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Posts Tagged ‘#smROI’

 FGS

Facebook Graph Search explained in 15 seconds. It’s really simple. Ready?

Think search your community/network instead of search the web.

That’s all it is.

If that doesn’t work for you, think about search in terms of degrees of separation. Remember David Armano’s influence ripples? Imagine search working the same way. It’s basically search coupled with social relevance.

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If that still doesn’t work for you, here’s Zuck:

ZuckAlso check out Christopher Penn’s insights here. (Relevant to marketing, digital and bizdev pros.)

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Looking for straight answers to real questions about value, process, planning, measurement, management and reporting in the social business space? pick up a copy of Social Media R.O.I.: Managing and Measuring Social Media Efforts in Your Organization. The book is 300 pages of facts and proven best practices. (Go to smroi.net to sample a free chapter first, just to make sure it’s worth the money.)

And if English isn’t your first language, you can even get it in Spanish, Japanese, German, Korean and Italian now, with more international editions on the way.

CEO-Read  –  Amazon.com  –  www.smroi.net  –  Barnes & Noble  –  Que

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LTV infographic by Kiss Metrics

“People pay you. Not pageviews.” That pretty much says it all. (image source.)

This is as badass as it is self-explanatory. For those of you who don’t know how to estimate customer lifetime value (LTV, or CLTV), this infographic should be a pretty handy little tool. (Just ignore the Starbucks references.) Why is this important? 3 reasons:

1. When justifying an investment in a marketing program whose goal will be to acquire (create) new customers, you can sift through your customer data and determine what the average customer spend (their value to the company in terms of net revenue) should be over time. You can drill into demos or average out every customer category to arrive at a gross average – that’s up to you. This helps you set targets. If the investment is $100,000 and management expects a x10 return on their investment for a certain timeframe, you can now figure out what your net new customer target needs to be for this campaign by performing some basic 8th grade math. If the brass still isn’t sure about the value of the investment, you can make your case by projecting the lifetime value of net new customers rather than monthly, quarterly or even annual sales. For that alone, it’s a handy little set of equations

2. Good marketing is about more than customer acquisition. It also has to focus on customer development and customer retention. When making your case for a program that focuses on keeping existing customers from leaving, being able to present LTV/CLTV figures provides you with a compelling argument for the funding of such programs. (It is a lot more cost effective to develop and retain customers than to acquire new ones.) Use LTV to model for management what breaks in the conversion chain will cost the company in lost revenue over time, and loyalty programs will be a lot more likely to get a little more love. If you spend $5,000,000 to onboard 10,000 new customers per year only to lose 60% of them by the following year, you can see whether or not your marketing plan is in fact a leaky bucket. You can’t know what you don’t know. Calculating LTV gives you parameters with which you can properly analyze your programs’ efficiencies and inefficiencies, including long term ROI.

3. Once you know your customers’ overall average LTV, you can start attacking not only the net new customers piece (acquisition) and the retention piece (loyalty), but the development piece as well. Say your overall customer LTV average works out to be $14,099. Why not try and move that needle up to $15,001, then $15,100, then $15,250?  This is the purpose of the customer development side of marketing (or business development, even). Devise ways to grow wallet-share. Increase average spend per transaction (yield) and buy rates (frequency). [Remember FRY? That’s what we’re talking about right now.] Tracking this number not only gives you baselines from which to devise targets and tactics, but it also gives you a dashboard needle with which to gauge your progress AND revise long term sales projections.

Do you know how many product managers and CMOs know how to do this (or bother to do this kind of analysis even if they do)? Not many. If you smell an opportunity to suddenly become a whole lot better at your job and maybe even impress higher paygrades with your business acumen, it means your nose is working.

One quick piece of advice: Don’t just file this away for later. Do something with it. Print the infographic, start playing with the equations, and see what you come up with. Create a baseline. Play with projections. Sift through customer data to see if certain demos might be more receptive to different types of messages and offers. Then use the data; don’t just collect and report it.

Very big hat tip to Business Insider and Liz Scherer for starting the information daisy chain, and of course a big thank you to Kiss Metrics and @avinash for putting together such a clean, clear and concise infographic detailing the LTV calculation process.

PS: If you aren’t familiar with F.R.Y. methodology, it’s all spelled out here:

Score your own copy of Social Media ROI: Managing and Measuring Social Media Efforts in Your Organization (Que) just about anywhere business books are sold, if you haven’t already. The book is actually about a whole lot more than ROI and focuses on a lot of business fundamentals with applications reaching beyond the digital world. (The Chapter on F.R.Y. will be particularly helpful given today’s blog topic.)

You can also check out smroi.net to dig deeper into the book and even sample a free chapter, or let the reviews on Amazon.com help you decide whether or not it is worth the price of a turkey sandwich.

Cheers,

Olivier

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I told you I would bring back this post regularly. Here it is again, until the day when everyone understands how simple this is. Okay, here we go:

If you are still having trouble explaining or understanding social media R.O.I., chances are that…

1. You are asking the wrong question.

Do you want to know what one of the worst questions dealing with the digital world is right now? This:

What is the ROI of Social Media?

It isn’t that the idea behind the question is wrong. It comes from the right place. It aims to answer 2 basic business questions: Why should I invest in this, (or rather, why should I invest in this rather than the other thing?), and what kind of financial benefit can I expect from it?

The problem is that the question can’t be answered as asked: Social media in and of itself has no cookie-cutter ROI. The social space is an amalgam of channels, platforms and activities that can produce a broad range of returns (and often none at all). When you ask “what is the social media or ROI,” do you mean to have Facebook’s profit margins figure in the answer? Twitter’s? Youtube’s? Every affiliate marketing blog’s ROI thrown in as well?

The question is too broad. Too general. It is like asking what the ROI of email is. Or the ROI of digital marketing. What is the ROI of social media? I don’t know… what is the ROI of television?

If you are still stuck on this, you have probably been asking the wrong question.

2. So what is the right question?

The question, then, is not what is the ROI of social media, but rather what is the ROI of [insert activity here] in social media?

To ask the question properly, you have to also define the timeframe. Here’s an example:

What was the ROI of [insert activity here] in social media for Q3 2011?

That is a legitimate ROI question that relates to social media. Here are a few more:

What was the ROI of shifting 20% of our customer service resources from a traditional call center to twitter this past year?

What was the ROI of shifting 40% of our digital budget from traditional web to social media in 2011?

What was the ROI of our social media-driven raspberry gum awareness campaign in Q1?

These are proper ROI questions.

3. The unfortunate effect of asking the question incorrectly.

What is the ROI of social media? asks nothing and everything at once. It begs a response in the interrogative: Just how do you mean? In instances where either educational gaps or a lack of discipline prevail, the vagueness of the question leads to an interpretation of the term R.O.I., which has already led many a social media “expert” down a shady path of improvisation.

This is how ROI went from being a simple financial calculation of investment vs. gain from investment to becoming any number of made-up equations mixing unrelated metrics into a mess of nonsense like this:

Social media ROI = [(tweets – followers) ÷ (comments x average monthly posts)] ÷ (Facebook shares x facebook likes) ÷ (mentions x channels used) x engagement

Huh?!

Equations like this are everywhere. Companies large and small have paid good money for the privilege of glimpsing them. Unfortunately, they are complete and utter bullshit. They measure nothing. Their aim is to confuse and extract legal tender from unsuspecting clients, nothing more. Don’t fall for it.

4. Pay attention and all the social media R.O.I. BS you have heard until now will evaporate in the next 90 seconds.

In case you missed it earlier, don’t think of ROI as being medium-specific. Think of it as activity-specific.

Are you using social media to increase sales of your latest product? Then measure the ROI of that. How much are you spending on that activity? What KPIs apply to the outcomes being driven by that activity? What is the ratio of cost to gain for that activity? This, you can measure. Stop here. Take it all in. Grab a pencil and a sheet of paper and work it out.

Once you grasp this, try something bigger. If you want to measure the ROI of specific activities across all media, do that. If you would rather focus only on your social media activity, go for it. It doesn’t really matter where you measure your cost to gain equation. Email, TV, print, mobile, social… it’s all the same. ROI is media-agnostic. Once you realize that your measurement should focus on the relationship between the activity and the outcome(s), the medium becomes a detail. ROI is ROI, regardless of the channel or the technology or the platform.

That’s the basic principle. To scale that model and determine the ROI of the sum of an organization’s social media activities, take your ROI calculations for each desired outcome, each campaign driving these outcomes, and each particular type of activity within their scope, then add them all up. Can measuring all of that be complex? You bet. Does it require a lot of work? Yes. It’s up to you to figure out if it is worth the time and resources.

If you have limited resources, you may decide to calculate the ROI of certain activities and not others. You’re the boss. But if you want to get a glimpse of what the process looks like, that’s it in its most basic form.

5. R.O.I. isn’t an afterthought.

Guess what: Acquiring Twitter followers and Facebook likes won’t drive a whole lot of anything unless you have a plan. In other words, if your social media activity doesn’t deliberately drive ROI, it probably won’t accidentally result in any.

This is pretty key. Don’t just measure a bunch of crap after the fact to see if any metrics jumped during the last measurement period. Think about what you will want to measure ahead of time, what metrics you will be looking to influence. Think more along the lines of business-relevant metrics than social media metrics like “likes” and “follows,” which don’t really tell you a whole lot.

6. R.O.I. doesn’t magically lose its relevance because social media “is about engagement.” 

If your business is for-profit and you are looking to use social media in any way, shape or form to help your business grow, then all of your questions regarding the R.O.I. of investing in social media activity are relevant. Any social media consultant who tells you otherwise is an idiot.

Concepts like Return on Engagement, Return on Influence, Return on Conversation are all bullshit. Nice exercises in light semantic theory, but utterly devoid of substance. First, they can’t be calculated. Second, they bring absolutely zero insight or value to your business. In fact, they pull your attention away from legitimate outcomes. Third, they are not in any way shape or form substitutes for Return on Investment.

Fact: If a social media “expert” tells you that ROI isn’t important, he (or she) is a hack. Remove them from your organization immediately.

Fact: A social media “expert” who doesn’t know how to calculate ROI properly (or teach you how to do it) might just be an expert at blogging, and not social media program management or social business integration.

Note: Integrating social media and business requires more experience than just making it look like 100,000+ “people” follow you on Twitter. Anyone can become a speaker nowadays. Anyone can publish a book and make themselves look like an expert. Unfortunately, at least 9 out of 10 social media speakers/experts/gurus/authors couldn’t effectively manage a Fortune 500 social media/business practice if you infused their brains with an extra 100 points of IQ and enrolled them in an executive MBA course. Be very careful who you hire, whose blogs you read, and whom you elect to influence your business decisions.

“Digital Influence” does not necessarily reflect competence. Always remember that. Some of the dumbest and most dishonest people in this business have enormous followings on Twitter, blogs and G+, and very high Klout scores to boot. (They spend an enormous amount of time making sure they do.) Conversely, some of the most brilliant, competent, ethical people in this business aren’t all that visible. Why? Because they are too busy doing real work to focus all of their efforts building personal brands and better mouse traps.

There are other litmus tests, but the ROI bit is a pretty solid one: A so-called expert who skirts the issue or fails a simple ROI problem/test from your CFO probably isn’t as qualified to advise you as his or her Klout score might have suggested. 😉

7. … But R.O.I. isn’t relevant to every type of activity.

Having said that, not all social media activity needs to drive ROI. As important as it may be to understand how to calculate it and why, it is equally important to know when ROI isn’t really relevant to a particular activity or objective.

Technical support, accounts receivable, digital reputation management, digital crisis management, R&D, customer service… These types of functions are not always tied directly to financial KPIs. Don’t force them into that box.

This is an important point because it reveals something about the nature of the operational integration of social media within organizations: Social media isn’t simply a “community management” function or a “content” play. Its value to an organization isn’t measured primarily in the obvious and overplayed likesfollowers, retweets and clickthroughs, or even in impressions or estimated media value. Social media’s value to an organization, whether translated into financial terms (ROI) or not, is determined by its ability to influence specific outcomes. This could be anything from the acquisition of new transacting customers to an increase in positive recommendations, from an increase in buy rate for product x to a positive shift in sentiment for product y, or from a boost in customer satisfaction after a contact with a CSR to the attenuation of a PR crisis.

In other words, for an organization, the value of social media depends on two factors:

1. The manner in which social media can be used to pursue a specific business objective.

2. The degree to which specific social media activity helped drive that objective.

In instances where financial investment and financial gain are relevant KPIs, this can turn into ROI. In instances where financial gain is not a relevant outcome, ROI might not matter one bit.

Knowing when and how ROI matters (or not) will a) help you avoid costly mistakes and will b) hopefully help you make smart decisions when it comes to assigning precious resources and budgets to specific social media/business programs.

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By the way, Social Media ROI – the book – doesn’t just talk about measurement and KPIs. It provides a simple framework with which businesses of all sizes can develop, build and manage social media programs in partnership with digital agencies or all on their own. Check it out at www.smroi.net, or look for it at fine bookstores everywhere.

Click here to read a free chapter.

CEO-Read  –  Amazon.com  –  www.smroi.net  –  Barnes & Noble  –  Que

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onourminds

I am pretty excited to announce that I will be speaking at the Like Minds Conference on October 16th in Exeter, England. The conference is the brainchild of Scott Gould, Trey Pennington, and Andrew Ellis who… presumably got the idea for this event while holding on to a pint or two. (At least I hope so.)

What I like about Like Minds so far:

1. The conference will focus on two things dear to my heart:

a) Sustainable social media practices (how to develop, manage and integrate social media programs, how to turn customers into brand advocates through social media, how to blend social media into your business mix, etc.), and

b) Best practices for social media measurement (particularly how to define and measure social media ROI).

Already, you can see how this is right up my alley. We’re finally tucking evangelism away and getting to methods and best practices. It’s about time.

2. It’s in Exeter, England.

As much as I love living on this side of the pond, it’s nice to fly back to the other side every once in a while and reconnect with my roots. (Yeah, I need a regular dose of euro living every once in a while, just to make sure all my systems are still properly calibrated.) And given the proximity of the UK to France, I’m guessing I’ll probably take advantage of being in the EU to pay my patria materna a quick visit, stuff my face with croissants and brie, shake my fist at a moped or two, and argue about art and literature with complete strangers.

Not to mention some of the sight-seeing I intend to do in the UK.

On a more serious note, the prospect of speaking at a conference in England is pretty cool, but more importantly the opportunity to learn from social media practitioners in in the UK and EU, compare notes, share stories, etc. is pure gold to me. Sometimes, you kind of have to hop out of the fishbowl a little bit and go see how the other fishies swim. I know I am going to come back with my head abuzz with ideas. (I won’t sleep for weeks.)

3. The roster of speakers.

Aside from moi, this is what it looks like so far:

Andrew Ellis @drewellis

Andrew is a creative director with extensive startup experience, a seasoned innovator, and co-founder of Like Minds. He pioneered Eyetoeye Digital as one of the earliest ‘new media’ agencies in 1993, working with both household brands, and multinationals. His work has received international acclaim, from the iconic slogan T-Shirts for Kathryn Hamnett in the early 80s, to Grammy nominations, and most recently, ‘Orbit’, a documentary-come-musical with extensive CGI of explored universe which is touring the US in 2010. Drew’s accomplisments, past and present, are available in full at his personal blog.

Trey Pennington @treypennington

Trey is leveraging social media to connect with audiences around the world. HubSpot ranks his Facebook profile as the #4 most influential in the world. Since January 2009, Trey has started or helped start ten Social Media Clubs—eight in the southeastern United States, one in the United Kingdom, and one in Australia. His home club now has over 550 members and was, for most of 2009, the second largest Social Media Club in the world. Trey’s book ‘Spitball Marketing’ is being launched at Like Minds. For more information, visit http://www.treypennington.com.

Laura Whitehead @littlelaura

Laura is a web developer and a consultant on social media integration and online community development. Based in South Devon and the founder of Popokatea, she works with awide range of clients including the nonprofit and public sector, and small business enabling them to use innovative methods and online technology to extend their reach, engage with their audience and achieve their goals. Laura was quoted in Fast Company as “the queen of nonprofit technology in the UK.” (Pretty cool.)

Andrew Davies @andjdavies

Andrew is co-founder of idiomag.com, an personalised publishing platform that is at the cutting edge of the digital publishing revolution. He also previously co-founded thruSITES, a London-based social media development agency with clients such as Universal Studios, Sky, ITV and Number 10.

Carl Haggerty @carlhaggerty

Carl is the Enterprise Architect at Devon County Council. He guides social media usage and change in businesses and organizations, creating and installing frameworks and policies for social media and networking. He has a broad background ranging from Sustainability and Community Development, Tourism & Economic Development to Business Administration and Communications. Carl’s blog is at http://carlhaggerty.wordpress.com.

In other words, no fluff. And some new voices, which I like.

4. Meeting a whole new batch of tweeps in the real world, all of whom will have really cool accents.

You can’t beat that.

5. The price of admission.

While some social media conferences charge upwards of $1000 for the privilege of listening to celebrities talk about their twitter adventures, this one made sure to make admission affordable, therefore open to all. I like that. If you book now, You’re only looking at 25 quid. At the door, 35 quid. I have a lot of respect for that.

So if you’re able to make it to Exter on the 16th of October, I encourage you to drop by, share your stories, listen to ours, and join the fun. Find out more here, or just go ahead and book today.

And if you intend to be there, drop me a note. 😉

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