Social Media ROI as Return on Influence #Optimize
Posted on 14. Dec, 2011 by Lee Odden in Blog, roi, Small Business Internet Marketing, Small Business Marketing, Social Media, social media marketing, social media ROI
While the topic of return on investment with social media participation seems to polarize many marketing, advertising, and public relations pundits, there are a growing number of companies and agencies that are implementing social media marketing and analysis efforts to answer the question firsthand.
We’ve all read about or seen favorite examples going back to Dell Outlet selling a few million dollars worth of discounted computer equipment through Twitter, to Blendtec selling more blenders because of its YouTube videos showing what happens when a Blendtec meets an iPhone, or a rake. Of course, there’s also the famed Old Spice example of selling more body wash because of Isaiah Mustafa on a horse on a beach.
It’s About the Customers
Besides those very viral and frequently shared social media ROI examples, there are also marketers that realize that it’s not always about selling widgets on Facebook or YouTube. It’s about the connections they make with customers being instrumental for recommendations and serving as inspiration to buy. It might not mean purchasing at the moment of social media interaction, but at some point in the future as the customer navigates the search, social, and mobile web.
It’s About Relationships
The value companies can get from investment in social media is directly tied to the relationships they build with customers and a relevant community. If a business wants to sell more widgets through Twitter, they could certainly achieve that goal providing they understand what information and experiences trigger those purchases and respond with an appropriate customer engagement plan. Whether Twitter is the sales channel or simply a proxy to the sales experience depends on the customers – not the brand’s objective of selling widgets on Twitter.
ROI is Also About Cost Savings
Sometimes realizing measurable business value from social media investment is a matter of creating efficiencies as some companies have by developing internal social network platforms that result in more effective collaboration and operational effectiveness. Those efficiencies often translate into better, faster, and more useful information for customers that result in cost savings or even more sales.
Measure What Matters
The better connections brands have with consumers, the more likely those consumers will be positively inclined to buy. Many social media ROI models are based on a direct marketing approach with an offer and response approach. The problem is that companies are chasing after a platform where relevant customers might be vs. understanding how to influence those customers through a social experience. The ROI from social media investment doesn’t have to come from direct sales through social networks, but that’s exactly how most companies evaluate.
It’s About Inspiration and Influence
A lot of productive social media marketing efforts are more likely to influence business outcomes than be the channel where those outcomes occur. Public and media relations, for example, isn’t that different. Positive media coverage creates awareness and inspires search or discovery of the brand and the sale occurs on the company website. Social experiences can provide brand-advertising benefits and inspire consumers to buy sooner, more quantity, or more often, as well as to choose one brand vs. another. What company wouldn’t want to sell more products, more often, more quickly?
Here are a few interesting data points and examples that suggest a correlation between social engagement and consumer buying behavior:
- eMarketer - Over 50 percent of Twitter followers are more likely to purchase from brands they follow.
- USA Today - Coca-Cola Facebook fans are two times as likely to consume product and 10 times more likely to purchase than non-fans, according to Wendy Clark, senior vice president of integrated marketing.
- Yahoo - Brands who sponsored content with social features increased purchase intent by 13 percent.
- Mashable - “Following Brands on Twitter Increases Purchase Intent.” A study by Constant Contact and research firm Chadwick Martin Bailey reports that 60 percent of brand followers are more likely to recommend a brand to a friend after following the brand on Twitter, and 50 percent of brand followers are more likely to buy from that brand.
The missing piece to many assessments of what value social media participation provides is that most marketers are chasing popular platforms with their own interpretation of what will motivate customers to buy. What they should be doing is understanding customer preferences and optimizing for the kinds of social experiences that will not only inspire purchase, but social sharing, advocacy, and loyalty. Social media is a communications platform that can help businesses serve customer needs across the lifecycle, not just at the top of the sales funnel. Understand that and an entirely new opportunity is revealed.
This post originally appeared in my Social Media Smarts column on ClickZ.
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Calculate Your Blogging ROI in 9 Steps
Posted on 26. Jul, 2011 by Jay Baer in Blog, Blogging and Content Creation, blogs, content creation, roi, Small Business Internet Marketing, Small Business Marketing, social media metrics, social media ROI, Web Analytics
Blogging isn’t free. Creating and sustaining a good blog for yourself or your company is a highly labor-intensive proposition. The people (maybe you) working on the blog could be doing something else that helps the company make money, save money, or both. Thus, blogging presents a serious opportunity cost to the company. Smart organizations methodically calculate the impact of blogging on the bottom line, making it easier to justify (or not) the resources allocated to the task.
Here’s how you might start to figure it out:
Blogging Expense Calculation
A. How many staff hours does it take per month to write, edit, track, manage the blog?
Let’s assume it’s 36 per month (3 posts per week at an average of 3 hours per post).
B. What do those hours cost the company in salary?
Let’s assume Susan spends 10 hours per month managing the blog, and her salary is $50,000. Paul spends 8 hours per month writing blog posts at a salary of $75,000. Shashi also spends 8 hours at a salary of $95,000. Warren spends 5 hours at a salary of $150,000. Olivier spends 5 hours at a salary of $40,000.
Divide each salary by 2000 (hours worked per year based on a 40-hour work week and two week’s vacation) to get average hourly salary compensation. In our example, it’s $25, $37.50, $47.50, $75, and $20, respectively. Multiply the hourly compensation by the number of hours devoted to determine the monthly salary expense (10 X $25 + 8 X $37.50 + 8 X $47.50 + 5 X $75 + 5 X $20 = $1405)
C. What do those hours cost the company in overhead and benefits?
Take your monthly salary costs figure ($1405) and multiply it by your company’s standard overhead calculation. This includes benefits, rent on a per-person basis, etc. Your accountant or CFO will know this number if you do not, and it’s typically 40% – 50%. We’ll use 45%, so the overhead and benefits cost of the blog labor is $632 ($1405 X 45%).
The total labor cost for your blog per month is $2037 ($1405 + $632).
D. What does the blog cost in design and technology fees?
If you built the blog internally, use the method above to calculate the labor/benefits cost of the blog’s creation. Or, if you had a third party create the blog, find out how much you paid. Divide either internal or external costs (or a combination) by 24 to find a monthly expense. (This is a two year amortization schedule for blog creation. Given that blogging continues to evolve and redesigns are common, I’m not comfortable stretching beyond 24 months).
Let’s assume that you had a Web development firm create your blog for $7,500. You did a slight update three months later for $1,000, making your total costs $8,500, and your amortized monthly cost $354 ($8,500 divided by 24).
E. What does the blog cost in hosting, maintenance, and app fees?
Let’s assume your monthly blog hosting is $19, and you spend $19 per month on Inbound Writer to help with you blog’s SEO, and you spend $19 per month on Formstack to create and manage landing pages to convince people to download your white paper. (both Inbound Writer and Formstack are awesome, by the way)
Your hosting, maintenance, and app fees are thus $57 per month.
Your total blogging cost per month is ($1405 + $632 + $354 + $57 = $2,448)
Blogging Revenue Calculation
Is that $2448 per month worth it? Let’s find out.
A. What revenue-oriented behaviors does the blog create?
Unless you’re selling ads on your blog, your blog’s value will primarily be derived in its ability to cause behavior among readers that leads to revenue. That often takes the form of lead generation, especially in B2B circumstances. This part of the process can differ quite a bit depending upon what type of company you are, whether you sell online, etc.
But, let’s assume you are the aforementioned Formstack, a provider of drag-and-drop online forms and landing pages (and a Convince & Convert sponsor).
On their blog, I’ve highlighted in orange three actions that can potentially create instantaneous leads or sales (in orange), and three other actions that might create leads or sales (in red). We’ll only concern ourselves with the more immediate potential in this analysis.
B. How many revenue-oriented actions are created?
Let’s assume that after visiting the blog, 30 people per month either call Formstack and sign up, subscribe using the “sign up now” button, or subscribe after visiting the Contact Us page. (this is not a real number, I’m using it for illustration purposes only)
To ensure that the blog had more than a middling role in driving those behaviors, you could set your Web analytics software (Google Analytics, for example) to only count people who have been on the blog more than 3 times, or have spent more than 3 minutes on the blog before clicking “Sign up Now” or any other attribute that indicates the blog was persuasive. For telephone sales, you might need to verbally inquire about the blog’s role unless you use a special tracking phone number than only appears on the blog (which would be a best practice).
C. What is the value of each behavior?
In Formstack’s case, it’s easier because customers can sign up directly online. They just need to know what the average lifetime value of a customer is (although this may require some guesswork for newer companies with less history). Let’s assume (again, not real numbers) that the average new customer spends $25 per month with Formstack, and remains a customer for 12 months. That makes the average lifetime value of a new customer $300 ($25 X 12).
However, not all of that $25 per month is net revenue to the company. Formstack has costs to provide the services to their customers, including technology, hosting, support, and other expenses. Most companies know (or can calculate) their true revenue after these expenses have been deducted (make sure you’re not double counting blogging expenses). In this example, let’s assume the true revenue after expenses per customer, per month is $19. That makes the actual lifetime customer value $228.
D. What is the total value of the behaviors?
In this example, Formstack would be generating $6,840 from the blog each month (30 sales driven by the blog X $228 average value = $6,840)
Calculating Blogging ROI
There is no debate about this last part. ROI stands for “return on investment” and not “return on influence” or “return on ignominy” or “rabbit on interstate”. The formula for calculating ROI is always essentially the same (with a couple of variations for finance geeks). The formula is:
REVENUE MINUS INVESTMENT, DIVIDED BY INVESTMENT (expressed as a percentage)
In this case, the monthly revenue is $6,840, and the investment is $2448. ($6,840 – $2,448 = $4,392. $4,392 divided by $2,448 = 179%) The monthly ROI of this blogging program is 179%.
How can you use this type of equation in your company?
Reporting Content Marketing ROI to the C-Level
Posted on 26. May, 2011 by Joe Pulizzi in Blog, content marketing, content marketing measurement, content strategy, return on objective, roi, Small Business Internet Marketing, Small Business Marketing
Listened to a fantastic presentation from my friend and CMI consultant Jason Falls last week on social media measurement. Much of what Jason reviewed is applicable to content marketing measurement and ROI, especially when communicating content creation and distribution to the C-Level.
What the C-Level Wants to Know about Content Marketing
Please don’t show an analytics report to your CXO. They don’t care, and probably will end up asking questions that will simply waste your time. Your CXO only cares about three things when it comes to your content marketing measurement and ROI:
- Is the content driving sales for us?
- Is the content saving costs for us?
- Is the content making our customers happier, thus helping with retention?
The reports you show to your CXO need to answer these types of questions, or why show them anything at all? Content marketing is all about developing content that maintains or changes a behavior, so that is the focus.
Return on Objective
All content initiatives need to have a goal, and those goals can be measured in a few ways.
Primary Content Indicators
Primary indicators are the types of measurements that the CXO wants to know about.
- Sales
- Cost Savings
- Customer Retention Rates (i.e., does engagement with the content keep customers longer versus those that don’t engage in the content?)
Secondary Content Indicators
Secondary indicators are the types of measurements that help us make the case for primary indicators. These can be:
- Increase in lead quality
- Increase in lead quantity
- Shorter sales cycles
- Increase in customer awareness
- Market share indicators
- Increase in cross-selling opportunities
- Qualitative customer feedback on the content
Our B2B Content Marketing Study reports the following measurements used by corporate marketers.
User Indicators
These are the types of measurements that the content “doers” need to look at to help drive the secondary indicators. These are things like:
- Web traffic increases
- Increase in page views
- Decrease in bounce rates
- Tweets or Facebook shares
- Search engine rankings
Bringing the Measurement Plan Together
When you are putting your plan together, the best way to go about making sense of all the numbers is to use these three indicators in conjunction.
- What is the goal of the content initiative?
- What are the user indicators (i.e., web traffic or SEO rankings) that will drive secondary indicators (i.e., leads, shorter sales cycles)?
- How can we develop a report for the CXO that shows the content making an impact on sales, cost savings or customer retention?
This, by the way, is not easy and there is no silver bullet, but by using this simplified framework, you can start to show that your content marketing is having an impact on the business.
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