• by Charlene Weisler , Op-Ed Contributor, January 30, 2014

Matt Roche, CEO of  Extole, helps to answer the question of how the social media ecosystem affects sales and conversions in a measurable way.  Extole uses referrals to lead customers through the ad funnel.

In my interview with him, Roche talks about his work at Extole, the social media space as it pertains to sales, the metrics his company has developed to quantify the efficacy of referrals on sales and the concept of the 12^th Man.

View the interview videos here.  Below is a short excerpt from the interview:

CW: How do you target consumers?

MR:  We don’t target consumers. That is the neat thing about social referrals. I used to be in a business that used targeted marketing, segment-based marketing, segment-based delivery.

This is a different type of behavioral targeting, but the behavior you are targeting is friendship. So no matter what the segments are that you can buy, on an advertising network or on TV, there is no segment that is more precise than the one that says, ‘I can trust you.”  That is the segment that you are buying: trust. What we are allowing you to do is buy trust at scale. So when Matt decides to refer to Charlene, there is something in our relationship that says that this is something that you would like. In a business context, it would be different than in a personal context. But it is the type of micro-targeting that implicitly uses our relationships.

 CW: What kind of metrics do you use?

MR:  It is not about engagement or mindshare or other fuzzy metrics – still important, but very difficult to get a handle on how they impact the end business. Our business is about acquiring customers. So we measure our business on what percent of your new customer acquisition comes through social referrals. This has proven to be very successful.

When I first started at Extole, I thought that the affiliate [response rate] was between 3% and 5% of the people who use it to get customer acquisitions. We were asked by our clients if Extole could do that. As it turns out, Extole is delivering a 10% response rate in its acquisitions of people. In fact, our top three customers do 40%, 38%, 20% of their total acquisitions through Extole. A third or more of the customers who are paying them money on any given period of time are coming directly from referrals in their own customer base.

Another important metric is conversion rate. Those in online commerce businesses know how important conversion rate is. It is the ratio of visitors to eventual buyers or subscribers. On an ecommerce site, between 1.9% and 2.1% is probably a good conversion rate. In our case, when a friend refers an offer, it can be 8%-12%, as much as ten times the conversion rate they would see normally, and those customers tend to be about 60% more loyal.