Additional Blogs by SAP
Showing results for 
Search instead for 
Did you mean: 
0 Kudos

We’ve all been hearing about the benefits of sentiment analysis when it comes to social media marketing and engagement - providing consumer insights and the immediacy to put that insight into action.  Any professional involved in social media marketing and social media engagement would benefit from the understandings that sentiment analysis brings: such as the key attributes influencing customer decisions, and finding those insights which drive consumer behavior – instantly.  With Sentiment analysis, one can visualize the latest trends, perceptions, and even compare ones’ brand to that of a competitor’s.  But what about sales and revenue?

Measuring the Impact of Increased Sentiment and “Buzz”

With all that sentiment analysis can achieve in helping marketers and customer service professionals do their jobs better and more effectively, what exactly can sentiment do to help the bottom line?  What is the impact on sales, overall?   For one, Maggie Fox at Social Media Group, has articulated that her research has shown that positive sentiment is harder to tie to sales, but negative sentiment is quite clearly related to negative sales and even stock price.  An example of the negative sentiment ties to stock price occurred at Facebook.  During the day of the Facebook IPO, twitter negative sentiment about Facebook ran high.  There were even moments during the day when Twitter sentiment about Facebook recovered, and so did the stock price. However, the negative sentiment won out in the end.

Placing a Monetary Value on a Fan

According to Marketing Profs, a recent study, The Value of a Facebook Fan 2013, examined the Facebook fan and performance of 20 top brands. It estimated the value of a fan by looking at spending, media value, acquisition cost, loyalty, and the propensity to recommend a brand to others.  On average, Fans spend 43% more on goods of the brands they like [ie positive sentiment] than same income non-fans.  So engagement fostering positive sentiment is aspirational - ‘training’ your fans to be better advocates may hold the key!

The Digirati, According to an MIT Sloan Study

Research conducted by the MIT Sloan Center for Digital Business in cooperation with research sponsor Capgemini Consulting, shows that “the digital advantage is not about luck or about the industry your firm is in. It is not just about how much cool digital stuff firms are doing. Companies that manage their digital activities in a certain way are 26% more profitable than their industry peers, and outperform on other measures as well.” This means building the leadership and governance capabilities to drive true value from digital investments.  In this two-year report, findings also showed that “In a global survey of nearly 400 large companies, we found that the digirati [those investing in technologies such as social media and analytics] are 26% more profitable, drive 9% more revenue from their physical assets, and earn 12% higher market valuations than their peers in the same industry.”

An 8% Loss in Sales Based Upon Negative Sentiment

AdAge reported that McKinsey Company released data that indicated that one of their telecom clients suffered an 8% loss in sales based upon negative sentiment in the social media space. For that company, that 8% loss in sales offset their TV ad spend. 

However, impact may not be straightforward.  Augie Ray blogged recently about the fact that “not all sentiment is equal” stating that sentiment impact on the bottom line is industry-dependent, as well as has global vs. local implications.  He cites a Colorado-based brewery which launched a new IPA product and was able to generate a huge uptick in expected sales as a result of a targeted local social media campaign.  That’s one.

Firms Analyzing Big Data Are More Productive and Profitable

Still another MIT study researched companies that analyze big data – information on Consumers, alliances, partners.... Erik Brynjolfsson, MIT, concluded that:

“Companies that use this type of ‘data driven decision making’ actually show higher performance. Working with Lorin Hitt and Heekyung Kim, I analyzed 179 large publicly-traded firms and found that the ones that adopted this method are about 5% more productive and profitable than their competitors.  Furthermore, the study found a relationship between this method and other performance measures such as asset utilization, return on equity and market value. There is a lot of low-hanging fruit for companies that are able to use Big Data to their advantage.”

Sentiment Analysis Is Here to Stay

Sentiment analysis across the social web is about listening, monitoring and taking action.  According to Forbes’ Steve Olenski, in a study of the CMO Club’s CMOs, three out of four CMOs surveyed or 76.2% identified social media as having such a profound impact on sales, and 80%+ said social has an impact on brand awareness and brand loyalty.  And nearly all CMOs now use social data to drive decisions.  Sentiment is a huge part of that social data.  And those figures have increased over previous studies.

In Conclusion

It’s pretty early to state the immediate impact of sentiment analysis on sales and revenue, but there are some leading clues. More and more, companies are leveraging sentiment for decision making, engagement metrics and selling, marketing and serving their customers better.   Movement in both stock price and sales have been attributed to sentiment.  The CMO seems to be the first of the “C” Suite executives to harness it.  As Social CMOs continue in a test and learn approach, we will undoubtedly see more examples of sentiment analysis and the impact on the bottom line in the future.