TOM PISELLO, CHAIRMAN & FOUNDER Blog: http://blog.alinean.com/ Twitter: @tpisello http://www.alinean.com http://www.fightfrugalnomics.com Is there an ROI from Social Media Marketing?
Agenda 1. Need for Social Media Spending and ROI Trends 2. How to Measure Social Media Marketing ROI? 3. The Alinean Social Media ROI Calculator 4. Best Practices to Maximize Social Media ROI 2
Social Media Spending and ROI Trends http://www.fightfrugalnomics.com 3
Social Media Spending on Rise Social Media spending: Currently 6.4% of digital marketing spending Increases of 50%+ in 2011? Growing to 18% of total marketing spend in 5 years? Greater spending = more financial accountability and transparency Frugalnomics - decision makers more empowered, skeptical and frugal than ever before Search engine optimization 7.6% Social networks 5.4% Display ads 21.0% IDC Digital Marketing Program Spend Allocations 2010 2010 CFOs taking more control 1/3 rd of Marketing departments, budgets and oversight Company web sites 26.7% Email marketing 18.6% Search ads 13.6% Digital events 7.1% 4
Realizing ROI Important to Future Spending Respondents identified the top digital and social media execution challenge as 'measurement and ROI - IDC s 2011 Tech Barometer 48% Creating ROI Measurements as most important focus for 2011 Current measurement efforts are incomplete: 65% of corporations using only Engagement Data as the top measurement metric mere 22% capturing Product Revenue, a key element in quantifying value and ROI Those that can effectively measure improvements can make the business case, and can truly obtain more budget funding. 5
How to Measure Social Media Marketing ROI? http://www.fightfrugalnomics.com 6
What is ROI? ROI the formula ROI = X 100% Example: Investment = $100,000 Savings + Incremental Value = $200,000 ROI = ($200,000 - $100,000) / $100,000 = 100% For every $ invested, get back original $1 plus extra $1 in benefits 7
ROI = Making The Case For Change Making the Case for Change Start with Status Quo Revenue AS IS Business / IT Costs AS IS Project Timeline Initial Year 1 Year 2 Year 3 MICROSOFT CONFIDENTIAL 8
ROI = Making The Case For Change Making the Case for Change Simulate Project Impact Revenue AS IS Business/ IT Costs AS IS Project Investment Revenue TO BE Incremental Revenue Benefits Project Gross Value Costs TO BE Cost Savings Project Timeline Initial Year 1 Year 2 Year 3 MICROSOFT CONFIDENTIAL 9
Benefits: Turning Engagements into Incremental Value 10
Value from Prospect Engagement New Customers New Prospect Benefits Marketing Campaigns Marketing Monitoring Sales 2.0 Lead Cost Avoidance Quantifying Value User Responds to Post / Campaign Conversion of Lead to Opportunity Conversion of Opportunity to Customer / Sale Monitor Identifies User as a Potential Prospect Conversion of Lead to Opportunity Conversion of Opportunity to Sale Sales Identifies User as a Potential Prospect Conversion of Lead to Opportunity Conversion of Opportunity to Sale Cost per lead savings Generate qualified leads via social media vs. other campaigns 11
Marketing Campaign Benefits Example Marketing Campaigns Searchers/Readers converting like a typical website visitor / direct marketing recipient, with a 3% to 5% conversion from a searcher/reader engagement to an opportunity Advocates/Influencers 100% more likely to convert to qualified lead than a follower, with 10% or more conversion to an opportunity Followers at least 50% more likely to convert than a less engaged searcher/reader, with an estimated 5-8% conversion to opportunity Engagement = 10,000 Followers Conversion of Engagement to Opportunity = 5% Conversion * 10,000 Followers = 500 Opportunities Conversion of Opportunities to Customers = 10% Conversion * 500 Opps = 50 New Customers Average annual value per Customer = $1000 Annual Subscription * 50 New Customers = $50,000 incremental revenue Net Value = $50,000 Incremental Revenue * 20% Net Margin (COS + variable SG&A)= $10,000 Incremental Margin 12
Challenges to Quantifying New Prospect / Customer Value New Customers Quantifying Value Challenges User Responds to Post / Campaign Conversion of Lead to Opportunity Conversion of Opportunity to Customer / Sale Track opportunities to sales in CRM Marketing Campaigns Marketing Monitoring Sales 2.0 Lead Cost Avoidance Monitor Identifies User as Potential Prospect Conversion of Lead to Opportunity Conversion of Opportunity to Sale Sales Identifies User as Potential Prospect Conversion of Lead to Opportunity Conversion of Opportunity to Sale Generate leads via social media vs. other campaigns Track leads to social marketing campaigns in Lead Nurturing Track qualified leads to opportunities in CRM Track leads to social marketing campaigns in Lead Nurturing Track qualified leads to opportunities in CRM Track opportunities to sales in CRM Track sales qualified leads to opportunities in CRM Track opportunities to sales in CRM Track cost of social media cost per lead Compare costs to reallocated campaigns / spending 13
Value from Existing Customer Engagements Existing Customers Quantifying Value Reduced Customer Churn Increased Lifetime Value Increased Up-Sell / Cross-Sell Reduced customer turnover / churn Increased duration of relationship with customer Renewal rate increases on annual / recurring subscriptions / services Increased up-sell / cross-sell rate Increased revenue per customer Increased Share of Wallet Customer Loyalty Campaign Cost Avoidance Increased share of wallet Reduce spending on customer loyalty campaigns 14
Reducing Customer Churn Example Current number of customers engaged via social media = 10,000 Reduction in customer turnover rate = 15% current turnover * 10% improvement via social media = 1.5% reduction Reduction in lost customers per year = 150 customers Revenue loss avoidance per customer loss = $1,000 / customer Revenue loss avoidance per year = $150,000 Incremental margin contribution per year = 20% * $150,000 = $30,000 15
Challenges to Quantifying Existing Customer Value Existing Customers Quantifying Value Challenges Reduced Customer Churn Reduced customer turnover / churn Measuring current customer turnover / churn Measuring satisfaction / retention improvements directly to social media campaigns / monitoring Percentage improvement in turnover / churn rate Increased Lifetime Value Increased duration of relationship with customer Renewal rate increases on annual / recurring subscriptions / services Tracking duration of customer relationship / annual subscription renewal rates Measuring incremental duration of relationships / renewal rates Increased up-sell / cross-sell rate Tracking baseline revenue per customer and current customer up-sell / cross-sell rates Measuring incremental up-sell / cross-sell / promotional Increased Up-Sell / Cross-Sell Increased revenue per customer sales to social media campaigns / monitoring Increased Share of Wallet Customer Loyalty Campaign Cost Avoidance Increased share of wallet Reduce spending on customer loyalty campaigns Tracking current share of wallet Measuring competitive wins to social media efforts Tying share of wallet increases to social media efforts Track cost of social media customer loyalty campaigns Current customer loyalty campaign spending Savings from existing campaigns compared to social media 16
Value from Collaborative Innovation Collaborative Innovation Quantifying Value Challenges Reduced Market Research Cost Product / Operational Cost Savings Suggestions Sales & Marketing Efficiency and Effectiveness Improvements Accelerated Time to Market Savings from current / traditional market research spending Savings from product suggestions Savings from supplier suggestions Savings from distribution suggestions Savings from process improvement suggestions Savings from marketing campaign suggestions / crowd-sourcing Savings from sales strategy suggestions / recommendations Improvements in sales & marketing effectiveness from recommendations Time to market / velocity savings from suggestions Measure current market research spending Tally investment in market research via social media Quantify difference from current spending Tracking related social media suggestions Quantifying specific cost reductions to collaborative suggestions Tracking related social media suggestions Quantifying specific cost reductions to collaborative suggestions Quantifying specific sales & marketing effectiveness improvements to collaborative suggestions Tracking related social media suggestions Measure time to market / velocity improvements from suggestions Quantify the value to incremental revenue / reduced cost 17
Social Media Marketing Investments Setup Labor & Services Content Marketing Labor & Services Campaign Management Labor & Services Monitoring and Collaboration Labor & Services Tools Integration Labor & Services 18
Social Media Value Map 19
The Alinean Social Media ROI Calculator http://www.fightfrugalnomics.com 20
Alinean Social Media Marketing ROI Calculator 21
Organization Profile 22
Social Media Engagement Profile 23
Social Media Value Map and ROI 24
Graphs and Assumptions 25
Value of Follower Details 26
Review and Edit Key Assumptions 27
ROI Analysis Report 28
Social Media ROI Best Practices http://www.fightfrugalnomics.com 29
Social Media ROI Engagement Effort and Success Most Engagement Success High Technology Consumer Products Retail Travel Media and Entertainment Hospitality Automotive Least Engagement Success Energy Utilities Wholesale & Distribution Pharmaceuticals Healthcare Chemicals Professional Services / Service Providers 600 Total Firms: Representative sample of Fortune 500, small and medium firms across 32 different industries 30
Engagement Success Important and timely content marketing An interactive dialogue with an active and engaged user base Special deals, discounts, contests and giveaways to promote, targeting frugal buyers (both business and consumer) A strong and passionate lifestyle brand connection to its user base A natural demographic alignment with social media participants. 31
Engagement Success = Social Media Hierarchy of Needs 32
Tier 1: Content Marketing Ideas Value Credibility Personalization Entertainment Provide content to facilitate the buying lifecycle Loosening of the Status Quo Committing to Change Exploring Possible Solutions Discovery Consideration Committing to a Solution Justifying the Decision Decision Making the Selection 33
Tier 2: Campaigns Coordinated communications to connect to and engage new prospects or existing customers via social media channels. Some campaign examples can include: Facebook fan contests to attract new fans Scheduled tweets to promote a webinar Research summary tweets to promote white papers Syndication of a blog post to LinkedIn Groups to gain new connections and spur discussions The most successful campaigns: Have a content foundation Drive interaction (give and take) vs. pure promotion (push) Are more credible, often involving the voice of advocates, experts and/ or third party validation Provide unique value to users, such as delivering special offers, exclusive events, or important content 34
Tier 3: Monitoring Actively listening by marketing and sales to social media channels to gain and engage additional prospects or customers. The monitoring can include: Answering questions or queries about the company or products Assuring that campaigns are achieving the expected goals, driving the right responses, reactions and results Gaining additional followers, connections and fans by tracking advocates and advocate reach Monitoring for positive sentiment and use for promotion to gain additional followers Monitoring for incidents / issues and negative sentiment to help mitigate these issues and limit risks Monitoring for competitive mentions or requests, engaging users who might be considering competitive solutions Providing feedback to fine tune campaigns and content to meet user needs Monitoring and Engagement Console essential for group success 35
Tier 4: Collaboration Collaborative Innovation- Creating and participating in a dialogue with prospects and customers to gain feedback and innovative ideas As opposed to the push oriented focus of traditional campaigns or the pull orientation of monitoring, collaboration is an interactive dialogue. Collaborative Innovation can include: Market Research Product Improvements, termed Social Sigma by Forrester, such as market opportunity, features and benefits, design, pricing and more Marketing Improvements, such as slogan testing, campaign and promotional ideas Business Development, such as advice on go-to-market, channel or strategic partners Advisory Advice, such as seeking and gathering advice on operational improvements, and suppliers 36
Measurement and Integration Measurement Conversation and Activity History / Archive Engagement Activity and Demographics Influence Measurement Lead and Transaction Tracking Tangible Benefits Quantification ROI Integration Campaign Management Content Management Lead nurturing CRM 37
Next Steps Social Media ROI Resource Center http://www.alinean.com/socialmediaroi Social Media ROI Calculator Research White Papers http://www.fightfrugalnomics.com 38