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ShareThis Calculates Cash Value of a Share

  |  April 30, 2014   |  Comments

Shares and recommendations add to the bottom line, while a "fabulous" review from a stranger trumps a "meh" from Mom.

Shares of product mentions and information via social media are more valuable than ever. How valuable? ShareThis now has a number.

A new report from ShareThis quantifies the value of a recommendation or share for three product categories: new cars, mini-tablet computers, and consumer packaged goods (CPG). Across all three categories, the value of a positive online share is 9.5 percent, which means that shared reviews or recommendations over social networks increase the value and desirability of products, whether that's store brands in a supermarket, personal electronics, or an automobile.

Although the study looked at three very different product categories at different price points, the findings were consistent across them: Recommendations trump brand and price by substantial margins. A recommendation has a relative importance of 57 percent, compared to a 28 percent relative importance for price and 16 percent for the brand - across all three categories.

"In a nutshell, online recommendations and online sharing have more impact than brand or price, according to the results of the study," says Kurt Abrahamson, chief executive (CEO) of ShareThis. "That's a big statement. It's not just the importance but that they are more important."

The study found that consumers are willing to pay, on average, 8.8 percent more for products that have strong positive recommendations, from a high of 10.6 percent for in-person recommendations to a low of 6.3 percent for consumer ratings. That adds, on average, $3,700 to the price that a consumer is willing to pay for a vehicle, $27 to the price of a mini-tablet and, $0.75 to the price of a typical supermarket item.

Looked at another way, in-person recommendations and online shares made consumers willing to consider mini-tablets priced at $359 equally with those priced at $329, $309, and $229.

"We're not saying marketers can raise the price of everything that gets a good review by 10 percent, but that the ability to generate positive recommendations is a key part of marketing strategy," Abrahamson says.

Bad reviews hurt, by the way. Negative recommendations can deter consumers from purchasing by an average of 11 percent across all categories.

Another interesting finding is that the strength of the recommendation -whether it's bad, moderate, good, or excellent - is far more important than the source or even the familiarity of the person who made it. In other words, a consumer might trust a "fabulous" review from a stranger more than she does a "meh" from her mom.

The data are the result of two studies conducted by Beresford Research, with a total of 6,000 U.S. consumers who had purchased or planned to purchase a product in one of the three categories. In each product category, researchers tested four levels of brand, four types of prices, and four recommendation strengths. For mini-tablets and vehicles, they added professional reviewers and their printed and online reviews to the recommendation sources.

The company says that paid media targeted toward those with a propensity to share can pay off: Delivering ads to users who share online about cars, for example, is six times more likely to lead to an actual sale, the report says. For example, Hispanic consumers are five times as likely to share as the general population, and they're twice as likely to buy the products they share about.

Professional reviews are especially important for higher-consideration products like cars.

Says Matt Wolfram, vice president of marketing and communications for ShareThis, "Either offline or online, reporters bring the most value to consumers, followed by in-person and online shares almost equally."

The ShareThis data also provides a simple rule of thumb for marketers to determine potential return on investment (ROI) of social media campaigns: The cost per share can be capped at the minimum added value of a share, as found in the study, to make sure that the cost of the promotion is less than the lift in revenue. For example, for automotive, incentives to share can be valued at anywhere up to a whopping $753; for consumer technology, the cost per share should be less than $21.68; and for CPG, keep it to $0.22.

Says Abrahamson, "We're saying there is a real value in terms of marketing your products and achieving positive recommendations and positive online shares. When you do marketing strategy, this needs to be an active part of the conversation. Sharing can no longer be the thing that happens after you launch your product."

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ABOUT THE AUTHOR

Susan Kuchinskas

Susan Kuchinskas has covered interactive advertising since its invention. The former staff writer for Adweek, Business 2.0, and M-Business covers technology, business and culture from Berkeley, CA.

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