This document outlines the process for justifying social media investments using ROI analysis. It discusses how social media requires an investment of resources like people, technology and time. While metrics like website traffic and followers don't directly translate to ROI, they can help create a baseline and prove impact. The key is to overlay social media activities with sales data to identify patterns and relationships between activities and transactions. This allows isolating the impact of social media and quantifying cost savings and revenue gains to calculate ROI using the ROI equation. The document advocates starting with a proof of concept to show social media is working before fully justifying further investments.

1. Enough with the Social Media BS. Give me the realz. Social Fresh Conference // 24 August 2009

2. SOCIAL MEDIA IS NOT FREE.

3. 1. It takes people.

4. 2. It takes technology.

5. 3. It takes time.

6. We have… rocks. … all of which are limited resources.

7. These resources = 100% of your budget E-Marketing Each resource has a specific cost Head Count Advertising I.T. Inbound Call Center Each resource yields specific results Marketing Sales Dept. Accounting Public Relations

8. These resources generate 100% of your business E-Marketing Losing even 1% of your budget’s efficiency could seriously ruin your day. Head Count Advertising I.T. Inbound Call Center Marketing Sales Dept. Accounting Public Relations

9. Okay fine. But if I’m going to take a chance on this social media thing, it had better make good business sense! Why should I allocate resources to it?

10. Reason #1: It will result in a cost reduction. Maybe in customer service? You mentioned something about business intelligence and market research? Reason #2: It will generate more revenue. I want more transactions, more net new customers, more customer loyalty, etc.

11. Now go figure out what Program you have to cut to fund this Social Media thing. Remember that our bonuses are on the line.

12. Understand that a new Social Media program’s funding doesn’t appear out of thin air.: Which buckets do we empty to fill this new one?

13. SAY HELLO TO: Business Justification R.O.I.

14. R.O.I. RETURN ON INVESTMENT

15. THE R.O.I. EQUATION Investment Expectation of return

16. THE R.O.I. EQUATION (GAIN FROM INVESTMENT - COST OF INVESTMENT) ROI = COST OF INVESTMENT

17. Truth about R.O.I. ROI is a business metric, not a media metric. ROI is 100% media-agnostic. Only measuring digital or social won’t get you anywhere.

18. Reason #1: COST REDUCTION Reason #2: REVENUE GENERATION Remember what Mr. Bossman said…

19. I shrank my PR budget by 20% and my outbound call budget by 40%. Now I can afford a team of social media Rock stars. Can I get a hellz yeah? Okay, hotshot, You have your Social Media doohickey. Now I’d better see some real results! Or else…

20. Woohoo! I have a job!!!

21. Dudes, we are ON THIS!!! Let’s start engagin’!!! I call dibs on the Corporate blog.

22. Cool. ACCOUNTING One Month Later…

23. What about our Twitternets? Oh my! Look at all the new visitors to our website! and all of our FaceBook friends! Hot Damn, we even have comments on the blog!

24. This rocks! I never had it so good!!!

25. Cool. ACCOUNTING Three Months Later…

26. Yeah but… What about the P&L? Monitoring to base… Monitoring to base… Our Google Analytics are through the roof! Even our social mentions are wicked good! We have liftoff!

27. Measuring media really rocks my world.

28. Nope. Anything? Nada. ACCOUNTING Six Months Later…

29. What kind of mood is The old man in today? Not good. He doesn’t care how many visitors the website gets, or how many eyeballs we estimate we’ve reached unless it means we’re selling more stuff.

30. But why? Our website is getting mad hits, Jack! And we have 3,000 followers on Twitter now! I’m sorry, son. If your Social Media program is generating revenue, we aren’t seeing it. We need to allocate resources where we can make money. It’s just business.

31. Darn it. This media measurement stuff isn’t working. We need to start tying this stuff to actual Business performance. Where to start? Let’s see… At the beginning?

32. Things happen in sequence.

33. Non-financial impact is not ROI (yet).

34. Types of non-financial impact Customer complaints Website Visitors Impressions Positive press Click-throughs YouTube views Retweets Coupons distributed Visitors to a brick & mortar store Positive WOM Delivered emails Negative press Negative WOM Employment applications Blog comments FaceBook friends Social mention Twitter followers

35. Non-financial impact = potential.

36. ROI = actualized potential.

37. Reason #1: COST REDUCTION Reason #2: REVENUE GENERATION Remember what Mr. Bossman said…

38. I need proof that what we’re doing is actually working. Start with proof of concept.

39. Step 1: Establish a baseline 8% YoY Growth

40. Baselines illustrate deltas (changes) Is something happening here?

41. Step 2: Create Activity Timelines

42. Step 2: Create Activity Timelines

43. Step 2: Create Activity Timelines

44. Step 3: Look at Sales Revenue

45. Step 3: Also look at # of transactions

46. Step 3: Also measure net new customers

47. Transaction data should be specific F.R.Y. FREQUENCY, REACH, YIELD How often customers transact. (transactions per month) How many customers you are reaching. (net new customers) How much they spend. ($ per transaction)

48. The latest numbers indicate that our YoY sales $ are up 60%. Our individual transactions have doubled, as have our transacting customers. Something’s working! Groovy! Let’s figure out what.

49. Step 4: Measure transactional precursors

50. Step 4: Measure transactional precursors

51. Step 4: Measure transactional precursors

52. We overlaid all of our timelines and noticed that since our social media activities began, our website visits are up, our social mentions are also up, and everyone seems to love us. So is there a discernable pattern in this?

53. Step 5: Overlay all timelines activities social data web data transactions loyalty metrics etc.

54. Step 6: Look for patterns Impact Uncertain Impact Impact Impact No Impact Before After

55. Step 7: Prove relationships How was this group Touched by SM? Before After

56. How long will all this analysis take? It’s all a process of elimination, really. Isolating patterns, quantifying deltas, proving ad-hocs… Then all we have to do is figure out what the cost savings and revenue gains are, and plug them into the equation.

57. THE R.O.I. EQUATION (GAIN FROM INVESTMENT - COST OF INVESTMENT) ROI = COST OF INVESTMENT

58. THE R.O.I. EQUATION Investment Expectation of return

59. Oh wow. This R.O.I. thing wasn’t at all about measuring media, impressions and eyeballs!

60. All things remaining the same… We may have proof of concept. Hot damn! ACCOUNTING First things first: Prove that Social Media works

61. So it turns out that our Social Media program is impacting every aspect of our business except traffic in our brick and mortar stores. Can you get on that? Yeah. We need to find out why we aren’t having an effect there. Kthxbye. Then use what you know to make it work better.

62. More store traffic. Roger that. Dudes, we are ON THIS!!! Let’s start engagin’!!! I’ll start crafting some wicked blog posts.

63. Finally, someone with some real metrics for me to sink my teeth into! Good job, Sparky! You done gewd!

64. So I guess Social Media is going to stick around a little while longer after all, isn’t it? Yessir. Looks like our budget is safe for now.

65. Drinks for Everybody!

66. Olivier Blanchard Principal, BrandBuilder Marketing 864.630.7398 www.thebrandbuildermarketing.com @thebrandbuilder(on Twitter) www.smroi.net

67. Slideography Slide # Source 3, 9, 10, 11, 18-31, 37, 38, 48, 52, 56, 59-65 4 6 UFO (TV series) http://ufoseries.com/ http://www.minnpost.com/stories/2008/06/18/2282/this_doesnt_compute_as_more_women_enter_scientific_fields_their_numbers_in_computer_science_are_declining Kim Jong Il puppet, from “Team America” http://blogs.rockymountainnews.com/bridget/kimjongil.jpg