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(originally published by Booz & Company)


What’s Your Company’s Facebook LPM (Likes per Million)?

Every company can compare its brand value to that of its competitors based on a readily available scale: Facebook “likes,” adjusted for company revenue.

Measuring brand value has always been something of a dark art. Marketers have experimented with many combinations of financial metrics, consumer research, and gut feel, seeking a scale. But the data is typically inconclusive, difficult and expensive to gather, and almost impossible to use in comparing one company to another. Fortunately, there is now a very easy way to track the number of consumers who value your brand, by using one of Facebook’s simplest features: “likes.”

What’s the Value of a Facebook Like?

Every company can compare its brand value to that of its competitors based on a scale that really matters: the love of Facebook fans, adjusted for company size. Watch this video to find out how you can measure your brand’s value using Facebook’s “like” feature.

What is brand value? To marketers, it is the proportion of consumers who are actively engaged with a group of products or services. Marketers continually seek to track the number of engaged consumers (sometimes known as brand zealots), because they are willing either to pay more for the brand (earning the company a price premium) or to go out of their way to get it (leading to more volume). The more zealots you have, the stronger your brand loyalty and the more valuable your brand.

A company’s (or brand’s) Facebook page is an Internet destination tailored for those zealots. It’s where people come to get information about the brand and to engage in dialogue with the producers and others who care. Social network statistics, particularly the number of Facebook “likes,” are thus indicators of brand engagement.

However, when considered on their own, these statistics are unreliable. Since larger firms with more customers almost inevitably attract more followers, the raw number of “likes” that a page has earned may simply reflect the size of the company behind it. Recently, we hypothesized that a true indication of brand value would be the popularity of the brand’s Facebook page indexed to the size of its revenue stream. If you could track your Facebook LPM — your likes per million dollars of revenue — you’d have a pretty good proxy for the way people feel about your products and services.

To test this hypothesis, we collected Facebook “like” numbers (which are automatically made public) for a range of leading consumer-facing companies. We then divided that by the companies’ revenues. (See Exhibit 1.)

This preliminary LPM analysis is fascinating — who would have thought that Subway would out-engage eBay and Best Buy? It also confirms that scale is no guarantee of online brand engagement: Walmart garners 10.6 million Facebook “likes,” an impressive number at first glance. But set against the company’s US$400+ billion revenues, this translates to a much less impressive 25 likes per million of revenue, well below the LPM of Macy’s and Kohl’s.

For this small but distinctive sample of brands, and at this moment (holiday season 2011), the “best in class” LPM metric tended to be about 2,000. Admittedly, some of these brands are experimenting with campaigns to attract “likes” through artificial means, such as offering coupons or raffle entries to those who click the button. But anecdotal evidence suggests that these “purchased likes” are relatively small in number for an established brand. More importantly, marketers should be able to track the portion of their “likes” that were effectively bought this way and discount their scores accordingly.

The absolute stars of the chart were midsized apparel brands such as Forever 21 that cater to (Facebook-crazy) teenage girls. Does that mean the LPM metric is unfairly skewed to young, social-network-savvy audiences — or does the metric nonetheless serve as a generic proxy for brand engagement? To answer that question, we plotted LPM against other measures of brand value. For example, we gathered data from Interbrand’s annual survey of the world’s leading brands, indexed them to each firm’s revenue, and compared that number to their LPM. (See Exhibit 2.) (The comparison set changed slightly since we could use only firms that Interbrand surveyed.)

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