MAXIMISE ROI USING SOCIAL MEDIA
Return On Investment (ROI), the elusive, concrete ROI. As marketers we know how difficult it is to measure direct causality and direct profit impact of much of our marketing efforts.
This only increases with multiple stakeholders holding us accountable for the money we spend. As one senior marketer told me, “there are literally hundreds of variables – some more prominent than others and we can’t say in any scientific way which ones are more successful than others”. So are we chasing after the wind regarding ROI for Social Media? I don’t think so. I have spoken to industry experts and done my own research to understand if there is an ROI on Social Media, and if so, what should the appropriate measures be and what actions should we be taking to get an ROI?
Should you measure social media results?
On one hand, there is some big talk regarding ROI and social media. Liam Walsh, Director of Sales and Commercial Development for Facebook AU/NZ, claims that Facebook are “working to identify ways to measure offline sales generated from social campaigns run on the site. Initial results indicate that 70% of campaigns get an offline ROI of 3X or higher, and 49% of campaigns get a return of 5X or greater.”*
On the other hand, according to a recent survey from Manta, a social network for US small businesses, about 61% of small businesses don’t see any return on investment on their social-media activities. Yet, almost 50% say they’ve increased their time spent on social media.
So, given all this, should we use and measure social media in our business?
5 Reasons why Social Media DOES have a positive ROI
- Builds a credible database of customers who want to hear from you – this list has value, both now and into the future.
- It facilitates “social commerce”, that is, it propagates networks for you brand/business that are based on friendships they trust, like and respect. In short, social commerce is the new ‘word-of-mouth’. For example, a Funeral Company had demonstrable success with Facebook because it offered an outlet to grieve, talk and gain helpful tips like ‘how to help young kids at funerals’ – cleverly, it offered a online ‘submit quote’ button through which substantial prospective leads were generated.
- By listening to and engaging with social media, you are able to get detailed research and insights into your target market.
- It IS the way consumers are dialoguing today – like it or not. There is a fundamental shift in power, away from businesses and towards consumers. Social media and technology (especially mobile technology) has facilitated this. We face the choice of either being part of the revolution or to watch it.
- Perhaps the most important reason is that it allows you to ADD VALUE. Social media, as part of a (integrated) marketing arsenal is an important weapon. Not a substitute, but a compliment. For example if a consumer was weighing up which credit card to ‘purchase’, they would consider many features like the interest rate, days credit, loyalty programs etc. – all dimensions on which many credit card brands are equal. However, if that consumer really didn’t like talking to frustrating ‘Customer Contact Centres’ with their trite answers and keypad menus, and instead could have a real-time conversation via social media with someone who answered their personal questions, that could well be sufficient to sign-up a new customer(s).
Now, I admit that many of these are very difficult to measure, but nonetheless, have positive impact on a business’s value-proposition.
4 Reasons Why Social Media DOES NOT have a positive ROI
- Sales and Brand damage from possible negative feedback. For example the recent Facebook reactions to Myer CEO Bernie Brookes’ comments about the impact to retailers following Government plans for the National Disability Insurance Scheme.
- The ‘noise’ overwhelms purpose & relevance – that is, “we don’t really know what conversation to have”.
- It’s too difficult, too time consuming – not for us.
- Businesses don’t even try to measure it. Sara Carter, a social media analyst claims that over 70% of online businesses that utilize Social Media as part of their marketing drive don’t bother to measure their return on investment. I think, part of the complication here is ‘attribution’, do we use first-click or last-click attribution – it’s just too difficult to measure!
Is there a positive ROI on social media?
Ultimately, there are far too many variables to limit social media to ROI causality. Perhaps the real question to ask first is, “do you want to be actively engaged with your customers?” If you think active engagement can lead to enhancing your value proposition, then yes, social media will have a positive ROI, because social media (done well) forces a business/brand to become more customer-centric. Social Media helps add value to customers beyond your product. Done well, there will be a positive ROI from acquisition, retention or up selling.
4 ways to maximise your ROI:
- Ensure you are offering added value to your customers. Does it provide a genuine utility? Is your social media content relevant, valuable and useful? A good hierarchy to guide you to social media strategy for ROI success would be:
- First “Service customers” use the medium to resolve their pain, give them answers in a reasonable time frame – you will get credit for this and/or avert a bigger disaster.
- Second “Push out general announcements” that are helpful/valuable (e.g. interest rate announcements).
- Third “Market to them”. Give useful guidance and information (such as links to articles) in reply to users questions, and if promotions are relevant then use them.
- Invest in measurement & listening tools e.g. Radian 6 and Oracle can provide you with valuable consumer insight that will help to optimise your digital content and even inspire new product content.
- Test & Measure:
- Try to work out a baseline Sales/Profit and then add social media impact to determine the difference. Todd Wasserman at Mashable suggests that perhaps the simplest way to calculate ROI is to look at your overall sales and then attribute a boost at least in part to your social media advertising or activity.
- Track Engagement – not just ‘Likes’ but rather how many of your customers are talking about you – target 10% (note: this will fluctuate, so this would be over several months). I recommend you use unique phone numbers, promo codes to track.
- Track referral traffic and/or Leads to ecommerce site/website/enquiry/quote or other revenue generating action, and then apply a dollar value to each lead depending on how many you typically convert for an average sale. Google analytics can help here.
- Like any campaign it needs time to develop a strategy and resource appropriately.
Cost and timing expectations with social media ROI
Timings: ROI is inevitably delayed because it takes time for posts and conversations to resonate with the customers to the point where they go from visitors to paid customers. The experts I spoke to suggest this could take at least 6 months, so be patient.
Costs: for a medium sized business your investment will be somewhere between $40-60,000 p.a if you look to outsource to experts and use them to develop content and strategy.
I suggest you embrace this media, don’t approach it as a bolt-on, but rather as a serious part of your marketing strategy. Consider my points 1-4 above and enjoy growing your business, learning from your customers and building your value proposition.
In the end, business is about a value proposition – social media when done well forces a brand to become even more customer-centric and if social media is doing this then there will be a positive ROI from acquisition, retention or an up-selling point of view.
*source B&T 29/3/13, p9