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Measuring the ROI of relationships

Measuring the ROI of relationships

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  • 1. Marrying for the MoneyThe ROI of RelationshipsSXSWi March, 2011Jen van der MeerDachis Group@jenvandermeer#MROI
  • 2. What youʼll need to getROI from our time together today:1-2 NapkinsFelt tip penBasic math skillsAt least onerelationship tomeasure:_Dog_Friend_Mom_Customer_Potential fiancée
  • 3. I calculate ROI in my sleepWall St. @jenvandermeer
  • 4. ROI is under attack!@mghoza @ehuddleston#e20 RT @andyjankowski: "What’s missing in love it. Measure success through operationalmost #social business attempts is a systematic metrics that are meaningful to biz and focuslink to metrics that matter." @jbernoff #sbs2011 social ROI on exception mgmt @jhagel #SBS2011@tmuellernyc @tstaleyWe are at an inflection point, a social generation ROI analysis for social software is a "foolsreplaces spreadsheet generation. @jobsworth, errand" John Hagel #SBS2011#SBS2011
  • 5. Good news: you can measure theROI of ANY relationship = - 567%
  • 6. 4 Cases
  • 7. Case study 1:The rich husband
  • 8. The stats upfrontTime frame: 2006Job: Real estate lawyerEducation: Ivy undergrad, top law schoolProspects: Real estate developerCurrent salary: $80,000 + 20k in bonusSalary of fellow alumni:$1 MM in combination of cash + bonusIncreasing 100% each yearInvestment: fabulous wardrobe $100,000
  • 9. Problem: ROI frameworkData that was needed at the start:Length of relationshipCash transaction amount per yearProfit per transactionUnderstanding of stocks vs. flowsCost of investment to initiate relationship
  • 10. Length of relationship? 5 years
  • 11. Revenue per year: $1MM $1 MM 1000 750 500 $100k $100k 250 2006 2007 $10K 2008 0 2009 2010 Salary Cash Bonus
  • 12. Profit per yearly transactions $900k $900k 900 675 450 225 $-90k 0 2006 2007 -225 2008 2009 Profit 2010
  • 13. Marriage lifetime value Year 0 2006 2007 2008 2009 2010 Revenue $100k $1 MM $1 MM $100k $10k1 time acquisition cost -$100k Costs x year -$100k -$100k -$100k -$100k -$100k Profit x year $0 + $900k + $900k + $0 + $-90k $1.71 MM - $100k = $1.61 MM = 11.1x $100k
  • 14. Successful relationship? 11.1 x return
  • 15. Case study 2:Skippy
  • 16. Skippy lives for 14 years $50 x 12 months x 14 years - $8,400 $300 x 14 years - $4,200 $20 x 12 months x 14 years - $3,360 = - $15,960
  • 17. Skippy ROI: the value of a dog Initial cost: $2,000 Revenue: $0 Lifetime cost: $-15,960 ROI = $15,960 - $2,000 = $-17,960 = -898% $2,000
  • 18. ROI Conclusion: <
  • 19. What is the problem with measuringthe transactional cost of arelationship?What we value most are thetransactions that cannot bemeasured. Immeasurable. Beyondmeasure. Priceless.
  • 20. Case study 3:Value of aFacebook fan
  • 21. Value of a fan:Vitrue: $3.60 (earned media)Syncapse: $136.38 (layer cake of value)Cost of a fan:Webtrends: $1.07
  • 22. The value of a fan:
  • 23. Problem with value of a fan view“Fans” who Customers donʼt buy Fans and who are not (haters, customers on FB totallyunqualified) #ROIFAIL
  • 24. Case Study 4:Holistic customerLife time value
  • 25. Gas profits
  • 26. Marketing Decision:
  • 27. Gas customer lifetime value Year 0 2006 2007 2008 2009 2010 Revenue $1500 $1800 $2100 $2500 $30001 time acquisition cost -$100 Costs x year -$1410 -$1692 -$1974 -$2350 -$2820 Profit x year $90 + $108 + $126 + $150 + $180 $654 - $100k = $554 = 5.5x $100
  • 28. ROI Conclusion: < <
  • 29. So we CAN measure the ROI of arelationship.But transactional value distorts thepurpose of why people are inbusiness. Why they becomecustomers.
  • 30. “Your grandparents are far moreprepared for whatʼs coming than youare. They understood the humanconnection, small-town rules.All of you who just worry aboutmetrics, numbers, roi, youre going todie." - @garyvee
  • 31. SO WHAT.(do we measure).
  • 32. Healthy relationship?# and quality of:hugs. kisses. pleasant surprises.help around the house. positivereinforcement. listening. mutualsupport. shared experiences?
  • 33. Customer referral value LOYAL CUSTOMER SOCIAL CUSTOMER receipt $100 receipt receipt $200 $50 receipt $50 Higher Lifetime Value Higher Referral ValueAccording to Kumar, Petersen, and Leone, your most valuable customers are those whoseword of mouth brings in the most profitable new customers, regardless of how much theythemselves buy.
  • 34. Wall Street Secret Revealed:Customer Lifetime Value is notsomething that “the street” caresabout.When CMOs and CTOs say ROI,they really mean, “show me a pretty dashboard.”
  • 35. if you dream it...what are the levers and behaviors thadrive human connections betweenpeople and organizations?
  • 36. Dashboard: Social Program Health!presence! conversion! advocacy!size of tribe social contribution to media mix, revenue brand community % % weekly#followers score YTD Impressions YTD CPO YTD Revenue YTD Impressions YTD CPO YTD Revenue engaged growth3,544,215 2.3% +4.2% 49.5 55,542,222 $0.34 $42554,254 55,542,222 $0.34 $42554,254 campaigns: social channels Facebook Campaign XYZ impressions eng. CTR CPOcompetitive tribes 5,544,555 2.3% .15% .15 total followers competitor 1 client content performance competitor 2 Video ABC engagement rate WOM impressions sharing. CTR CTR 1/5/02 1/6/02 1/7/02 1/8/02 1/9/02sentiment analysis 3 months avg. 217,225 42.6% .5% .10% comments and sentiment about brand ambassador team Interactions Sampling Reach Trial Conversion based on 3.5 MM 10,998,877 2,444,546 43% sentiments Top ambassador eventsbrand tracking 3 months avg. social contribution to site referrals (SEO?) Twitter 20 Innovative 15 10 Youtube Edgy 5 Lansing, MI Oradell, NJ SF, CA Pragmatic 0 Facebook U Mich Ambassador Outside Out of touch May June July Aug Sept Oct Nov Dec Sampling Thank You Lands party event Sponsorship
  • 37. How far can we take this?As the social graph reveals a huge volume of dataabout our actual relational behavior, we have anopportunity to pause for a moment: to considerthe value system reflected in how we measureeach other, ourselves, our relationships in theworld.
  • 38. fitbit
  • 39. Energy Hub
  • 40. James Burke: Applying Analytics to Relationships
  • 41. Analog analytics
  • 42. In conclusion:ROI can be measured.But human connections are fluid,dynamic, and worth more thanfinancial transactions alone.To measure the health of arelationship, define those actions of reciprocity and advocacy.
  • 43. thank you! @jenvandermeer