How can conversations be money? What is money?
Money is a floating exchange as Wikipedia describes:
The Nixon Shock was a series of economic measures taken by President Richard Nixon in 1971 including unilaterally canceling the direct convertability of the US Dollar to gold. It helped end the existing Bretton Woods system of international financial exchange, ushering in the era of freely floating currencies that remains to the present day.
Remove the ability to convert dollars to gold and money becomes an idea. Money exists on a checkerboard where other “pieces” such as oil, housing and even Big Macs float together in a constant give and take.
Money has no static “value”. Once money moved from fixed exchange to a free float checked by other similar instruments ANYTHING can be thought of as “currency”. Since it takes investment to create websites, products and the social/mobile conversations that prime the new Ecommerce conversations are money.
Work Back To The Money
If your online store made $100, has 10 subscribers 5 of whom bought with an Average Order Value (AOV) of $20, generated 20 social shares, 5 return visits in a year on average, 5 reviews, 5 comments, 5,000 words of content, and a Lifetime Value (LTV) of $100 per customer here is how conversations become money:
Cost of Acquisition: $20 ($200 in marketing / 10 subscribers).
LTV / COA: $5 to $1 ($100 LTV / $20 COA).
Conversations: $3.33 gross ($100 in Sales / 30 total conversational elements 20 shares, 5 reviews, 5 comments).
Conversations Costs: $6.66 ($200 in Marketing / 30 total conversational elements).
Annual Value of An Average Customer: $100 ($20 AOV * 5 return visits)
This example uses a favorite modeling tactic – ISOLATE and ASSIGN. Isolate a factor such as conversations and then assign 100% of all sales and costs. Once you have Conversation Gross Sales & Costs run the model for other channels such as email marketing, social media marketing, video marketing and content marketing.
We are using the associative principle to defeat the attribution monster.
Attribution is moot as long as each isolated element is calculated with the same metrics. In our example our marketing costs are high. Marketing costs can be 2x sales for a new site, but they better not stay that way for long. We try to keep our marketing costs to 20% or less of gross sales.
Just as the dollar is pegged to other “currency-like instruments” conversations are pegged to other “conversation-like” instruments too such as social media marketing, email marketing and content marketing. Look at the value of content marketing in our model as it too is underwater:
$.04 a word (I’ve paid that before)
$.02 in sales per word
50% underwater as everything will be with these numbers
Now let’s suspend our concern for profitability since this is new site where we knew our initial marketing costs would exceed our running costs and compare the value of a word $.02 to value of a conversation $3.33. This analysis isn’t meant to ELIMINATE supportive ideas, but modeling metrics like this helps understand the “more with less” idea.
More with less is about finding the tactics and ideas where LESS effort generates more response thus driving costs down. In our example conversations provide more of an impact per “unit of work” than writing content. You can’t eliminate content writing since those 5,000 words are part of a matrix that generated $100 in sales.
Matrix is a generous word. Big bowl of spaghetti is a more accurate analogy. As we mix Internet marketing tactics they become related to each other. Its impossible to isolate tactics from each other. Eliminate the content and the number and value of conversations are sure to fall. This is the “seesaw dance” every Internet marketing tactic does with every other tactic (i.e. big bowl of spaghetti).
Conversations Are The New Money Because
Conversations are the new money because every online purchase started with a conversation. The vast majority of conversion starting conversations are Word-of-Mouth (WOM). Here are some amazing WOM stats from Newstex.com:
Word-of-mouth affects purchase behavior.
50% of purchase decisions are influenced by word-of-mouth.
Word-of-mouth has massive reach.
1,000 customers can generate 500,000 conversations about a brand.
Word-of-mouth builds audience trust.
92% of consumers trust recommendations from friends and family more than any other form of advertising and just 10% trust brands today.
Word-of-mouth influences people.
81% of consumers are influenced by their friends’ social media posts.
Word-of-mouth supports positive reputation management.
66% of brand mentions on the social web are positive.
Word-of-mouth affects search engines.
25% of search results for the world’s 20 largest brands are links to user-generated content published via social media.
Word-of-mouth marketing works.
89% of consumers believe that customer testimonials are the most effective content with 70% reviewing online customer reviews first when they consider a brand.
Curagami’s mission is simple – help ecommerce merchants and content marketers KNOW what content has value and why. Armed with a little information merchants and content marketers enter the magical land of “get MORE, do LESS”.