October 2012


 

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Working Behind the Scenes

With hurricane Sandy devastating the Northeastern U.S., Tom Larsen, senior vice president of EQECAT, a catastrophe risk modeling firm used by insurance companies and others forecast economic losses from Hurricane Sandy at $10-20 billion, and insured damage at somewhere from $5 to $10 billion (not including what would be covered by federal flood insurance.)

John Carney of CNBC.com talks about some unsung heroes that you might not have considered – the Federal Reserve:

The offices of the Federal Reserve banks of New York and Philadelphia are nearly empty. But the staffs of the banks, as well as the Board of the Federal Reserve in New York, are working from home to keep the U.S. financial system flowing smoothly.

In addition to creating liquidity in the economy as a stop gap against unemployment while Congress squabbles instead of hammering out a fiscal compromise, the Fed does a lot of other things to help keep the economy on track.

In a storm, people tend to withdrew more cash than usual in a storm for fear that power outages may restrict access to ATMs, bank tellers and credit card purchases. In preparation for a storm, the Fed moves in to help banks anticipate and meet an unusual demand for cash by:

  • Extending their hours to allow commercial banks more time to pick up cash.
  • Allowing banks to withdraw cash from other parts of the Fed if the branch they use is inaccessible. (a Northern New Jersey bank that would normally be served by the FRBNY can withdraw cash from the Philadelphia or Boston Fed if needed.)

I know it isn’t very exciting, but it’s nice to know that they’re doing their part.

You Have To Pay To Play

Pamela Vaughan  of Hubspot writes a post titled Facebook Rolls Out ‘Promoted Posts’ to Extend the Reach of Your Page’s Content. It explains Facebook’s new tool that enables you to extend the reach of your Facebook page’s organic content through Promoted Posts. This is a paid offering that allows page admins to promote recent posts and extend their reach beyond the normal exposure they’d get in fans’ news feeds.

Why is it offered? According to Ms. Vaughan:

Traditionally, the reach of the organic content you post to your Facebook business page has been limited by the scope of Facebook’s EdgeRank algorithm. In other words, when you posted an update to your page, that update would only reach a limited number of your fans’ news feeds, because Facebook’s algorithm ranks and shows content based on the likely interest of a given user.

Promoted Posts now increases the percentage of fans your Facebook page’s organic content reaches, but only if you pay for it – a new strategy to monitize Facebook. However, Facebook isn’t revealing exactly how much more that percentage is. They will only say this:

Your promoted posts will be seen by a larger percentage of the people who like your Page than would normally see it. It will also be seen by a larger percentage of the friends of people who interact with your post. – Facebook

How It Works

For a fee, you can promote a post on your Facebook Page, including status updates, photos, offers, videos, and questions. This generatse sponsored stories that get delivered to  desktop and mobile news feeds, rather than the right-hand sidebar where ads are normally displayed. They are seen by people who are already fans of your page and friends of people who have liked, shared, commented, or claimed an offer from the promoted post.) These promoted stories are marked as “Sponsored” in news feeds, and run for up to 3 days after the post is  created. The tool is reportedly being rolled out to all Facebook pages that have at least 400 fans.

Uses for Promoted Posts

Promoted Posts can help marketers get more exposure for organic Facebook content, since, according to Facebook, fans spend 2x more on average than non-fans. Ms. Vaughan recommends this form of paid offering for the following purposes:

  • Posts about lead-gen marketing offers such as ebook landing pages.
  • Posts about marketing events such as webinar or live event registrations.
  • Posts about specials, discounts, or Facebook Offer coupons to drive in-store or on-site ecommerce sales.
  • Posts about new product or service launches.
  • Posts about important company news and other updates.
One of the advantages of this is that Facebook ad Manager provides robust tracking tools to measure the success of your efforts, which are explained in this post.

promo stats

promo stats 2

Hubspot provides detailed instructions on how to use Promoted Posts.  Facebook has also produced an overview video at https://www.facebook.com/help/promote.

Many Voice Objections

Many object to the slick and surreptitious manner in which a supposedly free social network is being monetized. Here are some of the criticisms people are raising:


This comment appears on the Yoga for Cynics Facebook Page:

Facebook is now pushing administrators to pay to promote every post/update from their page. In an attempt to make page administrators pay for “promoted posts,” Facebook will now only let 7% of you receive each update we post, meaning that now, in order to receive all our messages/posts, you must do the following:

1) Go to the Yoga for Cynics page. Note how clever and insightful the contents are.
2) Hover your mouse over where it says “LIKED” and click on “ADD TO INTERESTS LISTS”

By doing this, you will be able to see all of our posts in your news feed.


Bonnie Sandy provides the following frank feedback to Ms. Vaughan’s article:

Am I the only one that takes issue with an algorithm that controls your post views, followed with a package to have those post appear higher! Brooklyn hustlers have nothing on these guys! That just sounds like highway robbery.

Facebook…turned off the features that allowed us to communicate with [fans] then changed [the] algorithm so a 28-30% interaction is now down to 7% (overnight) now the ask to Promote post… seriously! –


Tony Argyle writes:
The fact that Facebook already censors information to page Likers because of what they deem ” relevant” is unacceptable – now they are suddenly prepared to make it relevant because you’re prepared to pay them?..and it appears to not even be pay per click. We’re about to discover less and less people will see anything on our pages until Facebook gets money. The fact that, in many cases you’ve already paid for a Facebook ad to generate the Likes doesn’t seem to stop Facebook from charging – a Like will soon be practically worthless.

 Bars4Bikers writes:
I noticed this yesterday, and I have a huge problem with it. We’ve all worked hard to get our “likes” and now Facebook is saying that they’ll let more of the people who already like our page see our posts for a fee? If it would impression on people who don’t already like the page, I could see where it would be great. This is extortion.

And Lee of the Buddhist Humor Page writes:

Last spring people saw their exposure rates plummet from 20 – 30% down to 7% due to the newsfeed algorithm changing. So under the old model, you posted a status update and if you had 1000 “talking about” regulars, you could pretty much expect 200 – 350 of them would see that post. Now, it’s capped at 70 unless you PAY.

Conclusions

Facebook’s IPO offer didn’t inspire much confidence, and their business model as an advertising platform has raised questions. I have already called attention to a little-known problem with their pay-per-click model – a problematic algorithm that in effect overcharges for clicks that have little or no expected engagement or conversions. The lack of fairness and transparency means that you should closely evaluate the return you are getting from your Facebook marketing.

Related Post

 

She worked in Marketing…He, in Compliance

Click to view the Facebook Marketing Humor and Wisdom Page

The Job Creators Strike Again!

 

 

Click to view the Facebook Marketing Humor and Wisdom Page

 

Click to view the Facebook Marketing Humor and Wisdom Page

, motivational psychologist and author of ‘Succeed’ and “Nine Things Successful People Do Differently” writes a must read article for HBR.org and the Huffington Post titled “The Presentation Mistake You Don’t Know You’re Making.”

Dr. Halvorson discusses an important principle in behavioral economics – a pervasive bias in presenter thinking (“more is better”) that actually runs counter to an equally pervasive consumer perceptual bias (less is more). The implications for marketing are significant.

The Presenter’s Paradox: More is Actually Not Better

In 2012, psychologists Kimberlee Weaver, Stephen Garcia and Norbert Schwarz undertook a robust series of seven studies into  the “presenter’s paradox” in the Journal of Consumer Research, Inc. Their findings in impression formation demonstrate that:

Perceivers’ judgments show a weighted averaging pattern, which results in less favorable evaluations when mildly favorable information is added to highly favorable information…We show that presenters…instead design presentations that include all of the favorable information available. This additive strategy (“more is better”) hurts presenters in their perceivers’ eyes because mildly favorable information dilutes the impact of highly favorable information.

The Effect Explained

We assume when we present someone with a list of accomplishments  or a bundle of product and service benefits, that consumers will see what we’re offering additively. The example Dr. Halvorson gives is this: In applying for a job, we may list the following qualifications:

  • Graduating from Harvard.
  • Having a prestigious internship.
  • Demonstrating a record of successfully applying rigorous statistical skills.

Knowing that the company does business in Latin America, we add the following skillset:

  • Having taken 2 semesters of Spanish in college.
The result: The first 3 skills all rank a “10” on the scale of impressiveness, but the last skill ranks only a “2.” So how is this perceived by the interviewer?
We reason that more is better. Added together, we believe we have enhanced the effectiveness of our presentation:
  • 10 + 10 + 10 + 2 = “32” in impressiveness.

But the client or buyer reasons differently:  Consumers don’t add up the impressiveness, they average it,  seeing the big picture by looking at the package as a whole, rather than focusing on the individual parts.  Their perception:

  • (10+ 10+ 10+ 2)/4 = “8” in impressiveness.

The better proposition is to not add the less impressive benefit or accomplishment (2 semesters of Spanish.)  The consumer averages this as follows:

  • (10 + 10+ 10)/3 =”10″ in impressiveness.

So mentioning an additional benefit of lessor value makes you a less attractive candidate than if you’d said nothing at all.

The Effect Also Works “In Reverse

The same effect emerges in creating deterrents to discourage bad behavior. Another study asked participants were asked to choose between two punishments to give for littering: 1) a $750 fine plus two hours of community service, or 2) a $750 fine. Results:
  • 86% of participants administering punishment felt that the fine plus community service would be the stronger deterrent.
  • However,  participants who were handed these punishments rated the $750 with the two hours of community service as significantly less severe than the fine alone.

They reasoned that the overall punishment was on average less disparaging because two hours of community service isn’t really that bad.

Marketing Experiment

The research examines the implications of this effect for a variety of marketing contexts. Buyers were presented with an iPod Touch package that contained either an iPod, cover, and one free song download, or just an iPod and cover. The surprising result:

  • Buyers were willing to pay an average of $177 for the package with the download.
  • But they were willing to pay $242 for the one without the download. The addition of the low-value free song download brought down the perceived value of the package by as much as $65.

Yet, a second set of participants asked to play the role of marketer and judge which of the two packages would be more attractive to consumers overwhelmingly (92%) choose the package with the free download.

Financial Marketing: Humana Cheapens Their Value Proposition

Medicare Advantage products offered by private insurers provide an alternative to traditional Medicare. They are aptly named since have some significant advantages: they are more comprehensive, covering deductibles and copays that traditional Medicare does not, and prescription drug coverage as well, if elected.

They also provide some additional ancillary benefits, including vision care and wellness benefits.

One of the big providers, Humana, aired an infomercial during the end-of-year open enrollment period. The infomercial devoted a disproportionate amount of time to hawking the benefits of, and showing client testimonies about, membership in the Silver Sneakers fitness program. The value of health club membership is rather insignificant in comparison to providing comprehensive care in the event of chronic and life threatening illness. The presenter’s paradox informs us that devoting so much time to calling out this benefit of lesser value cheapens the consumer’s perception of the brand.

Conclusion

More is actually not better, when you add a benefit or feature that is of lesser quality than the rest of your offerings. Its dilutes the favorability of core benefits.

Dr. Halvorson’s advice: to stop ourselves from making this kind of mistake, marketers should think “big picture:

What does the package I am presenting look like taken as a whole, and are there any components that are actually bringing down its overall value or impact?

Related articles by Heidi Grant Halvorson, Ph.D.: click here.

 

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