New Comm Biz

It’s almost the golden rule of relationship building but it’s especially true of relationship building on the Web. People often ask me what approach they should take with the various tools and social networking sites like blogs, Twitter and Facebook. My answer is usually some variation of the following: You should engage with the intent to add more value than you receive.

The crafty capitalist out there occasionally wonders at the logic of this. If I’m giving away more value than I receive where’s the economic rationale? When I say to give more value than you receive there are two ways that this works:

1. When you first start an engagement you will be giving away far more value than you receive. This is true of any marketing initiative. Your budget of hundreds or millions of dollars is long since spent before your first ad, direct mailer or sales call (with accompanying collateral) ever makes it out your door. It’s the expectation that value will come back at some future point.
2. The individual value you create for one customer is greater than the value that one customer returns to you. This makes sense when you ad up the sum of all the individuals. Hopefully that number exceeds the value you gave away.

I’m going to attempt something very scary here. I’m going to try and do some math.

At a basic level if you create a value of 100 points for the community you engage with and there are 1,000 members you engage with that you receive a value of 10 from, then you in essence receive 10,000 points of value for the 100 you gave up. (Wow that sounded too much like a story problem didn’t it?)

What is Value?

That’s something you need to determine depending on your business objectives. Is there a measurable value for every person that knows about you and your company who could potentially refer you business? If so how much is that worth? If that’s too abstract for you how much is a potential lead? How much is a link to your site from a blogger? Figure out what all the potential outcomes are and assign a value to them.

Conversely, how much is the value your giving up worth? Take into account incremental increases in cost, not existing fixed costs (I know there are accountants out there that will adamantly disagree with me but I’m a marketer so screw it.) How much would it cost a community member to gain whatever you are giving away. More accurately how much would the community be willing to pay for that value. Keep in mind that you may be bringing value to a specific community that doesn’t care.

Let’s get really granular for a minute.

Lets assume that your corporate blog imparts tips, tricks, wisdom etc to your readers in a certain verticle. Let’s assume that the value of that knowledge is equal to $1,000 in training, time saved or expertise. Let’s then assume that you have 1,000 readers to your blog. On average if you have a well targeted readership and a really strong value prop you could realistically convert 1% of your readers or 10 people.. This means that your conversion would need to create at least $100 for you to break even, everything above that is bonus.

Most companies never track to this level, but they should. Heck I don’t always track to this level but this is part of my 09 goal. If social networking wants to be taken seriously (heck if marketing wants to be taken this seriously) then we need to be this granular.

The important part though is that we need to be quantitative without loosing the human part of our relationship with the communities we engage with.

Track and measure results not people.

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