The Problem of Inflation for Digital Marketing
Some days ago as I was on Facebook and my eye was caught by a campaign by a Non-Profit organization called WeDay. As you can see from the screenshot of the cheerful creative on their page, the campaign tagline is “1 Like = $1.”
That tagline really impressed me. How straightforward, how smart it is. What an immediate way for me to show my support. All they ask from me is 1 Like, which is $1— what an easy and awesome way to contribute to their fundraising. I am “liking it” and feeling great about my transaction.
But then I got conflicted. I remembered that finding the value of a digital action is what I do for a living, and I thought of the complex variables that we’re learning establish value. Countless hours are spent developing models and having conversations about the variance of value across clients and industries. How could this single non-profit organization confidently set the value of a Like, and make it so provocatively available?
The answer is belief. A belief from the business that the dollar value of a Like for the business is $1. The outcome of this public declaration is a speech act that changes the way visitors perceive the true value of one Like.
When I first saw the message, my mind translated it to mean that my Like is effectively giving this business $1. This happens because money is a belief system. Let’s take a look at the simple definition of money, from About.com:
“Money is anything that is commonly accepted by a group of people for the exchange of goods, services, or resources. Every country has its own system of coins and paper money.”
In this definition, the key is that money is “is commonly accepted by a group.” When you change a group, for example, a country, the money changes too.
To understand better how money is a construct, we can travel to an island called Yap in the South Pacific. In the pre-industrial era, the island used for currency round stones with one hole in the middle, called Rai, that weighed several tons each.
At the time, the Yap economy was working was through verbal transactions; the stone money never moved, but ownership was transferred through a verbal agreement. So if you wanted to buy a piece of land, then you would tell the seller where your Rai is located and agree to trade ownership of the stone in exchange for the land. After, the seller would be able to trade with the stone money the same way. This process could function even if the stones were under the sea!
This is a prime example that illustrating that money is essentially a fiction, a socially agreed-upon belief.
Marketing professionals and stakeholders always base marketing decisions on ROI, which means that there is always some estimate of the money their decisions generate. So one would imagine that we could all agree on the dollar value of a site visitor staying 5 minutes on a website, right?
The problem here is that although everyone estimates how marketing actions will translate to a monetary outcome, every stakeholder’s estimate is a little different. As a result, different parties within an organization disagree. For example:
In this example we can see that:
1. All parties translate the actions into some value.
2. The way that the parties value the actions varies widely.
This is a fundamental problem of inflation, as the actions have different “spending power” depending on the party responding. In this case, however, all three parties work under the same roof.
This marketing inflation problem reminds me of how Brazil moved from its extremely unstable currency, the Cruzeiro, to its current Real.
In the 1980’s Brazil's inflation reached 80% per month. At that rate, if eggs cost $1 one day, they'll cost $2 a month later. If it keeps up for a year, they'll cost $1,000. For example:
This reality made the people of Brazil lose faith in their currency, which created a loop that exacerbated the inflation.
The way Brazil dealt with the issue was to invent a new currency called the Unit of Real Value (“URV”). People still carried Cruzeiros, the local currency, in their pockets. But their wages, taxes, and all prices were now listed in URVs. And URVs were stable.
While all products and services were defined in URVs, the people did not hold URVs, they held Cruzeiros. The newspapers published a daily table showing the exchange rate of Cruzeiros to URV. Based on that, people knew how many Cruzeiros they need to buy a product/service.
The benefit of doing this was that today, tomorrow, and months later, the eggs would still cost 1 URV, no matter how the exchange rate to Cruzeiros changed.
People began to believe in the value of money again as the URV was always the same, despite the fact that they were technically exchanging Cruzeiros. As people started thinking in URVs, the inflation started falling drastically, and finally stopped with the introduction of the new currency: the Real. One Real was worth exactly one URV.
In 20 years, Brazilians tricked themselves out of having no faith in their currency into 100% confidence that it would never change. The Real is one of the most stable currencies in the world today.
Extending this line of thinking to the inflation problem we examined in digital actions, we see that we need to create our own URV. Let’s call it DURV for “Digital Unit of Real Value.” This way, we can translate the perception of every party into DURVs and make all parties use a single currency.
To a single currency in this setup would mean, for example:
1. To define and report success on DURVs
2. To make targets and KPIs based on DURVs
3. To prioritize initiatives based on DURVs
Stakeholders will start talking about actions and decisions based on a shared monetary convention. This builds trust and belief within the organization in the value of this virtual currency, which expands as stakeholders use it to discuss issues with other stakeholders.
Using a common language makes a wide range of questions easier to solve. For example:
● How should I optimize my marketing mix (from a strategy to a tactical level)?
● Where should I direct the traffic to my website?
● How many Likes should my brand page get?
Right now you see dozens of metrics trying to quantify success, which makes it hard to comprehend and communicate. This is bad for decision making.
The way that you define your virtual currency to bring your organization can be as simple as setting a $1 value for all actions, or as complicated as making a sophisticated statistical model. See Avinash Khausik: Website goal value for some good starting guidelines.
Once your organization believes in your virtual currency (as with the URVs) you can move into translating the virtual currency into actual dollars on 1-1 rate, and true ROI becomes a reality. It is true ROI, because everyone within the organization believes in it.
Use this reasoning to work within your organization to understand what money is and truly stands for. Unravel the monetary problems that digital properties have and improve your decision making, communication, and profits.
Now to the bottom line: how much is 1 Like worth for your organization?
This American Life (The invention of money)