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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.
  • Transcript

    • 1. Social Media ROI:The Real Value of Social
      Marcel Santilli - @santilli
      April 20, 2011
    • 2. Placing a monetary value on social
      2
    • 3. 3
      50 years ago…
      Successful businesses took the time to build relationships with customers.
    • 4. Today.
      Efficiency and growth made companies forget the value of being social.
      4
    • 5. 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. 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. 7
      25 BILLION.
      Amount of content items shared each month on Facebook.
      That’s more than 6x last year’s volume
    • 8. 8
      500 BILLION.
      The number of peer influence impressions Americans generate per year via social media.
      62% from Facebook
    • 9. 9
      27 MILLION.
      Number of tweets per day on Twitter.
      That’s 8x last year’s volume.
    • 10. 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. 11
    • 12. 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. 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
      14% of consumers trust advertisement
      78% trust peer recommendations
      74% rely on social networks to guide purchase decisions
    • 15. 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
    • 16. “Success is rare”
      16
    • 17. Best in class approach to social media
      17
    • 18. 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
    • 19. How social media creates value for the brand
      19
    • 20. Reshaping the relationship: Nike
      20
    • 21. Nike Plus Community
      21
    • 22. OPEN Forum (American Express)
      22
    • 23. 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
    • 24. Does the marketing funnel still work?
      24
      Source: Forrester
    • 25. Challenge with attributing revenue to right touch point
      25
      First touch
      What do we attribute sales to?
      Last touch
    • 26. How do you measure intangible benefits?
      26
    • 27. Three biggest challengesBarriers to achieving buy-in on strategic social investments
      27
    • 28. 28
    • 29. 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
    • 30. 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
    • 31. ROI and CLV equations
      31
    • 32. 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. 33
    • 34. 34
      Engagement is key
      Unaware
      Interested
      1st time participant
      Regular participant
      Passionate participant
      Awareness & interest
      Call to action
      Incentive to return
      Progressive benefit
    • 35. 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
    • 36. 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.
    • 37. Four pillars of profit
      37
    • 38. 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.
    • 39. Customer lifetime value (CLV)
      39
    • 40. CLV sensitivity analysis
      40
      1% improvement = 13% increase in CLV
    • 41. Example: Customer acquisition cost
      41
      Questions to ask:
      • Are customers impacted by social media cheaper to “acquire”?
      • 42. How does social media impact CLV for these customers?
      • 43. What metrics correlate to business objective? Why or why not?
      • 44. 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
    • 45. 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
    • 46. IBM exampleUsing social media internally to surface IBMers’ expertise
      44
      Outcome = $100 Billion
    • 47. 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
    • 48. 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
    • 49. 47
      How can social media change the way YOU do business?
    • 50. 48
    • 51. 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

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