Erich Joachimsthaler is a business and sales expert. In 2009, he defined the idea of "social currency." In his words, it is the amount of success that an individual or business has in convincing customers to feel connected to particular brands. It is now an important economic concept. Economics is the science of how people buy goods, trade, and use money.

People often talk about their favorite or least favorite brands every day. A brand is a business' public image. For example, Nike's brand involves its name, its commercials, and what it posts to Twitter. That all affects how people perceive the company.

A New Way To Measure Wealth

In the 1980s, the French philosopher Pierre Bourdieu proposed the idea called social capital. It is a kind of wealth. Some have it more than others. It is not just based on money, though.

Each person has a network of family, friends, and other people around them. Depending on who you know, you often have more or less access to resources such as jobs. That is like having capital, or wealth, but it is actually social capital. Similar to cash, social capital can be earned, spent, and passed on.

Another of Bourdieu's ideas is called cultural capital. Bourdieu described cultural capital as a kind of status currency. A person's status is their standing in society. To shape it, people will seek out certain products. They want cool products to show off their social status. Cultural capital can help explain why, for example, people wait in line to buy new smartphone models or fancy name-brand shoes.

Joachimsthaler's definition of social currency updated Bourdieu's. Smartphones and social media have given branded companies a new ability. They can now target specific people they hope to reach.

In the past, advertising was more limited. Advertisers had to figure out what kinds of people read certain magazines and watched particular shows. Now, a large number of customers use sites like Facebook and Instagram. Brands are able to interact with social-media users online every day. Customers even talk about their products with friends and family. Companies want to understand how people communicate about their brands. The idea of social currency helps answer this question.

As with cash, not everyone has or can have social currency. This means that social currency is scarce, or limited. Scarcity is a basic concept in economics. Usually, the more a good is scarce, the more valuable it is.

Companies that want to gain social currency need to compete for consumers' attention on websites. Hundreds of other companies also want that attention. In this case, attention is a limited resource.

A Goal of Going Viral

It's easy to measure social currency of brands. You can just check how many people follow them on Facebook or Instagram. There are many ways to make this number go up. Sometimes companies tell their followers that their product is exclusive. In other words, they're saying the product is scarce.

Luxury brands do this. Diamond watches, for example, are shown as expensive and hard to find. Companies hope this will make more people want the product. Since the diamond watch is exclusive, the company says, purchasing it means the customer has more cultural capital. This only happens if buyers use the product in view of others, though. So, buyers are more likely to share information about those products. In this way, such brands are easily able to build social currency and become more desirable.

Smart brands sometimes try to make their advertisements "go viral." That means the ads are shared by both the company's followers and by people outside those communities. What makes people share viral content seems to be related to social currency. Just as people like to talk about being part of exclusive communities, they also like to share other things that make them look good. Say businesses are able to create video ads that their users want to share because it makes them look hip or smart. If so, brands can expand their communities. Hopefully, for them, this can bring more buyers.