RonAmok!

The adventures of an analog engineer and digital storyteller who studies emerging networks and their impact on the great game of business.

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Last August, I wrote a post called The Value of a Retweet, where I performed an analysis of a NewBlue, Inc. marketing campaign that offered 1% storewide discounts for every retweet that the company’s messages received. Through the power of “the internets,” my analysis found its way to Lisa Girolamo, NewBlue’s VP Marketing, who left a comment on the post. That comment initiated a little online discussion between Lisa, me and reader David Jacobs, who wondered if NewBlue, Inc. would be willing to share the results of their campaign. Long story short, Lisa agreed; I exchanged contact information with her; and we entered into a series of interviews.

Although it has taken much longer than I would have liked, I am pleased to announce the release of my most recent case study called “Awesome August: How NewBlue Inc, used social media to increase sales and add new customers during its slowest month of the year.” Please feel free to download the case study and share it with your friends.

Lastly, I’d like to thank Lisa for her time, candor, and patience as this project dragged out much longer than I had expected.

Aug 21, 2012

Yesterday, I got an email from NewBlueFX, a company that creates plugins for nonlinear video editors like my favorite, Sony Vegas. The email, entitled, “You Determine The Discount Sitewide Sale” described an interesting social marketing campaign that promised a one percent discount for every retweet of its message, with a sixty percent cap.

Here are the rules from the email:

  • The Tweet-a-thon starts Monday August 20th at 12:00AM PT and goes until Tuesday 11:59PM PT.
  • Total Tweets and corresponding discount to be announced Wednesday morning 7AM PT.
  • Discount can be used on any product available on NewBlueFX.com
  • Wednesday’s sitewide promotion expires Thursday, August 23rd at 7:00AM PT

I love this campaign from the standpoint that NewBlueFX clearly sees its audience as an asset. It also gives us the opportunity to play with some math to calculate potential dividends that the company is seeking to extract from those assets.

The company’s Twitter account, @newbluefx, has 928 followers (the asset). Due to NewBlueFX’s niche product line, this audience likely consists of specialized video artists who’ve made significant investments in sophisticated video editing software. Since like-minded people tend to follow each other on Twitter, NewBlueFX is betting that by encouraging its audience to spread its messages through their networks, that the message will ultimately find its way to the right people as opposed to (as traditional media offers) the most people.

The company has done something else by offering a discount for each retweet…it has established a retweet price.

Consider that the NewBlueFX online catalog contains 26 products, whose:

  • Average price is $127.64
  • Median price is $129.95
  • Mode price is $129.95
  • High price is $299.95
  • and a Low price is $49.95

By taking the median price of $129.95, New BlueFX has established a price of $1.299 for every retweet (1% of the median product price) its campaign generates–up to a cap of 60 retweets.

The model gets even more interesting if you compare it with advertising through traditional media. By capping its discount (and therefore the amount it is willing to pay for the entire campaign), any retweets generated over 60 will drive the effective cost per impression down–the opposite of what happens when purchasing traditional advertising.

Social vs. Traditional CPM

If the average Twitter user has 126 followers, each retweet has the potential to be spread to 60 x 126 = 7,560 people. Therefore, NewBlueFX has established that it is willing to pay $77.94 (60 x $1.299) for access to its audience’s audience. Had NewBlueFX decided to invest that same amount of money in someone else’s audience (traditional media), similar access would translate into a CPM (cost per thousand impressions) of $10.31 (1000*($77.94/7,560)).

Figure 1 illustrates the company’s CPM costs as a function of the retweets it generates:

  • If nobody retweets, NewBlueFx offers no discount, and therefore carries no advertising cost.
  • For the first 60 retweets, NewBlueFx pays a flat rate of $10.31 CPM, capping its campaign advertising expenditures to $77.94.
  • Then something very interesting happens. Because the discount is capped at 60%, every retweet that exceeds 60 is a bonus, essentially causing the company’s CPM rate to fall-off exponentially the more successful it is.

The more successful the campaign, the lower the CPM

 Figure 1: CPM per Retweet

This example shows the difference between social media and traditional media. In traditional media, your message will only travel as far as you are willing to pay for its distribution. In social media, your message will only travel as far as your audience (asset) is willing to spread it for you.

NewBlueFX recognizes that its audience is an asset that can pay dividends.

Does your company?