Facebook Ads: Optimize for Awareness, Not Direct Sales

The Challenge: Facebook Ads has not proven to be an effective direct sales medium. While this has led to shareholder frustration, advertisers should ignore the focus on sales and optimize for engagement and awareness.

When it comes to Facebook Ads, there's a significant disconnect between Wall Street and Madison Ave. Since Facebook's IPO in May, investors have been looking for revenues high enough to justify a multi-billion dollar market cap. They haven't found them. On Thursday last week, Facebook released their first earnings since their IPO. For investors, the results were predictably disappointing.

For advertisers, the fixation on Facebook's earnings is a distraction. The plain fact is that Facebook Ads isn't a direct sales channel; it's an awareness channel.

Earlier this month, Ad Age and Citigroup conducted a survey to determine why marketers use Facebook Ads. Overwhelmingly, marketers use Facebook Ads to, "Build awareness and sentiment for my brand." Others were trying to drive website traffic or build their fan base. Fewer than 10 percent of respondents said they were trying to generate sales leads or engage in social commerce.

The Ad Age survey reflects an important reality about Facebook Ads: while they're a powerful way to build brand awareness, they are not a strong direct sale mechanism. Of course, this doesn't mean that marketers should ignore them altogether. As Max Kalehoff recently wrote at MediaPost, “Facebook Ads, thus far, have proven to work best toward top- and middle-of-funnel marketing goals. Therefore, the fact that brand-building is the top goal is not surprising.”

When marketers recognize Facebook Ads as an awareness and engagement channel, they can optimize and budget their Facebook investment accordingly.

KEY TAKEAWAYS FOR MARKETERS

» Allocate Budget for Every Stage of the Conversion Funnel
Ultimately, your entire marketing budget is directed toward one goal: driving revenue. That said, each stage in the conversion funnel should have its own budget. Determine how much you're willing to spend at the top the funnel – "Awareness" and "Lead Generation" – and allocate a percentage of that budget to Facebook Ads.

» Define "Awareness" KPIs ("Key Performance Indicators")
If you optimize your Facebook Ads for direct sales, you'll always be disappointed. By defining "Awareness" KPIs, including "likes" and website visits, you'll be optimizing for Facebook's strengths. Measure results accordingly.

» Track Facebook Leads to the End of the Funnel
Not all leads are created equal. Determine how often leads generated by Facebook Ads eventually lead to sales, and allocate your "Awareness" budget accordingly.

Poor Service: Key Factor in Customer Churn

The Challenge: Even for the world's fastest-growing companies, neglecting service can lead to significant customer churn.

We wrote last week that "major Internet and social media sites, including Google, Facebook and LinkedIn, have done away with call centers." Viewing customer service as an operational cost rather than a marketing investment, they have shifted exclusively to online engagement. That is a mistake.

As Dwayne Flinchum of IridiumGroup put it, “customer service operators are decidedly not standing by.”

By neglecting customer service, these companies risk extraordinarily high rates of customer churn.

According to a study by CRMGuru, less than a third of customers listed "Poor Quality," "Price" or "Functionality" as reasons that they ended their relationship with a vendor. In contrast, more than 70% cited "Bad Customer Service." Average defection rates for Web-based companies - the ones reducing their service investments - are often as high as 50%.

As easy as it is to lose a customer, winning new customers is incredibly difficult. Across nearly all verticals, single-digit conversion rates are the norm. There is one exception to the rule: winning back former customers can lead to conversion rates as high as 70% ― as long as you treat them well.

The numbers tell a very clear story: the cost of neglecting customer service is increased customer churn, decreased revenue―and failure. The value of excelling at service is increased loyalty, revenue―and shareholder value.

Facebook, Twitter, LinkedIn and others like them are claiming that the cost of scaling call centers is too high. But while they remain some of the fastest-growing companies in the world today, their neglect of customer service could lead to just as precipitous a decline. Remember MySpace? Facebook ― or a customer-oriented competitor ― should.

KEY TAKEAWAYS FOR MARKETERS

» Give customers the opportunity to engage on all channels.
Many Web-based companies equate "engagement" with "social media engagement." This is too narrow: give customers the ability to engage on all channels ― including the phone.

» Make service a key component of your customer retention effort.
Bad customer service is the number one reason customers defect. Turn that sobering fact upside-down, and it becomes an opportunity: nothing drives retention and loyalty like quality service.

Facebook, Twitter, and Google: Too Big To Care?

The Challenge: Major Internet companies like Google, Facebook, and Twitter have decided that customer service call centers are obsolete. Many customers disagree.

Last week, The New York Times reported on the fact that nearly all major Internet and social media sites, including Google, Facebook and LinkedIn, have done away with call centers altogether. "The companies argue that with millions of users every day, they cannot possibly pick up the phone."

Facebook's automatic phone message explains that they cannot provide phone support because they are an "Internet-based company." This claim neglects a crucial fact: there are no "Internet" companies. All companies must be multichannel.

The key to successful multichannel service and marketing is not just to deliver "the right message to the right person at the right time”, but to do it per that customer's media preferences. As we've repeatedly emphasized, "If you focus on a single channel at the expense of others, you're neglecting a significant portion of your customer base."

Single channel service and support is based on the assumption that most customers prefer email. As The Times wrote, " Voice calls have been falling out of fashion with teenagers and people in their 20s for some time (text only, please)." This assumption neglects a huge percentage of customers―and it's false.

As ExactTarget reported in their 2012 Channel Preference Survey, "consumers still do prefer the phone under certain circumstances. ... 37% of US online consumers told us that they’ll call a company when they have an issue with its product or service."

If Facebook, Twitter, Google, and LinkedIn keep their phones off the hook, they'll be neglecting over a third of their customers.

These companies were brilliant enough to create transformational services. If they cared enough, they would figure out how to provide high quality, affordable, live customer service.

KEY TAKEAWAYS FOR MARKETERS

» Multichannel businesses provide value to all customers.
Effective businesses serve all their customers, and that's not possible without multichannel service. Give customers a full range of options, including email, live chat, social media, F.A.Q.'s―and phone support.

» Phone support is an investment, not a sunk cost.
American Express has repeatedly demonstrated the tremendous value of engaging customers on the phone., For businesses to argue that they cannot "afford" to speak with millions of customers is to miss an opportunity to grow engagement and revenue.

» Support quality directly impacts customer perceptions and brand equity.
Studies and statistics aside, one customer The New York Times spoke with made the essential point. After failing to reach Twitter via phone for two days, he said, "The plain and simple fact is that they’re too busy or too important to talk to us." Brand perception doesn't get much worse.

Microsoft’s Innovative Use of Interactive Ads

The Challenge: Paid streaming services are gaining in popularity, making interactive ads the new norm for TV. Marketers need to respond by integrating interactivity across channels.

With the advent of interactive ads on streaming services Hulu and MSN Video Player, viewers can engage TV ads with the simplicity and immediacy of online ads. With viewers growing accustomed to interactivity, one-way ads are quickly becoming a thing of the past.

The Tipping Point: Gaming
An increasing number of TV viewers are streaming content through gaming devices like Sony's PlayStation 3 or Microsoft's Xbox. (Every month, Xbox users watch 300 million hours of video on the platform.) These devices are rich with opportunities to interact. With the imminent release of NUads, Microsoft's interactive ads platform for Xbox Live, it's time for marketers to take note.

The Promise of Interactive TV Ads
Many Xbox Live channels, including Crackle and Live.fm, are already ad-supported. So far, these have been static audio and video advertisements.

With NUads ("natural user advertising") Xbox users will be able to interact with ads using "Kinect" voice and gesture-control capabilities. The platform will be rolled out in the Fall, and major advertisers including Toyota, Unilever, and Samsung Mobile have already signed on.

With NUads, marketers will be able to add interactive elements like poll questions, sharing functionality, or browser links to video ads. Customers can respond with a simple voice command or a wave of the hand. According to Rohan Oommen, general manager of Xbox Live EMEA, NUads will "fundamentally transform television advertising."

KEY TAKEAWAYS FOR MARKETERS
Here is how marketers can prepare for the transformation:

» Find Relevant Ways to Make Ads Interactive
With online ads, social media and, now, interactive video, every ad can be an opportunity to interact. As a result, selecting images and drafting ad copy is no longer enough. Marketers need to give customers a way to interact with ads, rather than passively viewing them.

» Only Add Interactivity if it Adds Value
Don't add poll questions or share buttons to ads just for the sake thereof. As Chris Hall wrote at Pocket-lint, "Interaction will come down to how clever advertisers are." If you aren't building creative interactions, you're just adding an additional step between users and the content they're trying to watch. Successful interactivity will require more.

» Don't Limit Interactivity to TV!
While NUads and platforms like Hulu have enabled interactivity on standard television commercials, that doesn't mean interactivity should be limited to TV. The top-performing social media advertisers give users ways to engage on Facebook and Twitter. And given new customer expectations, corporate websites can no longer be static.

Pseudo-Customization Is Annoying; True Personalization is Valued

The Challenge: A recent article in The New York Times highlighted the fact that customers find poor etailer customization "creepy”. It appears that businesses are still not providing customers with true personalization.

Today's sophisticated customers expect personalization across all points of contact. And, they expect these communications to be relevant and based on their stated preferences. A common sentiment expressed during recent Voice of Customer (VoC) research we conducted sums it up this way, "I expect more than just ‘we’ve looked at everything you’ve bought over the last X years and this is what we think you’ll like’. With today’s technology, I expect much more than that!"

Speaking with The New York Times, Patagonia's vice president of global e-commerce described the consequences of getting personalization wrong: "We saw customer frustration at being targeted outweigh any benefit. If you got it wrong once, it outweighed getting it right 10 times."

Many marketers are liable to draw the wrong conclusion, and do away with customization altogether. But abandoning multichannel customization is not an option.

Customers today view true personalization as a requirement for their preferred shopping venues, rather than as simply a perk. They're sophisticated enough to expect marketers to provide true preference-driven personalization, not just simplistic purchase based pseudo-customization.

And, per results of our Voice of Customer research efforts, today’s consumers will opt-in to share increasingly detailed personal preference information in exchange for marketer’s promise to deliver relevant information and offers.

This is not to say that traditional targeting methods are no longer relevant. Demographic and transactional data remain useful data points. But, in order to achieve necessary levels of accuracy, they must be enhanced by opt-in preferences provided by consumers.

In the Times article cited above, Mahender Nathan, Godiva's vice president for e-commerce and digital marketing, made the point well, "In conversation, if you think it’s odd that you know something about someone that they didn’t share with you, don’t use it."

The inverse holds as well: when someone “opts” to share something with you, they expect you to remember it in conversation―just as customers expect marketers to add value using the preferences they've shared.

KEY TAKEAWAYS FOR MARKETERS

» Replace Pseudo-Customization with Preference-Driven Personalization
You can only personalize a customer experience based on customer preferences if customers opt-in to share their preferences. To make sure they do so, offer a compelling value proposition.

» Supplement Transactional Data with Self-profiled Preferences
Transactional data is an extremely valuable indicator of historical customer preferences, but it's not enough. Use it, but only in tandem with self-profiled preferences.

» Understand the Reciprocity of Value Equation
Consumers will opt-in and share increasingly detailed personal preference information in exchange for marketer’s promise to deliver personalized and relevant offers, and communications across the multichannel mix.