Social Tags Reveal Consumers' Brand Associations and Predict Firm Value

Jul 31, 2014, 10:07 ET from American Marketing Association

CHICAGO, July 31, 2014 /PRNewswire-USNewswire/ -- New research shows how consumers' social tagging activities at websites such as Delicious, Pinterest, Digg, etc. provide a glimpse of what consumers really think about a brand by revealing their brand associations.  Social tags then act as proxy measures of brand performance and predict the financial valuation of the firm owning the brand. 

Social tagging or social bookmarking has emerged as a new way to share and categorize online content, allowing users to express their thoughts, perceptions, and feelings with respect to diverse concepts such as brands, firms, music, politics, and more. In social tagging, content is connected through user-generated keywords known as "tags" and is readily searchable through these tags (such as hashtags in Twitter). Social tagging or "folksonomy" as it is often referred to, contains rich associative information that offers marketers opportunities to infer what consumers think about a brand through the associations they make using the tags.

Using the data collected from delicious.comthe research examined social tagging data for 44 firms across 14 markets, and found that these associations act as proxy measures of customer-based brand equity and are able to explain firm value. The analysis appears in the July 2014 issue of the American Marketing Association's Journal of Marketing.

"The metrics we derived from social tags are very rich," explain the article's authors Hyoryung Nam and P. K. Kannan, marketing professors from Erasmus University in Netherlands and the Smith School of Business, University of Maryland, respectively.  "They not only capture customers' brand familiarity and favorability of the associations, but also the competitive overlap of brand associations, which tells us which other brands share these associations."  While there could be many factors such as accounting metrics, media citations and other user-generated content such as online reviews, etc. that affect firm valuation, the authors controlled for these factors and found that social tags still have significant informational value in explaining unanticipated stock returns.  

"What this means is that users' social tags are not just their opinions, views, thoughts, and feelings but collectively provide a proxy for the forward-looking market sentiments about a brand and firm" explain Nam and Kannan.  Apart from the prediction aspect, they highlight that their framework now provides a new set of metrics to track, measure, and manage brand equity, proactively improve brand performance, and thus have an impact on a firm's financial performance.

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