What’s Your Brand Value? Facebook Knows Says Booz&Co.

Measuring brand value has always been something of a dark art, says a Booz&Co article. Now, there is a new, easy way to make that determination using an unlikely source, Facebook.

The management consulting firm created a simple formula that compares the number of Facebook “likes” a brand has and adjusts it based on company revenue, something it refers to a “Likes Per Million” (LPM).

Booz defines brand value as the “proportion of consumers who are actively engaged with a group of products or services” – brand zealots, in other words – but suggests that measuring such engagement has long been a difficult process.

The company hypothesized that Facebook fan pages are uniquely positioned to identify those who fit that category. “A company’s (or brand’s) Facebook page is an Internet destination tailored for those zealots,” says the article. “It’s where people come to get information about the brand and to engage in dialogue with the producers and others who care.”

However, Facebook “likes” alone are insufficient to measure true brand value Booz concluded. (After all, larger companies are more likely to have more fans.) So, it added a modifier based on revenue. “[W]e hypothesized that a true indication of brand value would be the popularity of the brand’s Facebook page indexed to the size of its revenue stream,” the article states.

To test the hypothesis, Booz collected Facebook “like” numbers for a range of leading consumer-facing companies, then divided that by the companies’ revenue. The result can be seen in the graph below.

Topping the list are some of the usual suspects such as Starbucks and Coca-Cola, but others are dark horse surprises. For example, who would have guessed that Subway would outpace social media savvy brands like BestBuy, Target and Amazon.

The article also suggested that buying fans through “artificial” means such as Facebook ads or coupon giveaways do not factor as heavily as “likes” that come through organic means and, therefore, should be discounted.

Whether this LPM formula will become a de facto standard for determining brand value is anyone’s guess. It does, however, add weight to the argument that the influence of social media (and social commerce) will play an increasingly important role.

The research provided a number of interesting conclusions, so the post is well worth reading.