Social Media ROI: The Real Value of Social
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Presentation given at Michigan State University Social Media Executive Seminar on the calculating the return on social media based on customer lifetime value. Understand the metrics and value calculations of social ROI Learn how to quantify social media contributions to the bottom-line Determine the impact that social media has on sales and other parts of the business, and their interrelatedness
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Social Media ROI: The Real Value of Social
- 1. Social Media ROI: The Real Value of Social Marcel Santilli - @santilli April 20, 2011
- 2. Placing a monetary value on social 2 © 2011 IBM Corporation
- 3. 3 © 2011 IBM Corporation
- 4. 4 © 2011 IBM Corporation
- 5. Why social media matters Evolution of communication and interaction Role of social media in the organization Challenges with measuring ROI Framework to measure ROI The “R” and “I” in ROI Recommendations and key takeaways 5 © 2011 IBM Corporation
- 6. 6 © 2011 IBM Corporation
- 7. 7 © 2011 IBM Corporation
- 8. 8 © 2011 IBM Corporation
- 9. 9 © 2011 IBM Corporation
- 10. 10 © 2011 IBM Corporation
- 11. 11 © 2011 IBM Corporation
- 12. Why social media matters Evolution of communication and interaction Role of social media in the organization Challenges with measuring ROI Framework to measure ROI The “R” and “I” in ROI Recommendations and key takeaways 12 © 2011 IBM Corporation
- 13. Fewer ads Reached more people with undivided attention More ads Reach less people paying less attention ADS TARGET AUDIENCE REACH 13 © 2011 IBM Corporation
- 14. 14 © 2011 IBM Corporation
- 15. Why social media matters Evolution of communication and interaction Role of social media in the organization Challenges with measuring ROI Framework to measure ROI The “R” and “I” in ROI Recommendations and key takeaways 15 © 2011 IBM Corporation
- 16. “Success is rare” 16 © 2011 IBM Corporation
- 17. Best in class approach to social media 17 © 2011 IBM Corporation
- 18. How social media plugs into the organization Business Functions Business Processes Marketing Customer Business HR Legal IT Internal Service Development Communications Advertising Customer Collaboration Public Support Relations Measurement Reputation Data Analysis Management Research 18 © 2011 IBM Corporation
- 19. How social media creates value for the brand 19 © 2011 IBM Corporation
- 20. Reshaping the relationship: Nike 20 © 2011 IBM Corporation
- 21. Nike Plus Community 21 © 2011 IBM Corporation
- 22. OPEN Forum (American Express) 22 © 2011 IBM Corporation
- 23. Why social media matters Evolution of communication and interaction Role of social media in the organization Challenges with measuring ROI Framework to measure ROI The “R” and “I” in ROI Recommendations and key takeaways 23 © 2011 IBM Corporation
- 24. Does the marketing funnel still work? 24 Source: Forrester © 2011 IBM Corporation
- 25. Challenge with attributing revenue to right touch point First touch Searches on Google and clicks on paid search What do we attribute sales to? Watches webcast Visits four pages Watches YouTube and poses question and subscribes video and clicks on Twitter (gets to newsletter on product page answer right away) From newsletter, Reads several blog registers for posts and engages Downloads a trial Purchase webcast and on social media follows on Twitter Last touch 25 © 2011 IBM Corporation
- 26. How do you measure intangible benefits? 26 © 2011 IBM Corporation
- 27. Three biggest challenges Barriers to achieving buy-in on strategic social investments 27 © 2011 IBM Corporation
- 28. 28 © 2011 IBM Corporation
- 29. Why social media matters Evolution of communication and interaction Role of social media in the organization Challenges with measuring ROI Framework to measure ROI The “R” and “I” in ROI Recommendations and key takeaways 29 © 2011 IBM Corporation
- 30. Framework How can social media create customer value? Efficiency Enterprise Approach Effectiveness Brand + customer value Conversations Acceleration Business objective: Reduce churn Unique social experience Customer-centric KPI: Customer satisfaction Customer touch points (supporting social) Social transactional metrics: Customer Sentiment, mentions, etc Experience External factors (peers, competitors, etc) Sales cycle Retention Acquisition cost cost Customer Reach Lifetime value Yield # of Customers Cost Impacted VS (Tech, people, process) Frequency 30 Retention © 2011 IBM Corporation
- 31. ROI and CLV equations 31 © 2011 IBM Corporation
- 32. The investment-return relationship ROI should be measured here Non- Financial Investment Action Reaction financial impact impact This is very important but ROI doesn’t live here. 32 © 2011 IBM Corporation
- 33. 33 © 2011 IBM Corporation
- 34. Engagement is key Unaware Interested 1st time Regular Passionate participant participant participant Awareness & Call to action Incentive to Progressive interest return benefit 34 © 2011 IBM Corporation
- 35. Why social media matters Evolution of communication and interaction Role of social media in the organization Challenges with measuring ROI Framework to measure ROI The “R” and “I” in ROI Recommendations and key takeaways 35 © 2011 IBM Corporation
- 36. Customer value Definition: The perceived worth of the set of benefits received by a customer in exchange for the total cost of the offering, taking into consideration available competitive offerings and pricings. Customers define value (in terms of utility and not product or service) Value is opaque even to the customers Value is contextual – the end user, end use situation and environment Value is multi-dimensional – Functional, emotional and economic Value is a trade-off between benefits and costs Value is relative – Relative to the next best alternative Value is a mindset – the sole purpose of the firm is to create value not products or services 36 © 2011 IBM Corporation
- 37. Four pillars of profit Customer Loyalty satisfaction Customer Engagement value 37 © 2011 IBM Corporation
- 38. From satisfaction to profit Increased Greater Share of Longer customer Forgiveness for Consumption Wallet lifecycles occasional lapses Operational cost Cross-selling Price insensitivity Referrals savings opportunities Increasing the customer retention rate by 5% increases the average lifetime value of the firm’s customers by at least 25% - Reichald, The Loyalty Effect, HBS Press. 38 © 2011 IBM Corporation
- 39. Customer lifetime value (CLV) 39 © 2011 IBM Corporation
- 40. CLV sensitivity analysis From To New CLV Change in CLV Customer retention 50% 55% $ 93.74 ▲21% Transactions per customer 2.00 2.20 $ 107.47 ▲39% Average transaction size $250 $275 $ 107.47 ▲39% Acquisition cost $150 $135 $ 92.18 ▲19% Retention cost $50 $45 $ 84.76 ▲10% 1% improvement = 13% increase in CLV 40 © 2011 IBM Corporation
- 41. Example: Customer acquisition cost Business objective KPI Metrics Reduce customer acquisition • Cost per lead • Click-through rate by cost • Lead conversion rate channel • Marketing effectiveness • Engagement metrics (Retweets, likes, comments) • Organic search Questions to ask: • Are customers impacted by social media cheaper to “acquire”? • How does social media impact CLV for these customers? • What metrics correlate to business objective? Why or why not? • What is the impact of social interactions on KPIs? 41 © 2011 IBM Corporation
- 42. The “I” in ROI 1. Technology Infrastructure, software, hosting and professional services 2. People Development, strategy and planning, labor hours 3. Process-related Training, workflow reengineering 42 © 2011 IBM Corporation
- 43. 7 Steps to ROI 1. Set enterprise-wide business objectives 2. Determine related KPIs and relevant metrics 3. Estimate necessary investment (technology, people and process) 4. Compare customers impacted by social media against those that were not 5. Calculate CLV 6. Estimate number of customers impacted in relation to investment 7. Show relative ROI 43 © 2011 IBM Corporation
- 44. IBM example Using social media internally to surface IBMers’ expertise Outcome = $100 Billion 44 © 2011 IBM Corporation
- 45. Why social media matters Evolution of communication and interaction Role of social media in the organization Challenges with measuring ROI Framework to measure ROI The “R” and “I” in ROI Recommendations and key takeaways 45 © 2011 IBM Corporation
- 46. Recommendations and key takeaways 1. Start with business objectives 2. Think of how social media can change the way you do business 3. Put social experience at the center 4. Focus on creating value for your customer 5. Prove ROI through CLV 46 © 2011 IBM Corporation
- 47. 47 © 2011 IBM Corporation
- 48. 48 © 2011 IBM Corporation
- 49. Credit (white papers, research, pictures, blogs, articles, videos, etc) http://www.brandrepublic.com/news/969874/Social-networks-making-people-likely-complain-online/ http://www.thestrategyweb.com/social-networks-make-people-more-likely-to-complain http://www.adobe.com/engagement/pdfs/Forrester_Adobe_TEI.pdf http://www.techzone360.com/topics/techzone/articles/131154-ibm-social-channelmedia-social-crm-trends.htm http://www.theappgap.com/top-5-social-media-myths.html http://www.realinnovation.com/content/c081103a.asp http://thebrandstop.wordpress.com/marketing-frameworks/lifetime-value-customer-equity/ http://www.slideshare.net/brieuc/whats-the-roi-of-your-mother-a-presentation-about-roi-and-social-media http://pb-hass.deviantart.com/art/mother-and-daughter-24676572 http://www.scribd.com/doc/49442666/The-Virtuous-Circle-The-Role-of-Search-and-Social-Media-in-the-Purchase-Pathway-Research-from- GroupM-Search http://www.brandrepublic.com/news/969874/Social-networks-making-people-likely-complain-online/ Closing the CMO Leadership Deficit in Social Media, Marketing Leadership Council (July 2010) 49 © 2011 IBM Corporation
Hinweis der Redaktion
- The bottom line is that consumers are not listening anymore. Only 14% of consumers even trust ads. Interruptive marketing has seen its day.Consumers control the online environment so brands need to think about facilitating user-created actions, not just user-generated content. Unlike magazines and TV where brands are speaking AT consumers, the Internet and social web allows for more back and forth interaction.Today, 78% trust peer recommendations and a majority of consumers (74%) rely on social networks to guide purchase decisions. (Gartner, July 2010)Brands not paying attention to what their customers say about them on sites such as Twitter should reconsider that attitude. A recent survey showed that 60% of people have chosen not to buy or use a product or service after reading negative comments about them online.On top of that, according to Forrester, by 2014, 53% of total retail sales (online and offline) will be affected by the Web, as consumers increasingly use the Internet to research products before purchasing. (Forrester, March 2010)
- Social web has profoundly changed how customers interact with each other and with brands. You can no longer ignore and pretend like it does matter to your business.But what is the role of social media and social businessin your organization?
- A study by Marketing Leadership Council (MLC), looked into 250 prominent brands and found that measured social media success is actually rare among brands. Only 1 out of 10 brands are seeing significant business results from their social media efforts. So, despite the large number of exciting social media campaigns, very few companies are actually seeing returns. Why is that? Or perhaps a better question: what distinguishes the 11% of brands seeing business results from the rest? And what can we learn from the 11% in terms of the role of social media fits in the organization.
- What really distinguishes the 11% is a broader view of social media’s potential. More specifically it breaks down to three traits: Strategic focus – social media are used to enhance the brand’s competitive position by creating new value for consumersFirmwide collaboration – (and this is very important) social media has to be managed collaboratively to build and deepen firmwide customer relationshipsExecutive leadership – CMO advocates for social media across the enterprise and actively leads the firm’s efforts
- So now that we have a better understanding of how social media fits (or should fit) into and across your organization, let examine some of the challenges with measuring ROI.