ROI on Social Media Marketing

If “return on investment (ROI) social media marketing” was searched for using Google, hundreds of results would show up.  Purchases, views, and shares can all be measured but which approach to calculating the ROI of social media marketing is best?

A blogger by the name of Eric Harr has come up with an excellent approach.  In his blog post 5 Simple Steps to Measure Social Media RIO”, he explains a very solid approach.  He goes through the five steps and then uses a mathematical formula.  Maybe I really take to this approach because I am a finance student and this approach gives concrete numbers at the end.  The five steps are:

1)      Determine Your Social Media Spend (SMS)  In other words, he is saying to calculate how much money is spent using social media.  The common idea is that social media is free. However, he makes the point that social media takes time and time is money!

2)      Determine Your Lifetime Value (CVL)  Eric Harr states here that most companies don’t even know this important metric.  If a company can properly engage customers, the customers will share information with other users, and family and friends.  Simply put: if a customer is not engaged they may buy one time making the ROI low.  But if they share the products and company with other users, there is the possibility that they will also purchase the product.  In this sense, social media has done its job and increased the ROI.

3)      Determine New Customer Value Via Social Media (SMV)  Here, Eric Harr suggests that companies track conversations by using a program such as Google Analytics.  Companies can track sales, conversations etc. that customers are having.  It is suggested that companies place a value on each metric.  This could be a dollar amount for example.

4)      Determine Impression Value (IV)  “To determine IV, add up your impressions from Twitter and Facebook, cumulative YouTube views, website traffic and any other online source. Divide that total by 100 and then multiply by an industry-appropriate CPM (cost per thousand impressions)” ( Harr, 2012)

5)      Calculate Customer Service Value (CSV)  In this category, Eric Harr suggests that Twitter and Facebook are very valuable tools for companies to use for customer service.  He suggests that companies measure how much money they have saved by interacting for free on one of these platforms rather than paying for calls etc.

He then uses two simple formulas to calculate the ROI for a company:

IR=(Customer Value/10 (years) x Number of New Customers) + Impression Value (IV) + Customer Value Via Social (SMV) + Customer Service Value (CSV)

Social Media ROI = Investment Return (IR) – Social Media Spend (SMS) / Social Media Spend (SMS)

There are many articles out there that argue that measuring social media is not important.  If a company measured their ROI of regular marketing, why wouldn’t they try to measure social media marketing?

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Groundswell: From the Inside

Not only can Groundswell help your company externally, it can also help your company internally.  Take Best Buy for example.  They have an internal site called Blue Shirt Nation where employees can collaborate and feel empowered.  At first, it was thought that Blue Shirt Nation would help educate management.  In the end it ended up not only educating management, but enabling employees to help each other.  Employees were able to voice their opinions on subjects like their discount being taken away, and they were able to collaborate on problem solving, and share advice.

First, the had to get employee buy in… they knew people were not going to listen if it came down as a corporate initiative.  So the creators of Blue Shirt Nation travelled from store to store engaging staff and encouraging them to participate.

Best Buy – Blue Shirt Nation

Internal groundswell touches on the same five objectives as external groundswell.  I have touched on these in other blog posts.

• Listening
• Talking
• Energizing
• Supporting
• Embracing

The banking industry could benefit in the same ways that Best Buy did from implementing internal groundswell.  Where I am working right now, they have tried to incorporate something similar to Blue Shirt Nation.  However, it came down the pipe as a corporate initiative and there has not been much in the way of getting employees engaged in using it.  Whenever I have gone on it, the only people I really see posting in the forums etc are upper management.

I think it could be very beneficial to be able to go on and engage with other employees in similar positions.  We can discuss our thoughts and opinions and help each other out.  I really wish the company would find a way to engage more staff to use it.  (Just a side note.. I think it has to be an easy to use site for people to want to use it.  I havent quite figured ours out yet and it launched about a year ago.  Maybe more people would use it if the interface was simpler..)

Energize

What does it mean it mean to energize your company? It means spreading the word about your product or company without spending a lot of money.  It means creating excitment about your brand through word of mouth communication.  What better way to build excitment then to get your own customers talking about it.

According to the authors of Groundswell, word of mouth succeeds in energizing because it’s believeable, it’s self-reinforcing, and it’s self spreading.  It is believable because the opinions and information are coming first hand from users of the product or customers of the company.  It is self-reinforcing because you will hear the message from more than just one person making it intriguing.  It is self spreading because once you hear about the product or company, chances are you will also start talking about it.

There are a few ways that a company can energize itself.  A company could tap into an already existing online community, they could build their own online community, or they could set up a ratings and review system.  In the case of the banking industry, no one is going to go online to discuss different products and services in a community setting.  This will not be the most effective way.  Neither will a ratings and review system.  Most banks have very similar products and services due to a very high level of competition between institutions.  What may be beneficial for banks is to set up a place where customers can go and have their concerns, and suggestions.  As I said earlier in a previous post, banking users are mostly spectators so they have to have a reason to talk about the bank.

I watch shows like Dragon’s Den and Sharks Tank quite often and I see a trend among many of them.  They all think that “word of mouth” is how they will promote and sell their product or service.  The Dragon’s and Sharks always tell them that it is not guaranteed that it will work.  Although it is generally a small investment for companies to begin to create “word of mouth”, it is a risky one.  There is no guarantee that excitement will grow and it will get people talking about your product.  I believe developing excitement is important, I don’t think it should be the only technique that a company relies on for these very reasons.

One example of great word of mouth marketing is Blendtec.  Here is their video of the blender that can demolish an iPod!

I cannot even begin to explain how much I love Twitter. When I wake up in the morning, it is one if the first things that I look at. I get my daily news, company updates, and jokes, updates on what my friends, colleges and classmates are up to. If you look back a few blog posts I talked about social technographics aka what kind of connection you have to social media. When it comes to blogs and Facebook, I am more of a spectator but when it comes to Twitter, I am more of a creator. I love retweeting, and interacting with different companies and individuals on Twitter. Although you can only put 140 characters in a single tweet, you can get your point across quite easily.

In one of my last blog posts, I also spoke about using social media to listen, talk, energize, support and embrace your customers when in a business situation. Twitter makes it SO easy to listen to customers. You can look up trending topics by searching for words or by using #hashtags.

Twitter is a powerful listening tool because it enables business to learn about current or upcoming trends, and it lets them know what consumers really think of their company/product. Twitter is also very helpful for talking with customers. Not only can you answer customers back and retweet things that they have said, but you can also create tweets that your customer will care about.

Your company can use Twitter to get the message out about promotions or things that are valuable and interesting to your viewers. In regards to energizing, Twitter can be a powerful tool. By using the “retweet” button, it enables both customers and businesses alike to get word out about what they are trying to say. Keep in mind, this has both positive and negative consequences. Companies do not want negative information spreading like wildfire across Twitter.

How can you help reduce the negativity about your product on Twitter? (When I say negativity, I mean complaints, concerns etc) Well, you can use Twitter as a support system for your customer. Groundswell identified a strong example of a Mom who tweeted McDonald’s

McDonald’s responded in an appropriate way. They messaged this Mom directly and did damage control. I don’t think that this situation would have prevented this Mom from going to McDonald’s again, but McDonald’s sure turned this situation around and made it a very positive experience for this family. They send a handwritten note, a gift card and a Wolverine toy. Support = happy customers! Hopefully this is the message that the family will now spread for McDonald’s.

Twitter can also be used for embracing customers. It’s hard to collaborate and discuss ideas with people using only 140 characters, but many companies have used surveys, and sweepstakes to get information from their followers.

I am going to use TD Canada Trust as an example of a company that is using Twitter successfully. First of all, I am sure that they listen. Searching for hashtags and trends on Twitter will serve TD well in finding what concerns customers and non-customers a like have and they may be able to use these in strategies for new products and services. TD does a great job of talking to their customers. On their Twitter page, they have the names and pictures of the TD staff that will be interacting with followers. I think this is a GREAT idea because it puts a face to the person who is interacting with you on Twitter. Every time one of them talks to you, they sign their name at the end. TD also energizes customers by retweeting and interacting on a consistent basis. It keeps people engaged in

their Twitter page and makes them feel as though they are apart of something. Because TD is so good at talking to people, and keeping up to date with their page, it makes it easy to support their followers as well. They can quickly take care of any concerns that customers may have. TD also asks a lot of questions to their followers. It gets people engaged and wanting to share their opinions. TD also incorporates a lot of polls into their tweets. This is how they can successfully embrace their clients.

In my opinion in this day and age, you are CRAZY if you’re running a business and you are not on Facebook or Twitter.  It helps you align your business with customers needs and wants! It helps you interact! And it helps your audience stay engaged with your company!

Helping Groundswell Support Itself

This chaper in Groundswell started with a captivating story about a couple who were set to have twins but ended up having to stay in the hospital due to complications.  They were able to contact friends and family through CarePages .  This system helps patients contact friends and family through a blog rather than making individual phone calls.  The blog is only visible to people who have been invited. Members of the blog can write words of encouragement and support to those in the hospital.  This is a perfect example of how Groundswell can help people connect with each other.  It can be used as a profound support system.

The chapter then goes on to talk about different companies and how they have integrated Groundswell to help support the company.  For example, Dell has an online help forum where customers can speak to each other about different problems or concerns.  It costs companies thousands of dollars to hire someone to take phone calls answering customers questions and speaking to their concerns.  By implementing a customer forum, it elliminates the need for so many people at call centers.  This form of Groundswell supports itself.  The company does not need to actively manage the support forums.

So what are some examples of Groundswell that can help a company shift from a traditional call center, to a more innovative way to connect with customers?  Your company could create a support forum like I have mentioned above.  They could create a wiki to encourage team work and collaboration (between staff and customers!), or you could look to a question and answer type of Groundswell.  There are companies such as Yahoo and Naver that have set to help groundswell answer its own questions.

If you look at the banking industry, their most powerful form of groundswell support is through support forums.  For example, TD Canada Trust has a forum called TD Helps.  It is kind of a mix of the old technique of reaching your customers, and partially a groundswell support method.  They have set up a large forum with many different categories where customers and non-customers alike can post questions.  The questions can either by answered by the experts [that work for  TD] or by other customers/non-customers.

In comparison, RBC has an advice page where only staff members or experts answer the questions that customers have.  I couldn’t really find a place where customers could help customers.

Groundswell methods such as wikis, forums and help sites have proven to be very effective in not only helping customers, but saving the company time and money.

Although these groundswell methods work effectively for companies, they may not always work in day to day life….