Akolade DMF14


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  • Will be explained in a later section….
  • Want to answer these questions before you begin
    Know rationale for SMROI (the ROI of SMROI – costs and benefits)
    Know how you use SM, to then identify what to measure, and therefore what data you need
  • May discover you are doing more on social than you think
  • High value examples
  • Four overview types detailing how extensive the roi should be
    Look at hypothesis and ‘value’ of ROI and match with costs
  • Other benefits:
    Eg NPS
    Identify most influential users, determine most valuable customers/online users (ie for better targeting)
  • Savings as compared to “traditional” and non social
  • Dialogue provided actionable recommendations to Connectro
  • Akolade DMF14

    1. 1. 25-Jun-14 Social Media Return on Investment Workshop @HughStephensAkolade Digital Marketing 2014 Workshop A, 25 June 2014 #DMF14
    2. 2. 25-Jun-14 • Strategy, risk and advisory services – Risk management products: eLearning, monitoring – ROI products – in development! – UPVOTE – company magazine (?next week) 2 About Dialogue Consulting Strategy // Risk // Advisory
    3. 3. 3
    4. 4. 25-Jun-14 • Introductions • Part 1 • Morning tea (~10:30) • Part 2 • Finish (~12:30) 4 Agenda Questions & Tangents welcome!
    5. 5. 5
    6. 6. √Σπμ (!!!11!!1!)
    7. 7. 25-Jun-14 8 Primer: stats and numbers.
    8. 8. 25-Jun-14 • When we estimate, we are making assumptions on the true population mean. • If you don’t have every piece of information (e.g. from every person), you are estimating. • Sometimes you are confident that your estimate is good, others not. 9 Confidence in estimations We usually estimate things. Our confidence varies.
    9. 9. 25-Jun-14 Number line 10 0 $$$$$$ $
    10. 10. 25-Jun-14 • “I am xx% confident that the true population mean falls between yy and zz.” • Measurements reduce uncertainty. 11 Confidence intervals Measurements aim to narrow a confidence interval.
    11. 11. 25-Jun-14 • Monte Carlo • Basic concept: RETURNSOCIAL = [n(conversion traffic referred from social) * av(value sale) * P(social actually drove them there)] + [n(customer acq through social) * av(value of socially referred cust)] Estimates n(sales) == 2,000 av(val sale) = $110 (sd 25) P(social drive) = 0.1– 0.7 n(cust acq) = 400-1200 Av(value social ref cust) = $340 (sd 90) 12 Simulation is important Simulation helps model uncertainty & its impact
    12. 12. 25-Jun-14 • Midpoint estimate: $338,000 • Monte Carlo estimate: $359,590 (n=1k) • Similar, yes. But very few numbers estimated! • Often used to work out P(ROI>0)… 13 Monte Carlo Estimates Monte Carlo simulates across many variable values
    13. 13. 25-Jun-14 14 The summary.
    14. 14. 25-Jun-14 1.Why are we conducting an ROI evaluation? 2.What are the costs and benefits of doing so? 3.Do we understand our social media strategy and uses? 4.Do we have the required analysis and data collection skills? 5.Are we aware of the SMROI principles and framework? 15 Fast Five Ask these questions before you begin p5
    15. 15. 25-Jun-14 1. Understand the objectives 2. Involve stakeholders 3. Understand the platforms 4. Identify which metrics and KPIs change 5. Be selective in what is valued 6. Understand the valuation process 7. Make reasonable assumptions 8. Do not over-claim or over-fit 9. Be transparent 10.Verify the result 16 10 key SMROI principles Following these principles will increase the SMROI integrity p5
    16. 16. 25-Jun-14 • Business Strategy Avenue Evaluating social media based on the costs and revenues of executing business objectives • User Lifetime Value Evaluating social media based on the users connected to your social media accounts • User Network Analysis Evaluating social media based on the user network and amplification model • Opportunity Cost Evaluation Evaluating social media based on available alternatives 17 Remember the models There are four main models to evaluate SMROI p5
    17. 17. 25-Jun-14 Agenda 18 1 • What is SMROI? 2 • Why should you evaluate SMROI? 3 • Why isn’t it more common? 4 • How can you calculate SMROI? 5 • How does Dialogue Consulting do it?
    18. 18. 25-Jun-14 What is SMROI? Defining what we don’t know.1 19
    19. 19. 25-Jun-14 • Ratio between costs and revenues • 100% ROI == (?success?) – $1 expenditure, $2 made in revenues 20 SMROI? SMROI is simply ROI applied to a social media context p17
    20. 20. 25-Jun-14 Common examples include: • Sales • Advocacy – Word of mouth – User generated content • Leads • Donations 21 Revenues There are many sources of social media revenues
    21. 21. 25-Jun-14 Common examples include: • Personnel • Social media budgets e.g. Facebook Ads • Time • Hardware • Software • Other resources 22 Costs Social media costs are more easily identified
    22. 22. 25-Jun-14 Determining SMROI 1 Context 2 Model Calculation 4 Evaluation 5 Reporting 23 Dialogue Consulting uses a five phase SMROI process p29
    23. 23. 25-Jun-14 Why evaluate SMROI? The business case.2 24
    24. 24. 25-Jun-14 • Understanding use • Justify expenditure • Gain insights into Fans and Followers • Identify where value is generated • Identify cost reduction opportunities • Modify and optimise social media use 25 The SMROI rationale Return-on-investment evaluations bring many benefits p10
    25. 25. 25-Jun-14 26 Quantifying use SMROI helps identify where social media generates value • Financial tangibility – is the return monetary (eg sales) or non- monetary (eg brand equity)? • Time – is the return made in the long or short term? p8
    26. 26. 25-Jun-14 The Social Media Exchange 27 adapted from Larson & Watson, 2011 Modelling use identifies value sources and opportunities p20
    27. 27. 25-Jun-14 Some examples: • Modelling optimum marketing mix with social media • Determining best customer service delivery • Identify most efficient HR recruitment methods • Utilise most effective communication channels 28 Applications of the SMROI evaluation SMROI findings can be used in multiple ways
    28. 28. 25-Jun-14 Why isn’t it more common?The usual suspects.3 29
    29. 29. 25-Jun-14 • No ‘stock’ formula or method • Many different social media uses • Difficult to link and quantify revenue sources • Need to understand the process • Requires financial and statistical knowledge • Not considered important to evaluate 30 Barriers to SMROI evaluation Tangibility, skill, and knowledge barriers prevent evaluation “too hard” “unnecessary” p11
    30. 30. 25-Jun-14 • Misunderstanding • Miscalculation • Misinterpretation 31 Where can SMROI evaluations go wrong? Three main errors may occur during the SMROI analysis p39
    31. 31. 25-Jun-14 • Model inputs • Appropriateness and exhaustiveness of the model • Use of Proxies 32 1. Misunderstanding Occurs before the SMROI is calculated p39
    32. 32. 25-Jun-14 • Over-valuation • Combined platform valuations • Metrics • Future value of the platform 33 2. Miscalculation Occurs during the SMROI process p40
    33. 33. 25-Jun-14 • Comparing ROIs • Application to different platforms • Accounting for risk • Changes to platforms and users 34 3. Misinterpretation Occurs after the SMROI is evaluated p41
    34. 34. 25-Jun-14 How do you calculate it?Numbers and mathemagic.4 35
    35. 35. 25-Jun-14 The Dialogue Consulting Process 1 Context 2 Model Calculation 4 Evaluation 5 Reporting 36 There are five main stages to determining SMROI p29
    36. 36. 25-Jun-14 37 It’s impossible to measure something you don’t understand 1 Context A problem well stated is a problem half solved. - Charles Kettering
    37. 37. 25-Jun-14 1 Context 38 Understanding your social media use is crucial Assessment •Why and how is social media being used? Hypothesis •What is the SMROI evaluating? Cost-benefit •How extensive should it be? p29
    38. 38. 25-Jun-14 39 Use Assessment Identifying social media use has two perspectives Business Perspective What are your goals, objectives and strategies for social media? User Perspective How are Fans and Followers engaging with your presences? p29
    39. 39. 25-Jun-14 • Decide what to calculate • Different approaches require different processes – extensiveness – models – data – reporting • Helps clarify SMROI objectives • Determine the value and costs of evaluation 40 Determine hypothesis Establishing hypotheses shapes the SMROI process p30
    40. 40. 25-Jun-14 41 Hypothesis examples “Customer service delivery on social media generates a positive ROI” (…therefore we should use it more and ask for more resources) “Social media marketing isn’t generating positive ROI” (…therefore we need to identify why, and modify our use) “If we used social media, it would yield a positive ROI” (…if so, we should implement a presence)
    41. 41. 25-Jun-14 42 SMROI Cost-Benefit Hypotheses identify the ‘value’ to compare with SMROI costs p14
    42. 42. 25-Jun-14 43 Extensiveness of SMROI SMROI extensiveness depends on resource availability p15
    43. 43. 25-Jun-14 • Model choices: which models can be used? • Fit to SMROI purpose: does it apply to what is being measured? • Available data: do we have the right information? • Impact: does the data accurately reflect social media use? 44 2 Model Identification Four main factors determine appropriate model selection p31
    44. 44. 25-Jun-14 2.1 Models 45 There are four main way of quantifying social media Business strategy avenue User lifetime value Network Analysis Opportunity Cost p17
    45. 45. 25-Jun-14 • Common Examples – Customer Service – Marketing – HR • Value and cost drivers depend on strategy – Savings – Revenues (sales etc) – Time – Resources 46 2.1.1 Business Strategy Avenue Social media value comes from executing strategies online p20
    46. 46. 25-Jun-14 • Users are ‘assets’ • Assumed to generate future revenue – Sales, advocacy etc • Compare revenue to cost of acquisition and retention 47 2.1.2 User Lifetime Value Fans and Followers have value for businesses p23
    47. 47. 25-Jun-14 48 2.1.3 Network Analysis Social media can be valued by the connectedness of users • Users connect to businesses and each other • Users may share your content or mention you online • Word of mouth and advocacy yields value • Need to model user connectedness • Weight users by value • Approximates value of network p25
    48. 48. 25-Jun-14 • Social media isn’t the only way! • Examines the value of the next best option • Value a strategy – Marketing or customer service on social media? • Value a platform – Customer service on Twitter or by phone? • Value of social media – Quantify losses of not having a presence 49 2.1.4 Opportunity Cost Social media can be valued by its best equivalent alternative p27
    49. 49. 25-Jun-14 • What data is needed? • How to collect it? – Surveys and questionnaires – Observation and tracking • Reaching users • Representative samples 50 2.3 Data Collection Ensure the right data is sourced for the model and evaluation p45
    50. 50. 25-Jun-14 • Non generalizable findings • Biased samples • Non-responsiveness • Badly phrased questions • Unusable data • Ethics 51 Issues with data collection These main considerations impact on data collection p47
    51. 51. 25-Jun-14 • Determines how much of an outcome relates to social media • Outcomes indicators are metrics which explain costs and revenues • Errors arise from assuming your social media activity accounts for 100% of outcome indicators 52 2.4 Impact Determine how costs and revenue factors relate to social media p32
    52. 52. 25-Jun-14 • Alternatives to social media activity which may better explain outcomes • Compare these to determine impact 53 Benchmark Indicators Comparing against indicators reduces attribution errors p34
    53. 53. 25-Jun-14 • Deadweight: the outcome may have occurred regardless • Displacement: increase in social media activity may decrease other activities • Attribution: other factors may be contributing to the outcome • Drop-off: the outcome may reduce over time 54 Determining Impact Four factors explain the difference between indicators p32
    54. 54. 25-Jun-14 3 Calculation • Build the model: does it reflect your social media use? • Calculate the ROI figure: what is the return? • Apply a sensitivity analysis: what are the most influential factors? • Forecast changes: how might the ROI change in the future? 55 Determining SMROI should include sensitivity and forecasting p35
    55. 55. 25-Jun-14 4 Evaluation • Compare ROI values: how did social media perform? • Improvements: how can social media be used better? 56 Implementing findings can optimise social media use p35
    56. 56. 25-Jun-14 • How does investment in social media perform against traditional channels? • Modify social media use accordingly 57 Compare the ROI figures Determine how social media and other investments compare p36
    57. 57. 25-Jun-14 • How to gain more positive ROI? • Remember the ratio! • Examine current processes • What could generate higher return? • Where can cost savings be achieved? 58 Improve the SMROI figure Examine current activity to increase ROI p36
    58. 58. 25-Jun-14 5 Reporting • Format: Who is it for? • Process: How was it calculated? • Rationale: What outcome is intended? – Increased budget – More resources and personnel – Greater social media scope • Assurance: is it accurate? 59 SMROI findings must be communicated appropriately p37
    59. 59. 25-Jun-14 • Who conducted the SMROI • Why the SMROI was calculated • Stakeholder involvement • SMROI evaluation methodology • Rationale of proxies, assumptions, estimates or benchmarks used • Explanations and demonstrations of calculations • Review of the sensitivity analysis and the impact of changing variables • Recommendations based on findings 60 What to include in an SMROI report These key areas should be covered in your report p37
    60. 60. 25-Jun-14 How do we do it? A case study…5 61 Move to part 2 of your workbook!
    61. 61. 25-Jun-14 • Train provider for large city • Two presences • 12,000 Facebook Fans • 33,000 Twitter Followers • Frequent social media posting • Dedicated social media team (two employees) 62 Connectro Case Study Dialogue Consulting completed an ROI evaluation p4
    62. 62. 25-Jun-14 1. Consultation with Connectro 2. Determine what they wanted to evaluate – Customer service – Marketing 3. Examine how they use social media 4. Data collection and analysis 5. Calculation and evaluation 6. Findings and recommendations 7. Reporting 63 Process Application of the SMROI procedure to Connectro p4
    63. 63. 25-Jun-14 • Justify expenditure • Identify potential value from social media • Quantify current revenues and costs • Optimise use of social media • Identify opportunities for social media use • Focus on marketing and customer service strategies 64 Objectives Connectro and Dialogue identified key objectives p7
    64. 64. 25-Jun-14 • Provide service updates • Other Connectro and train usage information 65 Information channel Connectro keeps users updated via social media p6
    65. 65. 25-Jun-14 • Encourage train usage • Promote Connectro services • Frequent social media campaigns • Some paid promotion 66 Marketing Strategy Connectro uses social media to promote their services p6
    66. 66. 25-Jun-14 • Respond to user inquiries • Focus on quick resolution • Guaranteed response • Gain feedback from users 67 Customer Service Connectro uses social media as a customer service channel p6
    67. 67. 25-Jun-14 Overall Marketing Customer Service Costs • Time and resources • Software Paid promotion Value of lost use due to customer dissatisfaction Revenue s • Efficiency and cost savings Value of increased use due to campaigns Value of increased use due to user satisfaction 68 Cost and Revenue Identification Dialogue identified cash flows related to social media use p11
    68. 68. 25-Jun-14 • Positive figures • Every $1 gained $1.34 return 69 SMROI Results Dialogue found Connectro had an overall ROI of 34% p12
    69. 69. 25-Jun-14 70 Customer Service ROI 44% ROI on customer service in the last 12 months p13
    70. 70. 25-Jun-14 71 Marketing ROI 21% ROI on marketing in the last 12 months p13
    71. 71. 25-Jun-14 72 Identify the value drivers Significant cost and value drivers provide opportunities Greater utilisation and increase efficiency of social media Both Savings/Resources Focus campaigns to encourage behaviour change Improve user satisfaction Marketing Increased train use Customer service User satisfaction p15
    72. 72. 25-Jun-14 • Increase and focus on customer service satisfaction – Implement proper training and processes • Transfer additional customer service delivery to social media – Scale the customer service team and investment as required • Focus campaigns to encourage behaviour change – Reduce paid marketing on other channels – Apply demographic targeting strategies – Better utilise specific platform features – Research and target high value customer segments – Increase user awareness of their social media capabilities 73 Improving Connectro’s SMROI Apply SMROI findings to optimise social media strategy p15
    73. 73. 25-Jun-14 • Focused on key stakeholders • How to best communicate findings • How to implement recommendations • Provided assurance 74 Reporting Dialogue produced tailored SMROI reports for Connectro p16
    74. 74. 25-Jun-14 75 Dialogue recommends...
    75. 75. 25-Jun-14 Identify and understand your strategic purposes of maintaining a social media presence 76 Recommendation 1
    76. 76. 25-Jun-14 77 Recommendation 2 Social media presences should be evaluated regularly. Its use should be justified, cost- effective and add value.
    77. 77. 25-Jun-14 78 Recommendation 3 SMROI should be evaluated and help direct improvements to better extract value from social media.
    78. 78. 25-Jun-14 79 Recommendation 4 SMROI should be undertaken carefully to ensure models, metrics and calculations are accurate.
    79. 79. 25-Jun-14 80 Recommendation 5 To be valid and accurate, ROI models should remain fluid to reflect changes in social media platforms, uses and users.
    80. 80. 25-Jun-14 81 Questions?