This document outlines the process for justifying social media investments using ROI analysis. It discusses how social media requires an allocation of limited resources like people, technology and time. It then walks through the steps to prove that social media is generating cost reductions or revenue increases, including establishing a baseline, creating activity timelines, measuring sales and transactions, identifying patterns between social media activities and business metrics, and ultimately calculating ROI. The key message is that ROI is about tying social media to actual business performance, not just measuring impressions and engagement.

1. Enough withthe Social Media BS.Give me the realz.Social Fresh Conference // 24 August 2009

2. SOCIAL MEDIA IS NOT FREE.

3. 1. It takes people.

4. 2. It takes technology.

5. 3. It takes time.

6. We have… rocks.… all of which are limited resources.

7. These resources=100%of your budgetE-MarketingEach resourcehas a specific costHead CountAdvertisingI.T.Inbound Call CenterEach resourceyields specific resultsMarketingSales Dept.AccountingPublic Relations

8. These resourcesgenerate100%of your businessE-MarketingLosing even 1% of your budget’s efficiency could seriously ruin your day.Head CountAdvertisingI.T.Inbound Call CenterMarketingSales Dept.AccountingPublic Relations

9. Okay fine. But if I’m going to take a chanceon this social media thing,it had better make good businesssense! Why should I allocateresources to it?

10. Reason #1:It will result in a cost reduction.Maybe in customer service?You mentioned something aboutbusiness intelligence andmarket research?Reason #2:It will generate more revenue.I want more transactions, more net new customers,more customer loyalty,etc.

11. Now go figure out whatProgram you have to cutto fund this Social Media thing.Remember that our bonusesare on the line.

12. Understand that a newSocial Media program’sfunding doesn’t appearout of thin air.:Which buckets do we emptyto fill this new one?

13. SAY HELLO TO:Business JustificationR.O.I.

14. R.O.I.RETURNONINVESTMENT

15. THE R.O.I. EQUATIONInvestmentExpectation of return

16. THE R.O.I. EQUATION(GAIN FROM INVESTMENT - COST OF INVESTMENT)ROI =COST OF INVESTMENT

17. Truth about R.O.I.ROI is a business metric, not a media metric.ROI is 100% media-agnostic.Only measuring digital or social won’t get you anywhere.

18. Reason #1:COST REDUCTIONReason #2:REVENUE GENERATIONRemember what Mr. Bossman said…

19. I shrank my PR budget by 20%and my outbound call budget by 40%.Now I can afford a team of social mediaRock stars. Can I get a hellz yeah?Okay, hotshot,You have your Social Media doohickey.Now I’d better see some real results!Or else…

20. Woohoo!I have a job!!!

21. Dudes, we are ON THIS!!!Let’s start engagin’!!!I call dibs on theCorporate blog.

22. Cool.ACCOUNTINGOne Month Later…

23. What about ourTwitternets?Oh my! Look at all the newvisitors to our website!and all of our FaceBook friends!Hot Damn, we even have comments on the blog!

24. This rocks!I never had it sogood!!!

25. Cool.ACCOUNTINGThree Months Later…

26. Yeah but…What aboutthe P&L?Monitoring to base…Monitoring to base…Our Google Analytics are throughthe roof! Even our social mentionsare wicked good!We have liftoff!

27. Measuring mediareally rocks myworld.

28. Nope.Anything?Nada.ACCOUNTINGSix Months Later…

29. What kind of mood is The old man in today?Not good.He doesn’t care how many visitorsthe website gets, or how manyeyeballs we estimate we’ve reached unless it means we’re sellingmore stuff.

30. But why?Our website is getting mad hits, Jack!And we have 3,000 followerson Twitter now!I’m sorry, son.If your Social Media programis generating revenue, we aren’tseeing it. We need to allocate resources where we canmake money.It’s just business.

31. Darn it.This media measurementstuff isn’t working.We need to starttying this stuff to actualBusiness performance.Where to start?Let’s see…At the beginning?

32. Things happen in sequence.

33. Non-financial impact is not ROI (yet).

34. Types of non-financial impactCustomer complaintsWebsite VisitorsImpressionsPositive pressClick-throughsYouTube viewsRetweetsCoupons distributedVisitors to a brick & mortar storePositive WOMDelivered emailsNegative pressNegative WOMEmployment applicationsBlog commentsFaceBook friendsSocial mentionTwitter followers

35. Non-financial impact = potential.

36. ROI = actualized potential.

37. Reason #1:COST REDUCTIONReason #2:REVENUE GENERATIONRemember what Mr. Bossman said…

38. I need proof thatwhat we’re doingis actually working.Start with proof of concept.

39. Step 1: Establish a baseline8% YoY Growth

40. Baselines illustrate deltas (changes)Is something happening here?

41. Step 2: Create Activity Timelines

42. Step 2: Create Activity Timelines

43. Step 2: Create Activity Timelines

44. Step 3: Look at Sales Revenue

45. Step 3: Also look at # of transactions

46. Step 3: Also measure net new customers

47. Transaction data should be specificF.R.Y.FREQUENCY, REACH, YIELDHow often customers transact. (transactions per month)How many customers you are reaching. (net new customers)How much they spend. ($ per transaction)

48. The latest numbers indicatethat our YoY sales $ are up 60%.Our individual transactions have doubled,as have our transacting customers.Something’s working! Groovy!Let’s figure out what.

49. Step 4: Measure transactional precursors

50. Step 4: Measure transactional precursors

51. Step 4: Measure transactional precursors

52. We overlaid all of our timelinesand noticed that since our social mediaactivities began, our website visits are up,our social mentions are also up, andeveryone seems to love us. So is there a discernable patternin this?

53. Step 5: Overlay all timelinesactivitiessocial dataweb datatransactionsloyalty metricsetc.

54. Step 6: Look for patternsImpactUncertain ImpactImpactImpactNo ImpactBeforeAfter

55. Step 7: Prove relationshipsHow was this groupTouched by SM?BeforeAfter

56. How longwill all thisanalysis take?It’s all a processof elimination, really.Isolating patterns, quantifying deltas,proving ad-hocs…Then allwe have to do isfigure out what the cost savings and revenue gainsare, and plug them into the equation.

57. THE R.O.I. EQUATION(GAIN FROM INVESTMENT - COST OF INVESTMENT)ROI =COST OF INVESTMENT

58. THE R.O.I. EQUATIONInvestmentExpectation of return

59. Oh wow.This R.O.I. thingwasn’t at all aboutmeasuring media,impressions andeyeballs!

60. All things remaining the same…We may have proof ofconcept.Hot damn!ACCOUNTINGFirst things first: Prove that Social Media works

61. So it turns out that our Social Media program is impactingevery aspect of our business excepttraffic in our brick and mortar stores.Can you get on that? Yeah. We needto find out why we aren’t havingan effect there. Kthxbye. Then use what you know to make it work better.

62. More store traffic.Roger that.Dudes, we are ON THIS!!!Let’s start engagin’!!!I’ll start crafting somewicked blog posts.

63. Finally, someone with somereal metrics for me to sink my teeth into!Good job, Sparky! You done gewd!

64. So I guess Social Mediais going to stick around a little whilelonger after all, isn’t it?Yessir.Looks like our budgetis safe for now.

65. Drinks for Everybody!

66. Olivier BlanchardPrincipal, BrandBuilder Marketing864.630.7398www.thebrandbuildermarketing.com@thebrandbuilder(on Twitter)www.smroi.net

67. SlideographySlide # Source3, 9, 10, 11, 18-31, 37, 38, 48, 52, 56,59-6546UFO (TV series) http://ufoseries.com/http://www.minnpost.com/stories/2008/06/18/2282/this_doesnt_compute_as_more_women_enter_scientific_fields_their_numbers_in_computer_science_are_decliningKim Jong Il puppet, from “Team America”http://blogs.rockymountainnews.com/bridget/kimjongil.jpg