Likes, Followers, Re-Tweets… Oooh, aah & Ouch…Where’s the ROI

A simple way to understand social media ROI is to examine the telephone.

What’s the ROI of your phone line or rather phone based communication infrastructure? Confused let me explain.

Lets say you call 10 prospects via the phone, 5 say they like what you’re talking about and will get back to you, 4 ignore you and tell you to get lost, and 1 person actually buys your product or service. Now before you run off to calculate the ROI of this activity, let me compare this to a similar activity online using social media channels.

Social Media Objectives and Metrics

Social MetricsYou post a tweet on Twitter, someone re-tweets it, or post content on your blog and someone comments or links to it, or a community leader does a presentation about your product, or on Facebook, 10 people view your content, 5 people like it, and 1 person clicks on a link to purchase your product or service and actually buys it. The number of likes, re-tweets, etc. could be your social media metrics (Metrics are always numbers).

Here is an example of how you would break down your social objectives, targets and metrics:

Social Objectives – Increase presence/engagement on Twitter
Goals/Targets – 100 new followers, 200 re-tweets, 150 URL clicks.
Social Metrics or KPI’s  – Number of followers, number of re-tweets, number of clicks on URLs embedded in tweets

Note: You could have secondary metrics, which measure effects on say other channels. E.g. You’ve primarily run a campaign on Twitter, but people have cross-posted on other channels like FB, YouTube, thereby helping you spread the message and increase your reach.

Business Objectives and Metrics

Business ObjectivesOn the other hand, you might have the following business objectives. Increase in sales from net new transacting customers, or increase in sales from existing customers. Additionally, reduction in costs of customer support or getting new product or product enhancement ideas, which might lead to new revenue streams etc.

Here is an example of Business Objectives and Metrics

Business Objectives – Increase sales via net new customers
Goals/Targets – 10% increase in sales in Asia from new customers.
Business Metrics or KPI’s – Number of net new customers.

ROI – Return on Investment

You invest money, and you want a return. RETURN/INVESTMENT i.e. the amount of money(return) you get divided by the money you’ve invested tells you what your Return on Investment is. ROI is about $$$ amounts, money. The first step in calculating your ROI via social media, is to make your social and business metrics meet.

Social Metrics and Business Metrics, Making Them Meet

Mapping Social Objectives to Business Objectives

To measure the ROI, you need to map your social metrics to your business metrics. As in, is there an effect of the number of re-tweets to actual sales, or the number of positive blog posts or Facebook likes to the business metric of increased sales?

So basically instead of just putting that blog post or tweet out there, you could tie in and include information for customers, which could help them get a discount if they quote the source from where they got information about your product/service and in return it will help you track which channel was effective in getting them to buy.

Additionally,

MAKING THEM MEET

Change in SalesYou need to start mapping the effect of the volume of conversation/activity, happening on the social channel to your business objectives. There are multiple ways in which you might pursue this. A simplistic view is the following.

Assume your sales team has projected sales growth estimate for the year using their traditional channels at 5% year on year. Now assuming, you’ve started a social campaign/activities around the month of March, then any increase in sales beyond the expected 5% can be attributed to your social activities or an act of GOD.

Twitter Conversation Volume to Sales RatioAdditionally, you can map the conversation volume to the sales to view the effects.
You can get even more specific data, by providing specific coupons or codes which could be given to those people who participate on each social channel. During the purchase process you could easily identify based on the coupon data, which sales are due to that particular channel.

Questions?

1. Would you need to create coupons or codes for each channel, say one for FB, one for Twitter, one for your website, forums etc..

Firstly, I highly recommend, starting on a single channel, till you’ve got your processes and workflows in place to handle the new channel. Second, yes I would recommend creating separate coupons or codes for each social channel, as it will help you clearly identify which social channels are most effective in meeting each of your business objectives.

1. But… What if the coupon is shared to other users, and across channels?

Well, firstly even via T.V. or Newspapers etc. coupons/codes could be shared, additionally, online it’s simpler to generate individual coupons for each person. But heck, I for one would love it if people are sharing the coupons, and making more people aware of my products and services. Yes you might have a situation, where you’ve released a discount coupon which is only for new customers, and your existing customers might want to utilize it. You can obviously figure this out at the point of transaction and inform customers, and additionally, while sharing the coupon you can make it explicit, that it’s for X customers in Y region.

Doing the above will help you identify the volume of sales due to each channel. However, to calculate ROI, you need to do some more.

What is needed for ROI calculations?

You need some more data to calculate the ROI. Some examples are given below:

Calculate your costs, your investment

Creating ContentAdvertisingCost of creating marketing/advertising/social channel content, including cost of putting it out there including time spent: E.g. How much did it cost for creating the content(designer, copywriter, other personnel, agency costs, cost of medium, time spent, etc..).

Cost of InfrastructureCost of Infrastructure: Cost per call or Cost of web infrastructure per user etc.

I trust you’re getting the picture here… spend some time with your internal marketing expert or financial analysts who would typically have data which will help you calculate these costs. You need to put all of this together to calculate the ROI.

 

Social Media and Community ChannelsROI per channel: You might want to calculate the ROI, per channel, this will help you measure the effectiveness of each channel.

 

 

To Summarize

I’ve primarily used increasing sales to net new customers as a business objective here. You could have other objectives such as increasing purchases from current customers. I’d highly recommend that you use the F.R.Y methodology to get clarity on your business objectives, this is the most important first step. Additionally, social media can be leveraged to help with other business objectives such as reducing costs of research, product development, or hiring personnel, or reducing costs of customer support.

I’d love to hear how you’re measuring the effectiveness of your social media programs and how you’re calculating the ROI. Drop me an email. Smile

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