Social Media ROI
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The document discusses measuring social media return on investment (ROI). It begins by defining ROI as "return on investment" and explaining the formula: ROI = (Gain from Investment - Cost of Investment) / Cost of Investment. It then provides an example of a company that invested $30,000 in a social media program, which led to soft gains like increased customer engagement and hard gains totaling $60,000 from reducing call center costs and increased sales. Using the ROI formula, this results in a 100% ROI. However, the document notes that while ROI seems simple to calculate, companies often struggle to measure social media ROI beyond tracking likes and shares. It questions why measuring meaningful ROI remains a challenge if
Social Media ROI
- 1. Social Media ROI Mumbrella Talk September 6th 2011 Monday, 5 September 2011 Hi I’m Tim Evans, Ogilvy Group Melbourne’s Digital Strategy Director. Before I get started I’d like to thank Mumbrella for inviting me and thank all of you for coming along. There are some great speakers here today covering lots of interesting topics - and for the next 20 - 30 minutes I’m going to give you my thoughts on Social Media ROI.
- 2. Agenda • Say hello • What is ROI? • How can you measure social media ROI? • Questions 2 Monday, 5 September 2011 I’ve prepared an agenda for my chat. First I’m going to say hello, so hello. Then I’ll explain what ROI is and how it can be measured in social media. Afterwards I’ll open the floor and take some questions.
- 3. What is ROI? 3 Monday, 5 September 2011 So first - what is ROI? What does it stand for? Let me start by explaining what ROI is not.
- 4. 4 Monday, 5 September 2011 ROI is not return on interest, return on interactions or return on impressions. It is a business measurement with non variable values. And it stands for...
- 5. ROI does not stand for return on interest 4 Monday, 5 September 2011 ROI is not return on interest, return on interactions or return on impressions. It is a business measurement with non variable values. And it stands for...
- 6. ROI does not stand for return on interest return on interactions 4 Monday, 5 September 2011 ROI is not return on interest, return on interactions or return on impressions. It is a business measurement with non variable values. And it stands for...
- 7. ROI does not stand for return on interest return on interactions return on impressions 4 Monday, 5 September 2011 ROI is not return on interest, return on interactions or return on impressions. It is a business measurement with non variable values. And it stands for...
- 8. 5 Monday, 5 September 2011 Return on Investment. It has a concrete formula that goes like this...
- 9. ROI stands for return on investment 5 Monday, 5 September 2011 Return on Investment. It has a concrete formula that goes like this...
- 10. ROI = (gain from investment - cost of investment) cost of investment 6 Monday, 5 September 2011 the gain minus the cost divided by the cost. that’s it. and because everything you put into your social media program costs money - from head hours to technology - the gain must also be measured in money. For example - if Mumbrella paid me $100 to be here and it cost me $50 to get here - well that’s a 100% return on investment. Let’s apply this simple formula to a typical social media program.
- 11. Social Media ROI An example program INVESTMENT ACTION REACTION SOFT GAIN GAIN • Financial investment • Socialise the • Customers served via • 10% more customers • $15,000 cost in social media customer call centre social media served reduction in call program for Q1 is • Introduce electrical • Customers respond • 30% increase in centre $30,000 buyer’s guide on positively to buyer’s positive sentiment • 5,000 more Facebook guides transactions = • 5,000 likes $45,000 • Track interactions • 10% increase in time spent on site • $60,000 gain for Q1 • 10% increase in traffic 7 Monday, 5 September 2011 1st - The client invests $30k in their social program. For that - the agency socialises the call centre, introduces etc. Next the public responds. They like the buyer’s guides and they get service via social media. The agency is proud to report on what I’m calling ‘soft-gain’ success. These are non-financial metrics like - All this results in hard gain - which is money. 15k cost reduction in the call centre and 45k worth of sales for a grand total of $60,000.
- 12. Social Media ROI An example program This is money INVESTMENT ACTION REACTION SOFT GAIN GAIN • Financial investment • Socialise the • Customers served via • 10% more customers • $15,000 cost in social media customer call centre social media served reduction in call program for Q1 is • Introduce electrical • Customers respond • 30% increase in centre $30,000 buyer’s guide on positively to buyer’s positive sentiment • 5,000 more Facebook guides transactions = • 5,000 likes $45,000 • Track interactions • 10% increase in time spent on site • $60,000 gain for Q1 • 10% increase in traffic 8 Monday, 5 September 2011 Just to clarify - this is money and...
- 13. Social Media ROI An example program This is money INVESTMENT ACTION REACTION SOFT GAIN GAIN • Financial investment • $15,000 cost in social media reduction in call program for Q1 is centre $30,000 • 5,000 more This is marketing transactions = $45,000 • $60,000 gain for Q1 9 Monday, 5 September 2011 this is marketing. Marketing is still very important, but if your cost of investment is measured in dollars and your gain on investment is measured in facebook likes - well you’re doing it wrong. So in this example - the client invested $30k and gained $60k. Let’s plug those figures into our trusty formula and...
- 14. ($60,000 - $30,000) $30,000 ROI = 100% 10 Monday, 5 September 2011 hey presto - another 100% return on investment! Now if it’s so easy to calculate ROI...t
- 15. Why aren’t we doing it? 11 Monday, 5 September 2011 hen why is it such a hot topic? If it’s so easy - why am I here talking to you about it?
- 16. Social Media ROI What usually happens Most measurement stops here INVESTMENT ACTION REACTION SOFT GAIN GAIN • Financial investment • Socialise the • Customers served via • 10% more customers • $15,000 cost in social media customer call centre social media served reduction in call program for Q1 is • Introduce electrical • Customers respond • 30% increase in centre $30,000 buyer’s guide on positively to buyer’s positive sentiment • 5,000 more Facebook guides transactions = • 5,000 likes $45,000 • Track interactions • 10% increase in time spent on site • $60,000 gain for Q1 • 10% increase in traffic 12 Monday, 5 September 2011 Because the fact is - most measurement stops at the soft gain. It usually goes a little like this...
- 17. Social Media ROI What usually happens INVESTMENT ACTION REACTION SOFT GAIN GAIN • Agency asks client to • Agency writes a • Agency reports on • Client and agency • Calculating real ROI is pay for a social strategy with soft program against soft celebrate soft gain put into the too-hard media program gain success metrics metrics success basket i.e. 5,000 likes or • Program is optimised service level to produce better soft agreements such as gain metrics 5min response times • Client signs-off on strategy 13 Monday, 5 September 2011 Agency gets client to pay for social media program The agency writes up a strategy with soft gain success metrics like 5,000 likes and service level agreements such as 5min response times Client signs off and the agency reports on the program based on the soft gain metrics, so the program keeps being optimised to produce better soft gain metrics and we all celebrate our soft gain success. And that crucial last step where we convert our non-financial impact into real financial gain is simply put into the ‘too-hard’ basket. But it doesn’t have to be that way...
- 18. Measure social media ROI in 3 steps 14 Monday, 5 September 2011 Iʼm going to show you how to make the leap and measure social media ROI in 3 steps.
- 19. Step 1. Find the starting line 15 Monday, 5 September 2011 the first step is finding the starting line. because...
- 20. Social Media ROI Step 1. The starting line Start social media tracking The Electrical Dept 30 22.5 15 7.5 0 Q2 2010 Q3 2010 Q4 2010 Q1 2011 Q2 2011 Q3 2011 16 Monday, 5 September 2011 ...you need to start somewhere. This is often the hardest part for agencies - because it means getting your hands on your clientʼs financial data - and keeping it. But once you have access, you need to draw a line in the sand. This is where you start step 2...
- 21. Step 2. Track your social media activity 17 Monday, 5 September 2011 tracking your social media activity. You can measure whatever makes the most sense to you...
- 22. Social Media ROI Step 2. Track social media activity Negative Mentions Customers Served Positive Mentions Customers Served 50 40 Mentions 37.5 30 25 20 12.5 10 0 0 Q2 2010 Q3 2010 Q4 2010 Q1 2011 Q2 2011 Q3 2011 Q2 2010 Q3 2010 Q4 2010 Q1 2011 Q2 2011 Q3 2011 Traffic to Site from Facebook Impressions Interactions Facebook Activity Likes Site Traffic 40 400 30 300 20 200 10 100 0 0 Q2 2010 Q3 2010 Q4 2010 Q1 2011 Q2 2011 Q3 2011 Q2 2010 Q3 2010 Q4 2010 Q1 2011 Q2 2011 Q3 2011 18 Monday, 5 September 2011 Some examples are mentions - which can be split into positive and negative, customers served via social, site traffic driven from social or data from facebook insights. This is probably stuff youʼre already doing to measure your soft gain success. Itʼs the stuff you put in case study videos.
- 23. Step 3. Prove the relationship between social media activity & financial performance 19 Monday, 5 September 2011 the 3rd step is where we take the client’s transactional data and layer our social media activity across the same timeline.
- 24. Social Media ROI Step 3. Relationship of sales & social media Likes Interactions Impressions Sales Revenue Start social media tracking No. of Transacting Customers Mentions Customers Served Site Traffic Conversion Rate 200 150 100 50 0 Q2 2010 Q3 2010 Q4 2010 Q1 2011 Q2 2011 Q3 2011 20 Monday, 5 September 2011 Once we have all the data on the same timeline we look for patterns, isolate them and try to prove or disprove correlation...
- 25. Social Media ROI Step 3. Relationship of sales & social media Likes Interactions Test & prove correlation Impressions Sales Revenue No. of Transacting Customers Mentions Customers Served Site Traffic Conversion Rate 200 150 100 50 0 Q2 2010 Q3 2010 Q4 2010 Q1 2011 Q2 2011 Q3 2011 21 Monday, 5 September 2011 between social media activity and your clientʼs P & L.
- 26. Social Media ROI Step 3. Relationship of sales & social media Increase in customers serviced by other customers in your Increased conversion community rate from customers who = used the Facebook Demand reduction in call buyer’s guide centre 22 Monday, 5 September 2011 Sometimes this will be clear - like an increase in the conversion rate from social media. Other times - it will require some further calculations. For example maybe you notice that as more customers get service on your Facebook page - there is less demand on your call centre. To calculate the gain on this youʼd have to...
- 27. Social Media ROI Step 3. Relationship of sales & social media 1.Tally the number of Qs answered by community 5,000/m 2.10% are deflected 5,000 x .10 = 500 3.Multiply by avg. cost of call 500 x $20 = $10,000/m 23 Monday, 5 September 2011 First, you need to tally the number of questions answered by your community. Then you times that by 10% which is what salesforce tells us is the average amount of calls deflected after being served via social Then you times those deflected calls by the cost of a call to get your average amount of gain per month. In fact - socialising your call centre is a great way to project ROI and get some budget. But that’s a story for another time. Cos right now it’s time for my favourite part...
- 28. And so, in summary 24 Monday, 5 September 2011 The summary! Do y’all get that photo?
- 29. Social Media ROI Summary • ROI=(gain - cost)/cost - So if cost = $ then gain = $ • Don’t settle for soft gains - you can’t measure ROI in ‘likes’ • Get that financial data • Layer your social efforts on top of financial data • Prove correlation between social efforts & financial gain 25 Monday, 5 September 2011
- 30. Thanks. Questions? @tim__evans 26 Monday, 5 September 2011
- 31. Digital Strategist Learned ‘likes’ aren’t $ 27 Monday, 5 September 2011