The document discusses measuring return on investment (ROI) from social media marketing efforts. It provides examples of metrics used to measure non-financial and financial success, including website traffic, social media followers, and revenue. It emphasizes the importance of understanding lifetime customer value in order to accurately measure ROI and provides case studies of companies that improved ROI by leveraging social media.
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. 09/17/10 In order to measure ROI of marketing investments, you need to know Lifetime Customer Value #OPTSUM #ROI via @MikeDMerrill
22. Basic Online Metrics 09/17/10 Adapted from Paul Gillen at http://www.slideshare.net/pgillin/social-marketing-roi-yes-you-can 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. Applying ROI to Value of a Visitor 09/17/10 Adapted from Paul Gillen at http://www.slideshare.net/pgillin/social-marketing-roi-yes-you-can Monthly Visitors 10,000 Conversion Rate 5% Lifetime Customer Value $5,000 Calculation 10,000 * .05 * $5,000 Value of each visitor $25
24. Value of a Blog 09/17/10 Adapted from Paul Gillen at http://www.slideshare.net/pgillin/social-marketing-roi-yes-you-can 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
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