www.kathyherrmann.com©2010 Kathy Herrmann

What social business ROI really means

Who is using social media to gen revenues and cost savings?

And the reason is because…

Don’t be “myth”taken…

Avoid social media myths that will torpedo your initiative.

Social media is free.

That would be never…Even a small program has personnel costs.

Larger programs? Add in higher people costs plus technology.

Social media is exempt from Business 101 fundamentals.

Hmmm….that would be no…

Social initiatives are among a field of other corporate initiatives. Make the business case like you would for any other.

Metrics = Return On Investment

Web visitationsPage views

RegistrationsCustomer Satisfaction

Etc.

Metrics are important…But as leading

indicators of revenues (or cost savings).

Big honking no.

What executives really want to know

about a corporate initiative.

The purpose of business is to generate revenues or increase

profitability.

Get executive attention by showing them the money

associated with your social initiative.

Convert social benefits (like influence, loyalty, engagement,

etc.) into monetary terms….

…yes, really.

Social media can and should be valued.

The secret is to couple

defendable assumptions with appropriate risk.

Perform valuation

hand-in-hand with the strategic

vision and definition, as well

as tactics.

Strategic definition =

verbal or written expression of what

you plan to accomplish.

=

Valuation = numerical view of

the strategy.

1. Start with cash flow…

…of Gains and Costs.

NPV = Time-value of cash flows.

Incorporates risk via discount rate

(also known as cost of capital).

2. Determine Net Present Value

ROI =Gains - Costs

Costs

3. Determine ROI

Determined from the NPV of Gains and Costs.

What cash flows where?

Money out =

Social Media Costs

People costs…

• Social team staff:– Strategists - Execs &

managers.– Tacticals -

Community participants.

– IT.

• Third-party consultants.

Tech costs for social business platform…

• CRM, traditional (E.g., Salesforce, SAP, Sugar, RightNow).

• SCRM (same – via add-ons).

• Community solution (E.g., Jive, Lithium, SF Chatter, INgage).

• Premium web analytics solution (E.g., Radian6, Attensity 360, ScoutLabs, Clarabridge).

• Misc.

Money In = Social Media Gains

Revenues due to social initiatives =

x xReach

How many are you connecting

with

Impact

Who’s paying attention

Yield

How much is their spend

And then there’s Cost Savings from social…

• Call center savings:– Fewer incidents.– Fewer contacts per

incident.– Shorter time needed to

close incident.

• Cost of Sales savings:– Lower cost for lead

acquisition.– Shorter sales cycle.

Now you’re ready to be an executive champion helping them make an informed decision

about investing in social business.

Go forth and make social!

About

• Leading expert on social business and change management. 

• Practice centers on business process design and definition, valuation, and the user experience.  

• Valuation expert and designer of the ValueRight methodology and tool for social business valuation (and ROI) determination. 

• Active participate in the SCRM Accidental Community on Twitter, a premier group of social business thought leaders.

www.kathyherrmann.com

Thanks!

www.kathyherrmann.com©2010 Kathy Herrmann