Can We Use Social Media to Measure a Merger's Impact?
When two companies merge, are their products or services different enough to justify separate existences? Researchers are using social media analytics to answer these types of questions.
- By Steve Swoyer
- October 11, 2016
When is a merger and/or acquisition (M&A) truly "synergistic?" It's a fascinating question, especially when M&As involve companies with product or service lines that overlap in some way. Are the products or services different enough from one another to justify their separate existences? Does the combined company risk cannibalizing sales of one product to promote the growth of another?
William Rand, an assistant professor of business management at North Carolina State University, wants to use social media analytics to answer these questions.
He presented his findings in September at Teradata's 2016 Partners Conference.
Case Study: Do Expedia's Brands Cannibalize Each Other?
Rand used the M&A activity of travel and tourism giant Expedia as an example. "How do these mergers and acquisitions that are occurring within the Expedia global brand affect each of the individual brands? In some cases, [this involves] mergers among brands in the very same vertical," he noted. "How can you develop an insight into the relationships among these different brands?"
Rand started with two hypotheses. The first was that because the merging companies are separate entities, M&As should result in a minimum of cannibalization. The second was that some cannibalization will inevitably occur as marketers push consumers toward one brand at the expense of another.
In this second case, one in-house brand could lose share to another -- or one (or both) brands could lose share to competitive offerings. This last is a function of finite marketing budgets, Rand noted.
Even if marketers give priority to one product or service at the expense of another, the overall marketing budget is still divided in some way between both. By contrast, a leaner competitor can focus all of its marketing budget on a single product or service. That could give it an advantage.
Measuring Product Sentiment with Social Media Analytics
Social media gives companies a new way to measure the effects of both potential product cannibalization and divided marketing spend. In the past, Rand said, organizations would have to manually survey a statistically significant subset of customers to get information like this.
"We'd ask things like if you think Travelocity is an 'innovative' brand or a 'cool' brand," he said, explaining that marketing analysts could then use this sentiment information to build a profile of a company and its competitors. In the social world, this information is already out there.
"If we pull in [Twitter] data where we're seeing conversations about these brands, [we can] categorize those conversations that are occurring and then try to classify the overall image that these different brands have," he said.
He explained that "this could allow [a parent organization] to segment these [in-house and acquired] brands in a way that doesn't result in loss of market share to competing entities or cannibalization by other brands in the [same] portfolio."
Preliminary Conclusions from Twitter Data Analysis
Rand's team collected six months of data from Twitter to create a "brand map" based on conversations relating to each of Expedia's major brands. His research is ongoing, but he did share some initial conclusions.
First and foremost: cannibalization doesn't seem to be an issue, surprisingly enough. There doesn't seem to be much of an interrelationship between brands -- overlap, conflation, or brand dilution -- which supports the hypothesis that there is not much cannibalization.
"In [the] initial assessment [we] graphed ... [we] did some exploration as to the relationship between different brands. If we just looked at [measurements of] Twitter value over time ... Expedia has the most value in this space. When we actually started to look at correlations among the data, what we found was there was little relationship between the different sub-brands of the Expedia global brand. Again, this seems to support the first hypothesis [i.e., no cannibalization]."
The initial Twitter-based study is just the beginning, says Rand. "We hope to build on this work to examine the relationship to marketing efforts and actual booking data."
Analysis of this kind will increasingly be within the reach of most large and midsized companies. Rand and other researchers (both in academia and the private sector) are beginning to measure this use of social media analytics and codify the emerging best practices.
Stephen Swoyer is a technology writer with 20 years of experience. His writing has focused on business intelligence, data warehousing, and analytics for almost 15 years. Swoyer has an abiding interest in tech, but he’s particularly intrigued by the thorny people and process problems technology vendors never, ever want to talk about. You can contact him at [email protected].