The document discusses how to justify allocating resources to social media by demonstrating return on investment (ROI). It explains that social media requires resources like people, technology and time, which all have costs. To get budget for social media, one must show how it will reduce costs through activities like reducing customer service needs, or generate more revenue through increasing transactions, customers and loyalty. The document provides a framework for demonstrating ROI by establishing baselines, creating activity timelines, analyzing patterns between social media activities and business metrics, and quantifying the costs savings and revenue gains to calculate ROI.

1. Enough with
the 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 budget
E-Marketing Each resource
Head Count
Advertising has a specific cost
Inbound Call Center I.T.
Each resource
Marketing
Sales Dept. yields specific results
Public Relations Accounting

8. These resources
generate
100%
of your business
E-Marketing Losing even 1%
Head Count
Advertising of your budget’s efficiency
Inbound Call Center I.T. could seriously ruin
Marketing your day.
Sales Dept.
Public Relations Accounting

9. Okay fine. But if
I’m going to take a chance
on this social media thing,
it had better make good business
sense! Why should I allocate
resources to it?

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

11. Now go figure out what
Program you have to cut
to fund this Social Media thing.
Remember that our bonuses
are on the line.

12. Understand that a new
Social Media program’s
funding doesn’t appear
out of thin air.:
Which buckets do we empty
to fill this new one?

13. SAY HELLO TO:
Business Justification
R.O.I.

14. . . .
RETURN ON INVESTMENT

15. THE R.O.I. EQUATION
Investment Expectation 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: Reason #2:
COST REDUCTION REVENUE GENERATION
Remember 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 media
Rock 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 I call dibs on the
ON THIS!!! Corporate blog.
Let’s start engagin’!!!

22. Cool.
ACCOUNTING
One Month Later…

23. What about our
Twitternets?
Oh my! Look at all the new
visitors 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 so
good!!!

25. Cool.
ACCOUNTING
Three Months Later…

26. Yeah but…
What about
the P&L?
Monitoring to base…
Monitoring to base…
Our Google Analytics are through
the roof! Even our social mentions
are wicked good!
We have liftoff!

27. Measuring media
really rocks my
world.

28. Nope.
Anything?
Nada.
ACCOUNTING
Six Months Later…

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

30. But why? I’m sorry, son.
Our website is getting If your Social Media program
mad hits, Jack! is generating revenue, we aren’t
And we have 3,000 followers seeing it. We need to allocate
on Twitter now! resources where we can
make money.
It’s just business.

31. Darn it.
This media measurement
stuff isn’t working.
We need to start
tying this stuff to actual
Business 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 impact
Website Visitors Customer complaints
Impressions
Positive press
Click-throughs
YouTube views
Retweets Coupons distributed
Visitors to a brick & mortar store
Positive WOM
Delivered emails
Negative press
Negative WOM Employment applications
Blog comments
FaceBook friends
Social mention
Twitter followers

35. Non-financial impact = potential.

36. ROI = actualized potential.

37. Reason #1: Reason #2:
COST REDUCTION REVENUE GENERATION
Remember what Mr. Bossman said…

38. I need proof that
what we’re doing
is actually working.
Start with proof of concept.

39. Step 1: Establish a baseline
8% 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 specific
F.R.Y.
FREQUENCY, REACH, YIELD
How 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 indicate
that 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 timelines
and noticed that since our social media
activities began, our website visits are up,
our social mentions are also up, and
everyone seems to love us.
So is there a
discernable pattern
in this?

53. Step 5: Overlay all timelines
activities
social data
web data
transactions
loyalty metrics
etc.

54. Step 6: Look for patterns
Uncertain Impact Impact
Impact
Impact
No Impact
Before After

55. Step 7: Prove relationships
How was this group
Touched by SM?
Before After

56. How long
will all this
analysis take? It’s all a process
of elimination, really.
Isolating patterns,
quantifying deltas,
proving ad-hocs…
Then all
we have to do is
figure out what the cost
savings and revenue gains
are, 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. EQUATION
Investment Expectation of return

59. Oh wow.
This R.O.I. thing
wasn’t at all about
measuring media,
impressions and
eyeballs!

60. All things
remaining the
same…
We may have Hot damn! ACCOUNTING
proof of
concept.
First things first: Prove that Social Media works

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

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

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

64. So I guess Social Media
is going to stick around a little while
longer after all, isn’t it?
Yessir.
Looks like our budget
is safe for now.

65. Drinks for
Everybody!

66. Olivier Blanchard
Principal, BrandBuilder Marketing
864.630.7398
www.thebrandbuildermarketing.com
@thebrandbuilder (on Twitter)
www.smroi.net

67. Slideography
Slide # Source
3, 9, 10, 11, 18-31, UFO (TV series)
37, 38, 48, 52, 56, http://ufoseries.com/
59-65
4 http://www.minnpost.com/stories/2008/06/18/2282/this_doesnt_compute_as_more_wo
men_enter_scientific_fields_their_numbers_in_computer_science_are_declining
6 Kim Jong Il puppet, from “Team America”
http://blogs.rockymountainnews.com/bridget/kimjongil.jpg