Making investment decisions from Twitter insight – Part Two

The next study in my review builds on using social media data to inform investment decisions. It is based on the assumption that sentiment towards certain brands and goods affect a firm’s earnings and therefore inform investment decisions.

A Dynamic Model of the Effect of Online Communications on Firm Sales. (Garrett Sonnier, Leigh McAlister and Oliver Rutz)

The McAlister Study found a strong connection between online chatter and a firm’s daily sales. Making social media chatter a valuable resource for investors open to making investment decisions using customer insight to make money in the stock market.

Now as a marketing practitioner, this paper really resonates with me.

Firstly, it speaks right to the principles for Value Based Marketing that the late Peter Doyle set out in his book of the same title. The book incidentally that motivated me to want to study an MBA.

The governing objective of management in all of today's leading companies is to maximise long-term returns to shareholders. Value Based Marketing defines marketing's role as contributing to the task of shareholder value creation.

Secondly, it quantifies what marketing professionals have always known, word of mouth is powerful.

If customers are saying good things about your brand to their network (friends, family, colleagues etc), more people will buy that brand’s products. If customers dislike your price, product, promotion, people, processes or place of business, they will not only not buy from you, but tell everyone too.

Thirdly, it puts customer experience of a brand at the top of the leadership team’s agenda.

McAllister et al found that there is a significant effect of positive, negative, and neutral online communications on daily sales performance. They make the case for executives to listen to customer insight and to act on it. However, one caveat on this final point, from my own experience - combine social media insight with all the other data you have collected into a single view of those topics.

Conclusions
Listening to what is being said in social media and twitter in particular is still a relatively new development. What we are finding out about an organisation’s performance from it is not.

The single biggest take away for the C-Suite is – there is no longer anywhere to hide. Your customers and stakeholders have a collective voice and they are learning how to use it.

Your investors will recognise poor customer experience in your share price.

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