), primarily because each Apple fan brings about one new customer to Apple every year, accounting for 17% of all Apple’s new customers.

Of course, we need to caveat all this by saying we haven’t looked at the data first hand – Forrester is charging $499 for it – so we don’t know the base numbers used, nor the other variables researched, but the findings support the idea that your fans are your most valuable customers.

But what does the insight that your Facebook fans are your most valuable customers mean for you?

What it does NOT mean is that you should try to boost fan numbers on Facebook with Facebook campaigns; businesses that do this are simply undermining the commercial utility of their Facebook page.

The power of the Like button is not that it creates fans, it’s that it identifies fans.  Your Facebook page is a fan magnet – and allows you to effectively target your most valuable and profitable customers.

We believe that trying to create fans with a Facebook page is misguided, verging on idiotic from a business perspective – your Facebook page should be designed to reward fans.