1. Social Media ROI:
The Real Value of Social
Marcel Santilli - @santilli
April 20, 2011

2. Placing a monetary value on social
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5. 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
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12. 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
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13. Fewer ads Reached more people with undivided attention
More ads Reach less people paying less attention
ADS TARGET AUDIENCE REACH
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15. 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
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16. “Success is rare”
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17. Best in class approach to social media
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18. How social media plugs into the organization
Business Functions Business Processes
Marketing Customer Business HR Legal IT Internal
Service Development Communications
Advertising
Customer Collaboration
Public Support
Relations Measurement
Reputation Data Analysis
Management
Research
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19. How social media creates value for the brand
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20. Reshaping the relationship: Nike
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21. Nike Plus Community
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22. OPEN Forum (American Express)
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23. 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
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24. Does the marketing funnel still work?
24 Source: Forrester © 2011 IBM Corporation

25. Challenge with attributing revenue to right touch point
First touch
Searches on
Google and clicks
on paid search
What do we attribute
sales to?
Watches webcast
Visits four pages Watches YouTube
and poses question
and subscribes video and clicks
on Twitter (gets
to newsletter on product page
answer right away)
From newsletter,
Reads several blog
registers for
posts and engages Downloads a trial Purchase
webcast and
on social media
follows on Twitter
Last touch
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26. How do you measure intangible benefits?
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27. Three biggest challenges
Barriers to achieving buy-in on strategic social investments
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29. 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
29 © 2011 IBM Corporation

30. Framework
How can social media create customer value?
Efficiency
Enterprise Approach Effectiveness
Brand + customer value
Conversations Acceleration
Business objective:
Reduce churn
Unique social
experience
Customer-centric KPI:
Customer satisfaction
Customer touch points
(supporting social)
Social transactional
metrics: Customer
Sentiment, mentions, etc Experience External factors
(peers, competitors, etc)
Sales cycle
Retention Acquisition
cost cost
Customer
Reach Lifetime value Yield
# of Customers Cost
Impacted VS (Tech, people, process)
Frequency
30 Retention © 2011 IBM Corporation

31. ROI and CLV equations
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32. The investment-return relationship
ROI should be measured here
Non-
Financial
Investment Action Reaction financial
impact
impact
This is very important but ROI doesn’t live here.
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34. Engagement is key
Unaware Interested 1st time Regular Passionate
participant participant participant
Awareness & Call to action Incentive to Progressive
interest return benefit
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35. 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
35 © 2011 IBM Corporation

36. Customer value
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.
Customers define value (in terms of utility and not product or service)
Value is opaque even to the customers
Value is contextual – the end user, end use situation and environment
Value is multi-dimensional – Functional, emotional and economic
Value is a trade-off between benefits and costs
Value is relative – Relative to the next best alternative
Value is a mindset – the sole purpose of the firm is to create value not products or services
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37. Four pillars of profit
Customer
Loyalty
satisfaction
Customer
Engagement
value
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38. From satisfaction to profit
Increased Greater Share of Longer customer Forgiveness for
Consumption Wallet lifecycles occasional lapses
Operational cost Cross-selling
Price insensitivity Referrals
savings opportunities
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.
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39. Customer lifetime value (CLV)
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40. CLV sensitivity analysis
From To New CLV Change in CLV
Customer retention 50% 55% $ 93.74 ▲21%
Transactions per customer 2.00 2.20 $ 107.47 ▲39%
Average transaction size $250 $275 $ 107.47 ▲39%
Acquisition cost $150 $135 $ 92.18 ▲19%
Retention cost $50 $45 $ 84.76 ▲10%
1% improvement = 13% increase in CLV
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41. Example: Customer acquisition cost
Business objective KPI Metrics
Reduce customer acquisition • Cost per lead • Click-through rate by
cost • Lead conversion rate channel
• Marketing effectiveness • Engagement metrics
(Retweets, likes, comments)
• Organic search
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?
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42. 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
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43. 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
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44. IBM example
Using social media internally to surface IBMers’ expertise
Outcome = $100 Billion
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45. 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
45 © 2011 IBM Corporation

46. 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
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49. 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-complain
http://www.adobe.com/engagement/pdfs/Forrester_Adobe_TEI.pdf
http://www.techzone360.com/topics/techzone/articles/131154-ibm-social-channelmedia-social-crm-trends.htm
http://www.theappgap.com/top-5-social-media-myths.html
http://www.realinnovation.com/content/c081103a.asp
http://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-media
http://pb-hass.deviantart.com/art/mother-and-daughter-24676572
http://www.scribd.com/doc/49442666/The-Virtuous-Circle-The-Role-of-Search-and-Social-Media-in-the-Purchase-Pathway-Research-from-
GroupM-Search
http://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)
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