Social Media ROI: The Real Value of Social
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Social Media ROI: The Real Value of Social

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Presentation given at Michigan State University Social Media Executive Seminar on the calculating the return on social media based on customer lifetime value. ...

Presentation given at Michigan State University Social Media Executive Seminar on the calculating the return on social media based on customer lifetime value.

Understand the metrics and value calculations of social ROI

Learn how to quantify social media contributions to the bottom-line

Determine the impact that social media has on sales and other parts of the business, and their interrelatedness

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  • The bottom line is that consumers are not listening anymore. Only 14% of consumers even trust ads. Interruptive marketing has seen its day.Consumers control the online environment so brands need to think about facilitating user-created actions, not just user-generated content. Unlike magazines and TV where brands are speaking AT consumers, the Internet and social web allows for more back and forth interaction.Today, 78% trust peer recommendations and a majority of consumers (74%) rely on social networks to guide purchase decisions. (Gartner, July 2010)Brands not paying attention to what their customers say about them on sites such as Twitter should reconsider that attitude. A recent survey showed that 60% of people have chosen not to buy or use a product or service after reading negative comments about them online.On top of that, according to Forrester, by 2014, 53% of total retail sales (online and offline) will be affected by the Web, as consumers increasingly use the Internet to research products before purchasing. (Forrester, March 2010)
  • Social web has profoundly changed how customers interact with each other and with brands. You can no longer ignore and pretend like it does matter to your business.But what is the role of social media and social businessin your organization?
  • A study by Marketing Leadership Council (MLC), looked into 250 prominent brands and found that measured social media success is actually rare among brands. Only 1 out of 10 brands are seeing significant business results from their social media efforts. So, despite the large number of exciting social media campaigns, very few companies are actually seeing returns. Why is that? Or perhaps a better question: what distinguishes the 11% of brands seeing business results from the rest? And what can we learn from the 11% in terms of the role of social media fits in the organization.
  • What really distinguishes the 11% is a broader view of social media’s potential. More specifically it breaks down to three traits: Strategic focus – social media are used to enhance the brand’s competitive position by creating new value for consumersFirmwide collaboration – (and this is very important) social media has to be managed collaboratively to build and deepen firmwide customer relationshipsExecutive leadership – CMO advocates for social media across the enterprise and actively leads the firm’s efforts
  • So now that we have a better understanding of how social media fits (or should fit) into and across your organization, let examine some of the challenges with measuring ROI.

Social Media ROI: The Real Value of Social Social Media ROI: The Real Value of Social Presentation Transcript

  • Social Media ROI:The Real Value of Social
    Marcel Santilli - @santilli
    April 20, 2011
  • Placing a monetary value on social
    2
  • 3
    50 years ago…
    Successful businesses took the time to build relationships with customers.
  • Today.
    Efficiency and growth made companies forget the value of being social.
    4
  • 1
    Why social media matters
    Evolution of communication and interaction
    Role of social media in the organization
    Challenges with measuring ROI
    Framework to measure ROI
    The “R” and “I” in ROI
    Recommendations and key takeaways
    2
    5
    3
    4
    5
    6
    7
    8
    9
  • 6
    500 BILLION.
    Number of minutes spent on Facebook per month.
    13% of the time spent online in the US
    Average user spends 15 hours per month
    Last year, that was number was 150 billion.
  • 7
    25 BILLION.
    Amount of content items shared each month on Facebook.
    That’s more than 6x last year’s volume
  • 8
    500 BILLION.
    The number of peer influence impressions Americans generate per year via social media.
    62% from Facebook
  • 9
    27 MILLION.
    Number of tweets per day on Twitter.
    That’s 8x last year’s volume.
  • 10
    … is the second largest search engine in the world.
    36 HOURS.
    The amount of video uploaded to YouTube every minute.
    That’s more than double last year’s volume.
  • 11
  • 1
    Why social media matters
    Evolution of communication and interaction
    Role of social media in the organization
    Challenges with measuring ROI
    Framework to measure ROI
    The “R” and “I” in ROI
    Recommendations and key takeaways
    2
    12
    3
    4
    5
    6
    7
    8
    9
  • 13
    1960s
    Reached more people
    with undivided attention
    Fewer ads
    Today
    More ads
    Reach less people
    paying less attention
    REACH
    ADS
    TARGET AUDIENCE
  • 14
    14% of consumers trust advertisement
    78% trust peer recommendations
    74% rely on social networks to guide purchase decisions
  • 1
    Why social media matters
    Evolution of communication and interaction
    Role of social media in the organization
    Challenges with measuring ROI
    Framework to measure ROI
    The “R” and “I” in ROI
    Recommendations and key takeaways
    2
    15
    3
    4
    5
    6
    7
    8
    9
  • “Success is rare”
    16
  • Best in class approach to social media
    17
  • How social media plugs into the organization
    18
    Business Functions
    Business Processes
    Customer Service
    Business Development
    HR
    Legal
    IT
    Internal Communications
    Marketing
    Advertising
    Customer Support
    Collaboration
    Public Relations
    Measurement
    Reputation Management
    Data Analysis
    Research
  • How social media creates value for the brand
    19
  • Reshaping the relationship: Nike
    20
  • Nike Plus Community
    21
  • OPEN Forum (American Express)
    22
  • 1
    Why social media matters
    Evolution of communication and interaction
    Role of social media in the organization
    Challenges with measuring ROI
    Framework to measure ROI
    The “R” and “I” in ROI
    Recommendations and key takeaways
    2
    23
    3
    4
    5
    6
    7
    8
    9
  • Does the marketing funnel still work?
    24
    Source: Forrester
  • Challenge with attributing revenue to right touch point
    25
    First touch
    What do we attribute sales to?
    Last touch
  • How do you measure intangible benefits?
    26
  • Three biggest challengesBarriers to achieving buy-in on strategic social investments
    27
  • 28
  • 1
    Why social media matters
    Evolution of communication and interaction
    Role of social media in the organization
    Challenges with measuring ROI
    Framework to measure ROI
    The “R” and “I” in ROI
    Recommendations and key takeaways
    2
    29
    3
    4
    5
    6
    7
    8
    9
  • Framework
    30
    How can social media create customer value?
    Efficiency
    Effectiveness
    Acceleration
    Enterprise Approach
    Conversations
    Business objective:Reduce churn
    Brand + customer value
    Unique social experience
    Customer-centric KPI:Customer satisfaction
    Customer touch points
    (supporting social)
    Social transactional metrics:Sentiment, mentions, etc
    Customer Experience
    External factors
    (peers, competitors, etc)
    Sales cycle
    Retention cost
    Acquisition cost
    Customer Lifetime value
    Yield
    Reach
    # of Customers Impacted
    Cost
    (Tech, people, process)
    VS
    Frequency
    Retention
  • ROI and CLV equations
    31
  • The investment-return relationship
    32
    ROI should be measured here
    Investment
    Action
    Reaction
    Non-financial impact
    Financial impact
    This is very important but ROI doesn’t live here.
  • 33
  • 34
    Engagement is key
    Unaware
    Interested
    1st time participant
    Regular participant
    Passionate participant
    Awareness & interest
    Call to action
    Incentive to return
    Progressive benefit
  • 1
    Why social media matters
    Evolution of communication and interaction
    Role of social media in the organization
    Challenges with measuring ROI
    Framework to measure ROI
    The “R” and “I” in ROI
    Recommendations and key takeaways
    2
    35
    3
    4
    5
    6
    7
    8
    9
  • Customer value
    36
    Definition: The perceived worth of the set of benefits received by a customer in exchange for the total cost of the offering, taking into consideration available competitive offerings and pricings.
  • Four pillars of profit
    37
  • From satisfaction to profit
    38
    Increasing the customer retention rate by 5% increases the average lifetime value of the firm’s customers by at least 25%
    - Reichald,The Loyalty Effect, HBS Press.
  • Customer lifetime value (CLV)
    39
  • CLV sensitivity analysis
    40
    1% improvement = 13% increase in CLV
  • Example: Customer acquisition cost
    41
    Questions to ask:
    • Are customers impacted by social media cheaper to “acquire”?
    • How does social media impact CLV for these customers?
    • What metrics correlate to business objective? Why or why not?
    • What is the impact of social interactions on KPIs?
  • The “I” in ROI
    1. Technology
    Infrastructure, software, hosting and professional services
    2. People
    Development, strategy and planning, labor hours
    3. Process-related
    Training, workflow reengineering
    42
  • 7 Steps to ROI
    1. Set enterprise-wide business objectives
    2. Determine related KPIs and relevant metrics
    3. Estimate necessary investment (technology, people and process)
    4. Compare customers impacted by social media against those that were not
    5. Calculate CLV
    6. Estimate number of customers impacted in relation to investment
    7. Show relative ROI
    43
  • IBM exampleUsing social media internally to surface IBMers’ expertise
    44
    Outcome = $100 Billion
  • 1
    Why social media matters
    Evolution of communication and interaction
    Role of social media in the organization
    Challenges with measuring ROI
    Framework to measure ROI
    The “R” and “I” in ROI
    Recommendations and key takeaways
    2
    45
    3
    4
    5
    6
    7
    8
  • Recommendations and key takeaways
    1. Start with business objectives
    2. Think of how social media can change the way you do business
    3. Put social experience at the center
    4. Focus on creating value for your customer
    5. Prove ROI through CLV
    46
  • 47
    How can social media change the way YOU do business?
  • 48
  • Credit (white papers, research, pictures, blogs, articles, videos, etc)http://www.brandrepublic.com/news/969874/Social-networks-making-people-likely-complain-online/http://www.thestrategyweb.com/social-networks-make-people-more-likely-to-complainhttp://www.adobe.com/engagement/pdfs/Forrester_Adobe_TEI.pdf http://www.techzone360.com/topics/techzone/articles/131154-ibm-social-channelmedia-social-crm-trends.htmhttp://www.theappgap.com/top-5-social-media-myths.htmlhttp://www.realinnovation.com/content/c081103a.asphttp://thebrandstop.wordpress.com/marketing-frameworks/lifetime-value-customer-equity/http://www.slideshare.net/brieuc/whats-the-roi-of-your-mother-a-presentation-about-roi-and-social-mediahttp://pb-hass.deviantart.com/art/mother-and-daughter-24676572http://www.scribd.com/doc/49442666/The-Virtuous-Circle-The-Role-of-Search-and-Social-Media-in-the-Purchase-Pathway-Research-from-GroupM-Searchhttp://www.brandrepublic.com/news/969874/Social-networks-making-people-likely-complain-online/Closing the CMO Leadership Deficit in Social Media, Marketing Leadership Council (July 2010)
    49