Net Equivalent Value (NEV)
As the old saying goes, there are many ways to skin a cat. Admittedly, it is not a pleasant saying, but it is apropos here. When you can’t get at the actual value of your audiences, another way to appeal to management’s bottom line is to document how much it would cost you to reach the same audience via paid advertising—the Net Equivalent Value (NEV) of your proprietary audience. To calculate your NEV:
Pick one of your proprietary audiences.
Identify the paid advertising unit closest to the same type of attention you command when you interact with your proprietary audience.
Determine the CPM, CPC, CPA (cost per acquisition), or other billing method.
Multiply the appropriate ad cost by logical subset of your audience or its activities (for instance, if you’ve identified the CPC for a paid ad unit, you would multiply that figure by the number of clicks your proprietary audience generates).
The NEV method makes management more fully aware of the market value of your social audiences. Take Facebook FANS, for instance:
If you have 100,000 Facebook FANS
And your average organic (free) reach is 16 percent
Your average post reaches 16,000 FANS
Now, if Facebook charges a CPM of $10 for a Sponsored Post
Your NEV is $160 for every 1,000 FANS reached
As you apply this valuation model over time, you’ll soon be able to demonstrate to management that your proprietary audiences are delivering real value that you would have otherwise had to purchase via paid media.d
Direct Comparative Value (DCV)
With Direct Comparative Value (DCV), you extrapolate the value of one proprietary audience channel from the cost to message another. Friend and author Jay Baer (@JayBaer) developed a DCV methodology to value Facebook impressions based on cost per email open.17 His logic is that a Facebook post impression is akin to an email open since both FANS and SUBSCRIBERS are JOINERS who have opted into your company’s messaging. Accordingly, the cost to reach email SUBSCRIBERS can be used to approximate the cost to reach Facebook FANS.
Jay’s methodology is as follows:
1. Multiply your total number of email SUBSCRIBERS by your open rate.
2. Add up the cost to produce and send a single email to your SUBSCRIBERS (design, development, per email send fees, etc.).
3. Multiply #2 by #1 to get your Cost per email Opened.
4. Multiply the result of #3 by your Total Facebook Post Views from the past month (available in your Facebook Insights reporting).
Using Jay’s methodology, let’s say you have a $0.0175 cost per email opened and had 50,000 post impressions the past month. The DCV you’re generating on Facebook would be $875 ($0.0175 × 50,000). Again, it’s not a precise measurement of value; however, it is a justifiable comparative one based on what you already know you’re paying to have an email reach a SUBSCRIBER.
Comparative Incentive Value (CIV)
Our final valuation model, Comparative Incentive Value (CIV), is useful in industries where competitors provide consumers with incentives to subscribe, like, or follow—such as fast food or retail. To calculate your CIV:
Anonymously shop/visit your competitors (online or offline).
Document what incentives, if any, they provide to consumers to become SUBSCRIBERS, FANS, or FOLLOWERS.
Chart each incentive’s retail value and divide each by half (or whatever is an appropriate value for your industry) to get to the out-of-pocket cost for the incentive.
Add up the out-of-pocket incentive costs and divide by the number competitors offering them.
And poof! You have your CIV.
CIV provides a shorthand way to understand your audience members’ potential value, and gives you an idea of what type of incentive you might use to acquire new JOINERS. If you want to try a quick CIV analysis, just visit some of the fast food restaurants in your area. When I did just that, here’s what the different chains were offering me to become an email SUBSCRIBER:
Arby’s: $2.89 (free Regular Roast Beef with drink purchase)
Boston Market: $3.00 off next purchase to join “The V.I.P. Club”
Burger King: No incentive (but email offers provided throughout year)
Chipotle: No incentive (but email offers provided throughout year)
Jack in the Box: No incentive (but email offers provided throughout year)
Jimmy John’s: No incentive (but email offers provided throughout year)
KFC: No incentive (but email offers provided throughout year)
McDonald’s: No incentive
Qdoba: $1.99 (free chips & salsa or large drink)
Quizno’s: $2 off next purchase to join “The Q Club”
Penn Station: $4.49 (free 6″ sub)
Popeyes: No incentive (but email offers provided throughout year)
Subway: No incentive (but email offers provided throughout year)