Social Media ROI Explained


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How in the world do we measure Social Media ROI in the world of tweets, mentions and blogs? Simple framework to start measuring.

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  • Imagine if 5 years ago I came to you and said, I have a platform that will lower customer service costs, reduce returns, improve awareness, build brand loyalty and Drive revenue. It’s only $1MM but you’ll get $7MM in return. You’d say, who do I make the check out to. Today if I told you Social Media could do all of that but it costs zero, you would tell me to pound sand. Because there is no inherent cost you assume it has no value. Hi my name is Mike and I ’m a social media evangelist. The first step is admitting you have a problem. Notice I didn ’t say expert or guru. Why? First, the technology is changing so fast it’s important not to focus on the platform. How do you change how you acquire, retain and get referrals from your prospective customers. It’s a fundamental shift to how companies think about sharing content and helping others. I also think back 5 years ago how much easier it would have been to launch a new product a Dell if we had this kind of feedback loop.
  • Today ’s focus is on ROI. I’m going to spend a bit of time talking about this but the reality as marketers some times we get caught up with impressions, reach, and brand awareness and the overall quest for eyeballs. But he results with social media aren ’t instantaneous. It takes patience, evolution, and transition management within your company.
  • If I never saw this stock photo again there would be no love lost. Where do stock photos go to die? Blog posts.
  • However many start to invest in these social channels but remember to set the measurement criteria up front.
  • Note web visits are largest indicator but we are seeing evolution. We’ll come back to these
  • What ’s wrong with this metric. If I drive 10,000 people to your website and it doesn’t convert it’s irrelevant especially if your website sucks. Most folks can drive traffic but it may not be your target customer.
  • Is it nature vs. Nuture
  • With regard to investments in Social Media or any marketing for that matter we are trying to demonstrate a relationship between an investment of time or money in social media and revenue/profit In a Causal relationship we are looking to measure the actual revenue as a result of a specific sales channel such as Twitter. The example most cited here is Dell. They share Twitter specific promotions via twitter coupon codes to know where the promotion originated. Causal relationships are hard to nail down as there are often contributing factors. Correlation: Most commonly companies track overall sales or costs to see if there is an impact. So in aggregate did an increased investment in social media efforts drive up revenue more than average growth or reduce costs such as customer service, costs of sales, etc.
  • Before making investments in any marketing channel you need to decide what your goal is as it impacts how your implement social media examples New Customers – Focus on lead generation and lead capture Reducing costs – customer service via twitter and facebook
  • As you see here in this illustrative example we see a correlation to a rise in twitter followers and facebook fans and revenue. By overlaying several non-financial metrics with financial we have a better chance of understanding any correlation.
  • Nothing is more important to your business than acquiring new customers. In fact, research shows that it costs as much as 5-10 times more to acquire a customer than to keep one. But to determine how much to spend to acquire one, you need to understand what the LifeTime Value is. Once you know this you can make informed decisions as to where to allocate your marketing budget
  • Social Media ROI Explained

    1. 1. 09/17/10 Director of Marketing, ReachLocal President, Social Media Club of Dallas Organizer, Ignite Dallas @MikeDMerrill #OPTSUM #ROI
    2. 2. I Know I Saw My ROI Around Here Somewhere
    3. 3. Marketing has dramatically changed 09/17/10
    4. 4. From Interruption to Conversation… 09/17/10
    5. 5. 09/17/10 “ If your target market is humans, then you should be using Twitter” - @unmarketing #OPTSUM #ROI via @MikeDMerrill
    6. 6. Are You Even Measuring ROI? 09/17/10
    7. 7. What Are You Measuring? 09/17/10
    8. 8. Measurement is Improvement! 09/17/10
    9. 9. 09/17/10 Right or wrong, web traffic is the leading metric used today to measure social media success #OPTSUM #ROI via @MikeDMerrill
    10. 10. 09/17/10
    11. 11. The Equation 09/17/10 ROI= (Gain from Investment – Cost of Investment) Cost of Investment
    12. 12. Two Ways to Connect the Dots for ROI <ul><li>Cause </li></ul><ul><li>Correlation </li></ul>09/17/10 Profit Investment
    13. 13. What is your Financial Goal? <ul><li>Increase Revenue </li></ul><ul><ul><li>Increase in new customers </li></ul></ul><ul><ul><li>Increase in average revenue per sale </li></ul></ul><ul><ul><li>Increase in revenue from existing customers </li></ul></ul><ul><li>Reduce Costs </li></ul><ul><ul><li>Lower Cost of Customer Acquisition </li></ul></ul><ul><ul><li>Lower Cost of Customer Service </li></ul></ul>09/17/10
    14. 14. Evolution of Measurement <ul><li>Non Financial </li></ul><ul><li>Offsite </li></ul><ul><ul><li>Clickthroughs </li></ul></ul><ul><ul><li>Facebook Fans </li></ul></ul><ul><ul><li>Facebook Comments </li></ul></ul><ul><ul><li>Twitter Followers </li></ul></ul><ul><ul><li>Retweets </li></ul></ul><ul><ul><li>YouTube Views </li></ul></ul><ul><ul><li>YouTube Comments </li></ul></ul><ul><ul><li>Sentiment </li></ul></ul><ul><ul><li>Mentions </li></ul></ul><ul><ul><ul><li>Social </li></ul></ul></ul><ul><ul><ul><li>Press </li></ul></ul></ul><ul><li>Non Financial </li></ul><ul><li>Website </li></ul><ul><ul><li>Unique Visitors </li></ul></ul><ul><ul><li>Page Views </li></ul></ul><ul><ul><li>Time on Site </li></ul></ul><ul><ul><li>PageRank </li></ul></ul><ul><li>Non Financial </li></ul><ul><li>Conversions </li></ul><ul><ul><li>Contact form </li></ul></ul><ul><ul><li>Inbound Calls </li></ul></ul><ul><ul><li>Downloads </li></ul></ul><ul><ul><li>Event Registrations </li></ul></ul><ul><ul><li>Opt-in to email </li></ul></ul><ul><ul><li>Subscribe to Blog </li></ul></ul><ul><ul><li>Register for Online Community </li></ul></ul><ul><ul><li>Employment Apps </li></ul></ul><ul><ul><li>In-Store Visits </li></ul></ul><ul><ul><li>Support Calls </li></ul></ul><ul><ul><li>Returns </li></ul></ul>
    15. 15. Map Activity Timeline 09/17/10 Month 1 Month 2 Month 3 Month 4 Activated Twitter Added Twitter to Website Published Fan Page Added Fanpage to Website Press Release Published Blog Post Tweeted new offer Published Blog Post Posted Promotion to FB Spoke at Conference Held Webinar Industry Analyst Mentions Product Launch Leaked picture of product on FB New Product Announced Customer Case Study Comment o Fast Company Blog Posted First YouTube Video Posted pictures to FB Fan Page Publish Blog Post Announce Quarterly Earnings <ul><li>Overlay non-financial and financial to activity </li></ul><ul><li># of transactions, in store visits, coupon redemptions </li></ul><ul><li>Revenue </li></ul>Adapted from Olivier Blanchard at
    16. 16. Define Your Success Metrics 09/17/10 Adapted from Olivier Blanchard at
    17. 17. 09/17/10 Look for correlation by overlaying social media metrics with financial metrics over the same time period #OPTSUM #ROI via @MikeDMerrill
    18. 18. 09/17/10
    19. 19. Lifetime Customer Value 09/17/10 Years Total Revenue <ul><li>What is the value of a new customer? </li></ul><ul><ul><li>Initial sale </li></ul></ul><ul><ul><li>Repeat business </li></ul></ul><ul><ul><li>Up-sell </li></ul></ul><ul><ul><li>Referrals </li></ul></ul><ul><li>Knowing this value helps you… </li></ul><ul><ul><li>Determine how much to spend to get a new customer </li></ul></ul><ul><ul><li>Focus your marketing budget on the most cost-effective tactics </li></ul></ul><ul><ul><li>Develop plans to increase repeat business </li></ul></ul><ul><ul><li>Create programs to reward customer loyalty </li></ul></ul><ul><ul><li>Offer incentives to drive referrals </li></ul></ul>
    20. 20. Lifetime Customer Value - Example Avg. sale per customer Avg. repeat sales/year Avg. years as customer Special one-time purchases Lifetime customer sales Avg. value of referrals Total lifetime customer sales Gross profit margin Lifetime customer value Program cost Customers to break even 09/17/10
    21. 21. 09/17/10 In order to measure ROI of marketing investments, you need to know Lifetime Customer Value #OPTSUM #ROI via @MikeDMerrill
    22. 22. Basic Online Metrics 09/17/10 Adapted from Paul Gillen at Lifetime Customer Value (Revenue x Longevity) x Margin Conversion Rate New Customers Visits / Leads Value of a Visit / Lead Visitor x Conversion Rate x LCV
    23. 23. Applying ROI to Value of a Visitor 09/17/10 Adapted from Paul Gillen at Monthly Visitors 10,000 Conversion Rate 5% Lifetime Customer Value $5,000 Calculation 10,000 * .05 * $5,000 Value of each visitor $25
    24. 24. Value of a Blog 09/17/10 Adapted from Paul Gillen at ROI= ($25,000 – $6,000) $6,000 316% Monthly Search Traffic 5,000 Estimated Traffic w/Blog 6,000 Value of a visitor $25 Monthly value of a Blog $25,000 Monthly Blog Expense $6,000
    25. 25. 09/17/10
    26. 26. Case Study - Large 4 YR University in OK 09/17/10 Increase in Web Visits Increase in Twitter followers Increase in Revenue
    27. 27. McDonald’s Foursquare Campaign Brought in 33% more Foot Traffic 09/17/10 <ul><li>Foursquare day 4/16 </li></ul><ul><li>Randomly posted $5 and $10 coupons </li></ul><ul><li>Media published and promoted </li></ul><ul><li>Investment $1,000 </li></ul>
    28. 28. Brooks Stone: 1 Cast per month <ul><li>No website </li></ul><ul><li>No online marketing </li></ul><ul><li>No voice </li></ul><ul><li>No reach </li></ul>September 2009 <ul><li>4289 unique visits </li></ul><ul><li>#1 Google result for ”Connecticut Stonemason” </li></ul><ul><li>#1 Bing result for ”bluestone paths ct” </li></ul><ul><li>#1 Yahoo! result for ”ct shoreline stonework” </li></ul>June 2010 I’ve gotten more projects in the first half of 2010 than all of 2009 “ “ - Josh Brooks, Owner
    29. 29. Four Firkins: 1 Cast per day <ul><li>Static website </li></ul><ul><li>Infrequent updates </li></ul><ul><li>700+ Facebook fans </li></ul><ul><li>250+ Twitter followers </li></ul>August 2009 <ul><li>120+ Visits/Day </li></ul><ul><li>66 Clicks on Twitter from 1 Cast </li></ul><ul><li>50,000+ visits in 9 months </li></ul><ul><li>2,326 Facebook fans (330% Increase) </li></ul><ul><li>1,113 Twitter followers (440% Increase) </li></ul><ul><li>Engagement on every Cast </li></ul>June 2010 50% of my store traffic comes in as a direct result of my daily cast “ “ <ul><li>Jason Alvey, Owner </li></ul>
    30. 30. AJ Bombers <ul><li>1 year old Café – Milwaukee </li></ul><ul><li>Growth was static for first 6 months of business (+/- 5%) </li></ul><ul><li>Started using Twitter </li></ul><ul><ul><li>Tweeted specials </li></ul></ul><ul><ul><li>Asked for menu suggestions </li></ul></ul><ul><ul><li>Ran competition for new menu item </li></ul></ul><ul><li>January 2010 started using Foursquare </li></ul><ul><ul><li>Offered Mayor specials </li></ul></ul><ul><ul><li>February 2010 hosted “Swarm” event (50 people checking in) </li></ul></ul><ul><ul><li>1 hour prior ran a training session for non-foursquare users – 50 people showed up for training </li></ul></ul><ul><ul><li>165 showed up for the event </li></ul></ul><ul><ul><li>Growth now running at 110% per month over previous months </li></ul></ul>
    31. 31. Connect With Simon @incslinger [email_address] Book Now available for Pre-Order at save $8 NOW
    32. 33. Social Media Club Mission <ul><li>Promote media literacy, </li></ul><ul><li>Promote standard technologies, </li></ul><ul><li>Encourage ethical behavior, and </li></ul><ul><li>Share best practices. </li></ul><ul><li>Social Media Club hosts conversations that explore key issues facing our society as technologies transform the way we connect, communicate, collaborate and relate to each other. </li></ul>
    33. 34. SMC Dallas Branding and Social Sites <ul><li>Name: Social Media Club of Dallas </li></ul><ul><li>Hashtag: #smcdallas </li></ul><ul><li>Website and Blog: </li></ul><ul><li>Twitter: @smcdallas </li></ul><ul><li>Facebook: </li></ul><ul><li>LinkedIn: Search for Social Media Club Dallas </li></ul><ul><li>Flickr: </li></ul>
    34. 35. Upcoming SMC Dallas Events <ul><li>October 7 th , 2010 </li></ul><ul><ul><li>Screening “The Social Network” </li></ul></ul><ul><ul><li>Sponsored by @bizzydallas </li></ul></ul><ul><li>October 21 st , 2010 </li></ul><ul><ul><li>Social Media Tips and Tricks </li></ul></ul><ul><li>November 18 th , 2010 </li></ul><ul><ul><li>Amber Naslund @ambercadabra </li></ul></ul><ul><li>December 8 th , 2010 Holiday Party </li></ul>
    35. 36. <ul><li>Let ’s Connect and Follow Each Other </li></ul>09/17/10 @MikeDMerrill [email_address]