What Is a Social Sentiment Indicator?
Social sentiment indicators enable companies to discover what they are doing right and how they might improve. These measures can also give investors an idea of how publicly-listed stocks might perform.
Social sentiment should not be confused with market sentiment indicators, which are designed to represent how a group or population feels about the overall market or economy.
- A social sentiment indicator analyzes aggregated social media data to help businesses understand how they are performing in the eyes of consumers.
- Social sentiment indicators serve a variety of purposes, helping companies gauge the health of a brand, keep tabs on how its competition and products are doing, and even devise and decide on future plans.
- They can also give investors an idea of how a publicly-listed stock’s share price might perform.
How a Social Sentiment Indicator Works
Keeping customers cheerful is paramount for companies targeting long-term success. When the public is happy with a service or product, and all its other interactions with the provider, company revenues and profits are more likely to rise.
In the digital age, it has become much easier for companies and investors to gauge how well businesses are treating their customers. Social sentiment indicators can tell us a lot about the public perception of a company, at least in terms of what is being said on social media.
These indicators extract information users post publicly to Facebook, Twitter, blog posts, discussion groups, and forums. If the social sentiment indicator shows a negative change in reputation, the company might be able to address the problem before it grows and starts potentially heavily weighing on its share price.
Advantages of Social Sentiment Indicators
Social sentiment indicators serve a variety of purposes. Companies might blame social media for triggering a rise in complaints and encouraging hate campaigns. However, these same firms can use the internet and social sentiment indicators to their advantage, too, including in the following ways:
- Identify trends to target new customers
- Develop successful marketing campaigns and gauge if they are spending marketing dollars wisely
- Determine how consumers feel about competitors and similar products
- Assess what to expand on and what to drop or change
- Protect and improve their brand identity and image
Social sentiment indicators are also helping to reduce the burden on customer service email and call centers. Nowadays, it is possible to address questions and problems en masse via social media. In some cases, these communication methods might even be used to reach out to highly influential individuals with a track record of swaying sentiment on popular chat platforms.
Investors, too, can benefit from social sentiment indicators because the type of information that they collate tends to have a bearing on stock prices. If an investor spots that people on social media have suddenly started to complain about a particular company, they could opt to sell before the rest of the market reacts. Value investors, on the other hand, might use these tools to buy into a stock that they believe has been excessively punished by internet gossip.
Recording Social Sentiment
Given that companies and brands may create huge volumes of social media posts, gauging how effective they are or how they have been received can be a big task. Accordingly, there are a number of social sentiment analysis tools available, such as BuzzSumo, HootSuite, Google Alerts, and PeopleBrowsr.
Slight differences can be found in each tool. Some, for example, might specialize in tracking particular digital comments or trends and not all will analyze every social media platform out there. Normally, the more comprehensive ones charge a fee.
Examples of Social Sentiment Indicators
Sport and Entertainment
Social sentiment indicators can be deployed in different ways. For instance, sports and entertainment companies sometimes use them to give customers a more engaging viewing experience.
Technology giant International Business Machines Corp. (IBM) sought to leverage demand for online commentary by developing its own social sentiment indicator. Sports fans can tap into this particular tool to see the volume and negative or positive trend of tweets about each player, giving viewers a real-time idea of how fellow viewers are perceiving a match.
Meanwhile, some companies have created social sentiment indices to gauge public perception of the economy. One such index, the Wall Street Journal-IHS United States Social Sentiment Index, analyzes the data in over 5 million messages a day localized by time, place, and gender to identify and analyze trends.