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Welcome to the Jungle, I Mean Boardroom – Presenting The True Return on Investment (ROI) of Social Media Marketing

October 27, 2010 By Glenn Gabe

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Presenting Social ROI

Last Wednesday, I presented at Trenton Small Business Week on behalf of the Princeton Chamber of Commerce. The topic of my presentation was, “Understanding the True Return on Investment (ROI) of Social Media Marketing”. It’s one of my favorite subjects since it combines two topics that I’m extremely passionate about, Social Media and Analytics. Actually, it combines much more than just those two subjects, which comes across as I take people through the 53 slide presentation.

Although Social has gotten a lot of coverage in digital marketing, it’s clear that business owners are still wondering what the return will be. As I explain during the presentation, there unfortunately isn’t an easy formula for calculating ROI when it comes to Social Media. One of the core reasons ROI is tough to calculate is because Social Media impacts so many other channels and efforts, that it would be hard to run a straight formula. In addition, I’ve found that most companies completely underestimate the time and resources needed to effectively drive a Social strategy. And time and resources can quickly be seen in your costs. So, the combination of not understanding the ways Social is helping your company mixed with easily seeing the costs involved makes for a lethal combination from an executive viewpoint.

The Digital Ecosystem and Tracking
During my presentation, I first want to make sure the audience has a solid understanding of the digital ecosystem, including how all the various parts can work together (and often do). After that, I try and explain the various ways that Social Media can impact the bottom line. That includes impacting both revenue and costs. And weaved throughout the presentation is an extreme focus on tracking and analytics, with the core point being that if you’re not tracking your digital marketing efforts on a granular basis, you’re essentially flying blind. And if you need to make a case for your Social Media efforts to your boss or executive team, then flying blind won’t turn out very well for you. If you are only armed with opinion, you might be kissing your budget goodbye. In my experience, you can debate opinion until the cows come home, while data is hard to ignore. Always come armed with data.

You’re On in 5 Minutes. And Don’t Waste My Time Mr. Social Media Hot Shot
Executives, ROI, and Social MedaiAfter I go through numerous examples of how Social can impact a business, the presentation culminates with one slide that hits home for many marketers. It hits home because it puts the audience in the role of having to present to an executive team that wants to know how the company’s Social efforts are impacting the business. The slide presents a long list of possible answers to that question (based on the tracking you will hopefully have in place). So, I’ve decided to provide that list here in this blog post. It is by no means complete, but I think it gives you a quick understanding of the types of data that can be presented to make your case.

Before you view the list, here are a few important notes:
1. Every point in the following list will not tie to your own business. I’m simply providing possible answers to questions about Social Media ROI based on what I have seen first-hand. Also, I have been on both sides of the presentation. I have led presentations like this, but I have also helped executives understand the ROI of their social efforts (as a consultant).

2. In order to provide answers like what’s listed below, you must fully understand the various ways that your specific business can be impacted from a cost and revenue standpoint. Every business is unique. Don’t jump in without fully understanding the specific nuances of your own business.

3. You must have a solid strategy in place for Social Media Marketing. That’s not simply setting up a Twitter account and creating your Facebook Page. If you blindly jump in, I can tell you with almost 100% certainty that you will fail. And many companies are failing when it comes to Social Media Marketing. My presentation covers the core reasons why this is the case (but that’s for another blog post).

4. You must have tracking in place. As mentioned earlier, do not fly blind. Map out an analytics strategy in order to track both on-site and off-site metrics. Track as many KPI’s that make sense for your business and have a mechanism in place for tracking and trending that data. Note, you should track both quantitative and qualitative data. Remember, we are talking about “Social”, so some of your data will include actual correspondence (emails, tweets, messages, comments, etc.)

Setting The Stage – Welcome to the Jungle
As you step into the boardroom, you notice that the room goes silent. The CEO gives you a minute to hook up your laptop and then says, “OK, I gave you a budget last year to launch our Social Media efforts. We want to know today how that’s doing. So, what’s the ROI of Social Media FOR US?

{So, if you’ve mapped out a solid strategy, executed at a very high level, have tracking in place, and understand all the ways that Social can impact your business, your answer might look like the following.}

Well, I can’t give you a hard ROI number today. {3 members of the executive team gasp while the CFO snickers.}

But, I do have a number of data points to present.
{Remember, data is good, opinion is bad.}

Since we started our Social Media Marketing efforts 12 months ago…

Overall site traffic levels have increased by x%.

Traffic from Social Media sites has increased by y% (as you show trending graphs for each).

Overall revenue has gone up by x% since we launched our Social efforts…

And revenue directly from Social Media sites has increased by y%, but this doesn’t tell the whole story. More on that shortly. {BTW, to show revenue from Social, you set up an advanced segment to only show data from all Social sites.}

Overall support costs went down by x% as we were able to handle y# of customer issues via Twitter and Facebook.

Further, according to a post on Bitcoin Era Erfahrungen, based on using Social Media to nip support problems in the bud, we saved x # of customers that were ready to leave us. Our typical response time was y minutes from the time of the first sign of a problem (via monitoring real-time updates.)

Here is a document containing all customer and prospective customer correspondence via Social Media for the past year. {Document is so long is rolls out onto the floor.}

Since we know how much it costs to acquire a customer and how long it takes for a customer to become profitable, our Social efforts have saved the company $x in cost (by decreasing the Quit Rate of customers and not having to make up for those lost customers).

Our Social efforts also drove y # of new customer sign-ups, with the strongest number of sign-ups coming from blogging, Twitter, Facebook, and YouTube. Trending shows an increase in new customer sign-ups 4 months after our Social efforts launched, while maintaining higher levels of sign-ups throughout the year. (The black hole of Social Media was 4 months for our company.)

We increased our in-house email list by x number of subscribers…

With a majority of new sign-ups coming from organic search, blog posts, and referrals from both Twitter and Facebook. More on how Social impacts SEO soon.

And our in-house email list drives y% of revenue for the site (our second largest driver of revenue for the site.) Each subscriber accounts for $z per year.

We now have x Twitter followers and y FB fans.

These two assets enable us to engage our customers on a regular basis…

Which leads to powerful insights regarding our company and products, like… (add qualitative data here…) As a specific example, we launched the new version of Product X in March, only to find out via Twitter that many customers were experiencing problems with Y feature. We worked quickly and resolved the issue and formed even a stronger bond with many of those customers. Some of those customers ended up backing us up when other unhappy customers started attacking our company. The resulting positive word of mouth marketing about how we handled the situation resulted in x number of articles written about our company, which led to y number of new visitors to the site, which resulted in x number of new blog subscribers, y number of email subscribers, and z number of FB fans.

Trending shows spikes in traffic, orders, and revenue each time we share special offers, discounts, and exclusive deals via Twitter and Facebook. Here are the spikes I am referring to (showing trending graph with revenue overlaid).

Our blog now has x subscribers…

And our blog has helped us boost our website’s SEO power, which has led to an increase in natural search rankings…

And SEO accounts for x% of revenue on the site. It is currently the top driver of revenue.

Further, our blog accounts for most of our website’s inbound links (the valuable links anyway). These inbound links have a direct correlation to the trending you are seeing in this graph. {showing trending again} We’ve seen an increase in rankings, organic search traffic, and revenue from organic search. And there is no advertising spend for organic search traffic (while showing budgets for paid efforts).

Our increased natural search rankings led to a decrease in paid search spend, which we then reallocated to our Social efforts (to drive more of what I am presenting here).

Our blog also led to guest posts on highly influential blogs and sites. Those posts helped us gain incredible exposure in our industry…

Which led to x # of visitors back to our blog.

Which led to an increase in email subscribers, Twitter followers, and Facebook fans. As presented above, these three assets led to $x in combined revenue.

{Your CEO cuts in: Can you start over? I want to take notes.
The CFO is already through his second pencil, he’s been writing so fast.
Your CMO: {on phone with executive assistant to set up personal Twitter account.}

And after all of this planning, tracking, execution, and presenting, you might just have a new seat in the boardroom (see below). :)

Social Media Represented On The Executive Team

Can You Make A Case Like This?
As you can see, data can be your best friend. You might not be able to easily show the hard ROI from Social Media, but you sure can have a lot of data backing your efforts. In closing, have a strategy in place, understand the black hole of Social Media, track everything you can, trend changes over time, and document both quantitative and qualitative data. This is the type of information that your boss will love (and his boss too). Become obsessed with data. You won’t regret it.

GG

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Filed Under: blogging, ecommerce, facebook, google, SEO, social-media, Twitter, web-analytics, wom, youtube

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