Imagine you’re a CEO or an investor and you want to know what customers think of your latest product launch. You can do a survey, but they’re long and tedious. Or you can look at last year’s survey.
The American Customer Satisfaction Index, an economic indicator that measures the satisfaction of consumers across the U.S. economy, is good, but it only comes out once a year. That’s like driving by looking in the rear view mirror.
Researchers at Arizona State University’s W. P. Carey School of Business have come out with a new measure to take the pulse of customer attitudes toward companies, which analyzes social media in real time.
The Social Media Promoter Score analyzes detailed social media sentiment and content.
“A lot of companies these days definitely have some outlet that they communicate with customers,” said study co-author Donghyuk Shin, an assistant professor in the Department of Information Systems. “Whatever customers post there kind of reflects their perception about the company. Either it's a positive testament or some kind of complaint about a particular product.”
Results are an aggregate of sentiments. Researchers put them into three groups: positive, negative or neutral.
“You can actually aggregate the whole thing and see, 'Oh, it seems like overall, people are leaning towards a more positive sentiment towards the company,'” Shin said. “And that's how basically we measured. So we add not just raw measures, like how many likes it got or how many shared, for example. We actually look into are people saying positive things or negative things about the particular company or brand or product.”
The score also accounts for abnormal returns, such as if a company makes or loses more than expected.
“There should be some explanation,” Shin said. “We tried both measures: the traditional one and the new one that we developed. It turns out that our newly developed method is a little bit more effective in terms of explaining that. So, on average, our new index actually kind of captures those abnormal returns."
Shin explained the score is not a replacement for traditional indicators like the American Customer Satisfaction Index.
“We're not trying to discard or throw away the existing one, which has been used for like 20 or 30 years,” he said. “What we're trying to do is compliment that, so that you can make a more informed decision in terms of investment.”
Top image courtesy Pixabay
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