Not long ago, I created a comic-strip e-book designed to help people learn how to calculate the ROI of their social media campaigns. It was intended to be a fun and useful tool to help people understand concepts like Customer Lifetime Value and Allowable Cost Per Sale.
If your CEO or CFO are bugging you calculate the ROI of your social media campaign, then you might want to download the e-book. It includes some edgy humor, so if you’re not in a light-hearted mood, my apologies.
On a related note, I’ve included a graphic below with a quote some of you might find Pinterest-worthy. If you like it and want to share it with others, feel free to click the “Pin It” button and upload it to one of your Pinterest boards.
According to eMarketer, US companies using social media have spiked from 42% in 2008 to a whopping 80% this year.
Based on that, it looks as though just about everybody is jumping on the social media bandwagon. That’s great. But if you’re going to launch a social media campaign, you’ll need to understand the hidden costs associated with it.
With that in mind, we took a look at some of the hidden and not-so-hidden costs associated with running a social media campaign.
Here’s what we found:
Twitter: If you are looking to launch a new Twitter account, including both setup and outsourcing content creation, costs are on average $2,000-$4,000 per month. Already have a Twitter account, but looking to restructure it? Well, you are looking at a cost of $1,000-$2,500per month. Not as cheap as you thought, huh? These costs can include tasks such as:
Monitoring for related keywords, then pushing links/tweets to those talking about relevant topics
Obtaining relevant followers
Consistent feed updates
Despite what you may have heard, social media is not free. There are plenty of hidden costs associated with running a campaign.
Facebook:If you thought Twitter costs were high, take a look at Facebook! PR agencies charge an average $2,500-$5,000 per month with the highest amount reaching up to $9,000! Costs can involve content creation, analyzing and testing as well as other tasks such as:
Training
Running contests and notifications of new promotions
Status updates
Blog:Blogs can be a useful addition to your social marketing campaign and also relatively inexpensive depending on the components you are looking to include. Launching a blog from the ground-up can cost $1,000-$12,000 per month. A blog can include initial setup as well as outsourcing all content creation. Costs can also include additional tasks such as:
Blog postings
Monitoring and responding to user comments
SEO keyword research
Strategy: We are missing a very important component in these prices. Guess what? They don’t include strategy. Without objectives or a definitive game plan, it will be difficult for you to get anywhere with your social media marketing. Social media strategy has a wide range of costs, anywhere from $3,000-$20,000 per month with the average being $4,000-$7,000 per month.
Of course, there are various other social media platforms out there, such as Foursquare, Youtube, Linkedin, etc. However, your company doesn’t need to be on every social network. It’s best to focus on the most popular social sites in order to get the biggest bang for your buck instead of spreading yourself thin across numerous locations.
Also, prices vary based on the size of the business. Smaller businesses, such as the crème brulee man, can manage their Twitter account and other social media at little to no cost with high returns. However, larger companies, such as Best Buy and Starbucks, have more to lose with their social media platforms and must tread lightly.
Don’t let your social media campaign be a shot in the dark. Make the most out of the money that you have, but don’t underestimate the costs of effective social networking when building your budget.
If you’re like a lot of marketing directors, you’re probably still trying to wrap your mind around this whole social media ROI thing.
After all, it’s not all that difficult to launch a Facebook/YouTube/Twitter/LinkedIn campaign. But it is hard to calculate the success of your campaign on an ROI basis.
You can see the entire presentation in the viewer below. Or, just click here to download it directly from SlideShare.
With that in mind, I created a 1950s-style cartoon story that walks people through the entire ROI calculation process. (You’ll have to excuse my sense of humor in the cartoon — it can get a little sketchy at times.)
My intent was to create a document that people would want to share with co-workers.
Better still, I wanted to walk people through some of the more complex issues like Customer Lifetime Value, Cost Per Sale and the Hub-and-Spoke model. (All of which are covered in-depth in “How to Make Money with Social Media,” the book I co-wrote with Dr. Reshma Shah.)
In any case, I hope you enjoy the presentation below. Feel free to click the little buttons at the bottom if you’d like to share it with others via Twitter, Facebook or email.
If you like what you read today, you can have these blog posts delivered to your in box each morning by clicking here. Or, you can sign up for our free weekly e-newsletter by clicking here.
There’s been a good amount of buzz on the internet lately about a helpful little concept I developed called the Social Media ROI Cycle.
I created it to help people understand three distinct stages companies go through when they launch a social media campaign.
I’ve included a SlideShare version below with additional details on the concept. You’re free to download the presentation and use it for your own purposes with attribution. (To download it, just click on the “SlideShare” link above.)
In addition, I’ve included a 60 Second video of the Social Media ROI Cycle, which can also be viewed on our YouTube Channel.
The Social Media ROI Cycle
Stage 1: Launch
During this stage, 100% of a company’s focus is on launching the Big 4: LinkedIn, Facebook, Twitter and YouTube. Some companies focus on the Big 4 Plus More, which include things like Flickr, e-newsletters, blogs, SlideShare and other social media platforms. But most companies kick things off by quickly getting into the Big 4 simply as a way to have a social media presence.
The approach during this Launch stage is very executional with very little long-term planning. The primary objective is simply to get started.
Of course, the best way to dive into any marketing initiative is to start with an analysis of your target market’s needs and how your initiative might meet those needs, but the Social Media ROI Cycle is based on reality, not best practices. In other words, most companies just jump into social media with very little forethought, even though best practices would be to do some advanced planning.
Unfortunately, the results of the Stage 1 process are negligible. Oh, sure, you’ll be able to claim that you’ve “got a social media campaign” but you won’t really see much traction unless you move onto Stage 2.
Stage 2: Management
During this stage, roughly 60% of a company’s efforts are focused on the Big 4 (or the Big 4 Plus More). About 10% of the focus is on creative (content creation) and offer development, 20% on tracking quantitative metrics such as traffic, inbound links, Facebook likes, etc., and about 10% on qualitative metrics such as brand sentiment, survey results and customer polls.
The approach during the Management stage is still very tactical, but the focus is on mid-term instead of short-term results, which is good. The objective at this stage is to engage prospects and customers in some way that gets them to connect with the brand. Ideally, this would mean buying something, but it can also mean downloading a white paper, Liking a Facebook page, responding to a survey or any other tangible evidence that they’re connecting with your brand.
The results during the Management stage are typically a little better than the results during the Launch stage, but they’re still not as good as they can be. Which brings us to Stage 3: Optimization.
Stage 3: Optimization
Most companies today are still at either Stage 1 or Stage 2. But many of the companies I work with have started to reach the Stage 3.
As you can see in the InfoGraphic and video below, about 25% of the focus at this stage is on the Big 4 Plus More and about 30% is evenly split among creative and offer development, quantitative metrics and qualitative metrics.
About 25% of the focus is on improving conversion and optimization of campaigns. What do I mean by that? Improving conversion and optimization means tracking inbound leads and traffic across social media platforms using Atlas and Dart tracking and watching those leads turn into customers, either on e-commerce landing pages or through B2B lead generation programs.
It also means testing your way into success with our social media campaigns. This can be as simple as testing two different landing pages and seeing which one is the winner. Or it can be as complex as doing multivariate testing that tests more than one component of your website at a time.
The final 20% of a company’s efforts in Stage 3 include measuring the success of your campaign on an ROI basis. And, yes, you can measure a social media campaign on an ROI basis, despite what some social media experts will tell you.
The process involves understanding your Customer Lifetime Value (the total revenue the average customer generates for your business during the lifetime of their engagement with you), then using your CLV to compare it to the results generated by your social media campaign.
Here are a few action steps you can take to incorporate the Social Media ROI Cycle into your efforts.
Watch the 60-second video below, then figure out where you are on the Cycle: Stage 1, Stage 2 or Stage 3.
Start tracking the results of your campaign on a quantitative and qualitative basis
Read some of the blog posts on the 60 Second Marketer that provide insights into calculating the ROI of a social media campaign. (You’ll also find in-depth description of this process in my book, How to Make Money with Social Media.)
Set a timeline for your program to reach the next stage. Better still, go public with the timeline — things seem to get done when there’s a public deadline. (Download the Social Media ROI Cycle slides on SlideShare and incorporate them into your public declaration.)
Keep me posted on your thoughts, comments and reactions to the Social Media ROI Cycle. This is a living entity, so we’ll be doing more updates as we go
If you like what you read today, you can have these blog posts delivered to your in box each morning by clicking here. Or, you can sign up for our free weekly e-newsletter by clicking here.
Yesterday, I completed a webinar for the Direct Marketing Association called “How to Avoid the Great Social Media Crash of 2011.”
In the webinar, I pointed out that businesses using social media are setting themselves up for a big crash this year if they don’t measure the success of their campaigns on an ROI basis.
Click here to download the slides from Jamie Turner's presentation called "How to Avoid the Great Social Media Crash of 2011."
I also discussed a direct response formula used by many marketers called Customer Lifetime Value. This formula, in a very basic sense, is the amount of revenue a typical customer will generate for your business during the time that they’re engaged with your product or service.
If you’re a lawn care company and you know that a typical customer spends $80 per month with you and that the average customer stays with your company for 3 years, then your Customer Lifetime Value would be $80 x 12 months x 3 years = $2,880.
Once you now your CLV, you can decide how much you’d like to invest to acquire a customer. This is called your Allowable Cost Per Sale. Many people use 10% of their CLV as a starting point for their Allowable Cost Per Sale. In the example above, your CLV is $2,880 and 10% of your CLV is $288, so your Allowable Cost Per Sale is that number: $288.
Putting Customer Lifetime Value to Work in Social Media
To keep things straightforward, let’s assume that the lawn care company relies exclusively on direct mail to acquire new customers. Since a typical response rate for a direct mail piece in the lawn care industry is 0.5%, and since it costs about $1.44 to create and mail a direct mail piece, you know that you have to send out 200 direct mail pieces to acquire a new customer.
Here’s how the math works out:
Number of pieces sent: 200
Cost for printing and postage: $1.44
Total cost to send 200 pieces: $288
Response rate: 0.5%
Customers acquired: 200 pieces mailed x 0.5% response rate = 1 new customer
See how that works? For every $288 spent, the lawn care company gets 1 new customer.
Let’s take it a step further. If you’re a large, national lawn care company, you might spend $2.8 million on your annual direct mail campaign. By using the math above, you know that every year, you’ll gain about 10,000 new customers from your $2.8 million direct mail campaign.
Now, let’s assume that your CFO (or your CEO or CMO) wants to test the validity of a social media campaign. In order to do the test, you might slice off 10% of your $2.8 million direct mail budget and use that for a social media campaign. If you know that your $2.8 million direct mail campaign generates 10,000 new customers, then you also know that 10% of that (or $280,000) should generate about 1,000 new customers via direct mail.
That’s the pivotal number: 1,000 customers. After all, now that you know the math around your direct mail campaign, then you know that your social media campaign has to match that in order to be considered a success.
In other words, you have $288,000 to set up, launch and run a social media campaign that needs to generate 1,000 new customers a year.
How to Avoid the Great Social Media Crash of 2011
Once you understand the calculations above, you’re ready to start measuring your social media campaign on an ROI basis. (For an in-depth, step-by-step guide on how to set up a metrics-based social media campaign, you can read my book, How to Make Money with Social Media).
All that said, if you’re interested in downloading a copy of the webinar I conducted for the Direct Marketing Association called “How to Avoid the Great Social Media Crash of 2011″ you can do so by clicking the link.
The slides should give you a sense of some of the tools and techniques used by marketers who are interested in setting up their social media campaigns on an ROI basis.
Are you interested in learning how to measure the ROI of your social media campaign? Great. You’re in the right place.
The starting point for measuring the ROI of a social media campaign is to do a Customer Lifetime Value (CLV) analysis. Customer Lifetime Value is the net revenue a customer brings to your business over the entire course of your engagement with them.
For example, if you’re a cable company and a typical customer spends $100 a month with you and stays with your company an average of 2.5 years, then a simplified version of your Customer Lifetime Value would be $100/month x 12 months x 2.5 years = $3,000.
Are you interested in learning how to measure the ROI of your social media campaigns? Then click here to download a free chapter from Jamie Turner's soon-to-be-published book.
(We say this is a simplified version of Customer Lifetime Value because a more complex formula would factor in the net present value of money, the cost to service the account and several other variables. But we’re using this simplified version to keep the illustration short and sweet.)
Once you know your Customer Lifetime Value, you’ll have a sense of what you might spend to acquire that customer. A starting point for the example above would be 10% of of your CLV. 10% of $3,000 is $300, so that’s what you’d budget for in your customer acquisition program.
I imagine if you went to your CFO and said, “Can I spend $300 to make the company $3,000″ the answer would almost certainly be yes, unless your CFO wasn’t very smart. Or drunk. Or both.
Spending $300 to generate $3,000 is a 10:1 return on your investment which, by just about any standard, is a terrific ROI.
What does Customer Lifetime Value have to do with Social Media?
The starting point for any good social media campaign is measurement. By that, I mean that a well-run, well-managed social media campaign will be set up to measure the return on your investment.
So, for example, if you use direct mail as one of your primary sources of customer acquisition, and if your ROI on your direct mail campaign is 8:1, then you’d want to be sure that your social media campaign matched or exceeded that before you sunk huge amounts of money into it, right?
The problem is that most people don’t know how to set up their social media campaigns so that they can be measured. That’s a pretty big problem. And one that begs a solution.
Good news.
If learning how to measure the ROI of a social media campaign sounds like a fabulous idea, then you’d probably be interested in downloading a free advanced copy of a chapter from my book, “How to Make Money with Social Media” which will be published by the Financial Times Press this fall.
This chapter, called “Measuring the Only Really Important Thing — Your Return on Your Investment” outlines some of the tools you’ll need to set up a social media campaign that generates a specific, tangible return on your investment. It’s packed with good tips and techniques on how to set up a measurable social media campaign.
If you’re ready to get serious about social media, and if you’re ready to start measuring the effectiveness of your social media campaigns, then this chapter is for you. It outlines everything you’ll need to know about measuring social media campaigns on a specific, ROI basis.
So download your free chapter right now. Or, better still, order and advanced copy of the book from Amazon. After all, if you like the free chapter, then you’re going to love the full-length book.
Posted by Jamie Turner, Chief Content Officer at the 60 Second Marketer. “How to Make Money with Social Media” will be available in fine bookstores (and a few not-so-fine bookstores) this fall.
Social media is getting a great deal of buzz these days. But CEOs, CFOs and CMOs are all asking the same question, “How can I measure a social media campaign?”
Well, there’s good news. Despite what some people will tell you, social media can be measured in a very tangible, specific way. But the first thing you have to do is figure out what you want to measure. Do you want to measure the dialogue about your brand? Or do you want to measure the dollars generated from the campaign? (Of course, you could always measure both, which is the best approach.)
To help us get a better understanding of this, we sat down with Raphael Rivilla, who runs the Interactive Media department at BKV (one of the sponsors of the 60 Second Marketer). BKV has more experience than most agencies at measuring the effectiveness of social media campaigns.
Just what are some of the things that can be measured? With a little homework, Raphael and his team can tell you the following:
The positive/negative split about your brand in places like Twitter, the blogosphere, LinkedIn, Facebook, User Forums, etc.
The specific, relevant comments made about your brand on blogs, Twitter and other social media sites
The demographics of the people within your “community”
The percentage of your community who have active internet profiles
The percentage of names in your database with active internet profiles
A breakdown of users who have 1 to 7+ internet profiles
The percentage of users who are using widgets
A gender analysis of your customers across social media websites like Amazon, Flikr, MySpace, etc.
An age analysis
A geo-location analysis
But if you’re just measuring the dialogue, then you’re only accomplishing half of the task. The second (and more important) task is measuring the dollars generated by the campaign. According to BKV, not only is this possible, but once you measure how many prospects converted, you can to wag your finger in the CFO’s face and say, “See, I told you. Social media is measurable!”
(We wouldn’t actually recommend wagging your finger in your CFO’s face, but you get the idea.)
Here are just some of the things BKV can measure with regards to the conversion of your prospects to customers:
Which set of websites, social media sites and blogs converted the most customers from your behavioral targeting campaign
How many prospective customers opened, click-through and converted on an email campaign
Which website landing page converted the most customers and why
What “real estate” on an email was the most valuable. In other words, which space converted more prospects — the “free shipping” space or the “save 10% on blue widgets” space
How many customers converted from a paid search campaign and which version of the campaign outperformed the other
How people navigated through your site. Where did they get stuck? Where did they actually convert?
There are a number of ways to measure a social media campaign. But the starting point is to decide what it is you want to measure — do you want to measure the dialogue about your brand? Or do you want to measure the dollars generated by your campaign? Or do you want to measure both?
Once you’ve got that figured out, the rest is easy.
The 60 Second Marketer is a free online magazine brought to you by BKV Interactive and Direct Response. We try to provide quick updates on the newest tools, tips and techniques in marketing. We also try to accomplish that with a dose of humor or levity. As it turns out, we're pretty good at providing tools, tips and techniques, but we're not actually all that funny. Which would explain why people don't call us "funny" as much as they call us "laughable." Bummer. Our offices, for those of you who are interested, are located in Atlanta (404-233-0332) and Kansas City (913-648-8333). We also have offices on Bora Bora, but they don't have the phones installed yet.
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