TOM PISELLO, CHAIRMAN & FOUNDER

Blog: http://blog.alinean.com/

Is there an ROI from Social Media Marketing?

Blog: http://blog.alinean.com/

Twitter: @tpisello

http://www.alinean.comhttp://www.fightfrugalnomics.com

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

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© 2011 Alinean, Inc.3

Social Media Spending and ROI Trends

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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

© 2011 Alinean, Inc.4

Greater spending = more financial accountability and transparency

Frugalnomics - decision makers more empowered, skeptical and frugal than ever before

CFOs taking more control

• 1/3rd of Marketing departments, budgets and oversight

Display ads21.0%

Search ads13.6%

Email marketing

18.6%

Digital events7.1%

Company web sites

26.7%

Search engine optimization

7.6%

Social networks

5.4%

IDC Digital

Marketing Program

Spend Allocations

2010 2010

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

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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.”

© 2011 Alinean, Inc.6

How to Measure Social Media Marketing ROI?

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What is ROI?

ROI =ROI = X 100%X 100%

ROI the formula

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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

Revenue Revenue AS ISAS IS

Making Making the Case for Changethe Case for Change

ROI = Making The Case For Change

Start with Status Quo

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Business Business / IT Costs / IT Costs AS ISAS IS

Project Timeline InitialInitial Year 1Year 1 Year 2Year 2 Year 3Year 3

IncrementalRevenueBenefits

Revenue Revenue TO BETO BE

ProjectProject

Making Making the Case for Changethe Case for Change

ROI = Making The Case For Change

Revenue Revenue AS ISAS IS

Simulate Project Impact

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Project Project InvestmentInvestment

CostSavings

CostsCostsTO BETO BE

ProjectProjectGrossGrossValueValue

Business/ IT Costs Business/ IT Costs AS ISAS IS

Project Timeline InitialInitial Year 1Year 1 Year 2Year 2 Year 3Year 3

Benefits: Turning Engagements into Incremental Value

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Value from Prospect Engagement – New Customers

New Prospect Benefits Quantifying Value

Marketing Campaigns

User Responds to Post / Campaign

Conversion of Lead to Opportunity

Conversion of Opportunity to Customer / Sale

Marketing Monitoring

Monitor Identifies User as a Potential Prospect

Conversion of Lead to Opportunity

Conversion of Opportunity to Sale

Sales Identifies User as a Potential Prospect

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Sales 2.0

Sales Identifies User as a Potential Prospect

Conversion of Lead to Opportunity

Conversion of Opportunity to Sale

Lead Cost Avoidance

Cost per lead savings

Generate qualified leads via social media vs. other campaigns

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

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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

Challenges to Quantifying New Prospect / Customer Value

New Customers Quantifying Value Challenges

Marketing Campaigns

User Responds to Post / Campaign

Conversion of Lead to Opportunity

Conversion of Opportunity to Customer /

Sale

Track leads to social marketing campaigns in

Lead Nurturing

Track qualified leads to opportunities in CRM

Track opportunities to sales in CRM

Marketing Monitoring

Monitor Identifies User as Potential

Prospect

Conversion of Lead to Opportunity

Conversion of Opportunity to Sale

Track leads to social marketing campaigns in

Lead Nurturing

Track qualified leads to opportunities in CRM

Track opportunities to sales in CRM

Sales Identifies User as Potential

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Sales 2.0

Sales Identifies User as Potential

Prospect

Conversion of Lead to Opportunity

Conversion of Opportunity to Sale

Track sales qualified leads to opportunities in

CRM

Track opportunities to sales in CRM

Lead Cost Avoidance

Generate leads via social media vs. other

campaigns

Track cost of social media cost per lead

Compare costs to reallocated campaigns /

spending

Value from Existing Customer Engagements

Existing Customers Quantifying Value

Reduced Customer Churn Reduced customer turnover / churn

Increased Lifetime Value

Increased duration of relationship with customer

Renewal rate increases on annual / recurring subscriptions /

services

Increased up-sell / cross-sell rate

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Increased Up-Sell / Cross-Sell

Increased up-sell / cross-sell rate

Increased revenue per customer

Increased Share of Wallet Increased share of wallet

Customer Loyalty Campaign Cost

Avoidance Reduce spending on customer loyalty campaigns

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

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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

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

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Increased Up-Sell / Cross-Sell

Increased up-sell / cross-sell rate

Increased revenue per customer

Measuring incremental up-sell / cross-sell / promotional

sales to social media campaigns / monitoring

Increased Share of Wallet Increased share of wallet

Tracking current share of wallet

Measuring competitive wins to social media efforts

Tying share of wallet increases to social media efforts

Customer Loyalty Campaign Cost

Avoidance Reduce spending on customer loyalty campaigns

Track cost of social media customer loyalty campaigns

Current customer loyalty campaign spending

Savings from existing campaigns compared to social

media

Value from Collaborative Innovation

Collaborative Innovation Quantifying Value Challenges

Reduced Market Research Cost

Savings from current / traditional market

research spending

Measure current market research spending

Tally investment in market research via social media

Quantify difference from current spending

Product / Operational Cost

Savings Suggestions

Savings from product suggestions

Savings from supplier suggestions

Savings from distribution suggestions

Savings from process improvement suggestions

Tracking related social media suggestions

Quantifying specific cost reductions to collaborative

suggestions

Savings from marketing campaign suggestions /

crowd-sourcing

Savings from sales strategy suggestions /

recommendations

Tracking related social media suggestions

Quantifying specific cost reductions to collaborative

suggestions

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Sales & Marketing Efficiency and

Effectiveness Improvements

recommendations

Improvements in sales & marketing effectiveness

from recommendations

suggestions

Quantifying specific sales & marketing effectiveness

improvements to collaborative suggestions

Accelerated Time to Market

Time to market / velocity savings from

suggestions

Tracking related social media suggestions

Measure time to market / velocity improvements from

suggestions

Quantify the value to incremental revenue / reduced

cost

Social Media Marketing Investments

• Setup Labor & Services

• Content Marketing Labor & Services

• Campaign Management Labor & Services

• Monitoring and Collaboration Labor & Services

• Tools

• Integration Labor & Services

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• Integration Labor & Services

Social Media Value Map

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The Alinean Social Media ROI Calculator

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Alinean Social Media Marketing ROI Calculator

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Organization Profile

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Social Media Engagement Profile

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Social Media Value Map and ROI

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Graphs and Assumptions

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Value of Follower Details

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Review and Edit Key Assumptions

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ROI Analysis Report

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Social Media ROI Best Practices

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Social Media ROI – Engagement Effort and Success

• Most Engagement Success

– High Technology

– Consumer Products

– Retail

• Least Engagement Success

– Energy

– Utilities

– Wholesale & Distribution

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– Retail

– Travel

– Media and Entertainment

– Hospitality

– Automotive

– 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

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)

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consumer)

• A strong and passionate “lifestyle” brand connection to its user base

• A natural demographic alignment with social media participants.

Engagement Success = Social Media Hierarchy of Needs™

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Tier 1: Content Marketing

• Ideas

• Value

• Credibility

• Personalization

Loosening of the Status

Quo

Committing to Change

Discovery

Provide content to facilitate the buying lifecycle

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• Entertainment Exploring Possible Solutions

Justifying the Decision

Making the

Selection

Committing to a Solution

Decision

Consideration

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

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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

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

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– 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

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

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– 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

Measurement and Integration

• Measurement

– Conversation and Activity History / Archive

– Engagement Activity and Demographics

– Influence Measurement

– Lead and Transaction Tracking

– Tangible Benefits Quantification

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– Tangible Benefits Quantification

– ROI

• Integration

– Campaign Management

– Content Management

– Lead nurturing

– CRM

Next Steps

• Social Media ROI Resource Center

– http://www.alinean.com/socialmediaroi

• Social Media ROI Calculator

• Research White Papers

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• Research White Papers

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