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Friday, September 14, 2012

Measuring Social ROI...A Social Media ROI Calculator

Are you measuring your social ROI?  You know what I say

              .........just do it!

You have to start somewhere.  You have to start sometime.  So it might as well be now.  To be honest, it is really not that difficult to put some numbers against your social marketing efforts.  Trust me.  And, it becomes a fun exercise in doing what I call "What if" analyses.

I have been doing ROI calculations for a long long time. And I thought, why aren't more marketers trying a bit harder to determine the ROI of their social marketing efforts.

When I went to the Social Media Benchmark Conference on May 9th in NYC this year I expected to hear all about Social ROI and how various companies are doing it.  To my surprise very few numbers were revealed.  I thought wow.  How can this be?  See my post titled Beer, Sex and Social Media regarding this conference for more details.

Another conference is coming up titled Social Media ROI sponsored by Business Insider in NYC on September 27th.  I plan on attending this one as well.  And, I am curious to see if I will get some real numbers this time.  I will find out soon and report back of course.  But in the mean time lets you and I discuss social ROI and how we can do it.

Of course let me be very upfront, clear and honest...an ROI for your social campaign is not going to be perfect.  By no means.  There will be a lot of assumptions you will have to make.  But with a little thought, and the use of preexisting research, some real meaning can result out of your efforts.  It is actually kind of fun.  A challenge.  I love challenges!

So let me take you through the thought process and the steps to conduct a social ROI analysis.

First of all there is a ton of great research out there that we can use to help us do our ROI analyses.  I consolidated some of the best studies from ComScore, Forrester and others available today to help us.  They are summarized below. These will become inputs into our calculations later.

Facts from "The Power of Like" by Comscore & Facebook, May 2011
  • 16% of fans are reached by branded content by a brand that posts 5 of 7 days and roughly 22% are reached for brands that post every day as shown below in Figure 1.  Pretty useful data for our ROI calculations.
Figure 1
  • Results are similar for friends of fans - a given status update from a user will result in about 12 % reach among friends.
  • Fans and friends of fans for Starbucks were found to spend 8% more and transact 11% more in store than non-fans and non-friends of fans as shown below in Figure 2.  I think we can use this too.
Figure 2
  •  Southwest airlines exposed fans were 5 times more likely to visit the web site than non-exposed fans. And, Southwest exposed friends of fans were 2.5 times more likely to visit the web site than non-exposed friends of fans
  • Bing fans conducted 68% more searches than non-fans.  Bing friends of fans conducted 27% more searches than non-friends of fans               

Facts from "The Facebook Factor" by Forrester, April 9, 2012
  • Between 55% and 95% of fans are likely to purchase in the next 12 months for the companies considered in this study (BestBuy, Coke, BlackBerry, Walmart).  Very interesting.
  • Between 10% and 74% of non-fans are likely to purchase in the next 12 months
  • Fans were between 5.3 and 11.4 times more likely to purchase (see Figure 3 below)
Figure 3

Facts from "The Value of a Facebook Fan" by Syncapse, June 2010 
  • Fans spend 84% more than non-fans based on the companies studied.  Now that is a great fact.
  • Fans are 28% more likely to stay with a brand
  • Fans are 41% more likely to recommend a brand to a friend
  • 68% of fans in general recommend a brand to a friend
  • 48% of non-fans recommend a brand to a friend               

Facts from “What is the Typical Virality Rate for a Facebook Post?” by EdgeRank Checker, March 2012
  • The median "virality" rate for Facebook pages is 1.92%.  A valuable number also for our consideration.

The ROI Calculation
Below is an example ROI analysis I conducted for a client not that long ago.  To protect the client and my work for them, I have removed reference to their name and some of the calculations.  

The main goal of the analysis was to help them understand the benefits of obtaining 100,000 fans and if those benefits would offset the costs.  The screenshot of the Excel spreadsheet I created to conduct this analysis is below and requires the following data:
  • The lift in spend for fans and non fans (using ComScore study)
  •  An estimate of one year customer value, or some other proxy.  For this client we used $100.
  • What percent of those fans you obtain will even see your posts if you do them daily.  Again, not all will see them.
  • The virality rate based on research findings
  • Reach for your friends based on comments and shares.  Not all will see them
  • Estimate of average friends per fan.  130 was based on a study I found somewhere but you can use whatever you think.
  • % of fans and friends that are exposed that will buy again based on the research available..
Putting it all together in a spreadsheet was the next step.  Calculations were done to determine:
  • How many of your fans will see a given post
  • How many of those will share it
  • What the true reach of the friends of the fans will be
  • How many of the exposed fans and friends are already your customers
  • The resulting increase in spend.  

Using the facts from the various studies cited above and assumptions obtained from the client I input the data into my spreadsheet and determined the increased value to the brand by obtaining 100,000 fans would be approximately $211,000.  And, this is just based on a one year value.  So the question posed to the client was:

What will it cost you to get these fans and will it be less than $211,000.

Keep in mind, as good as these numbers look, we have not even taken into consideration other benefits like conversion of fans that are not customers to customers, increased customer retention, increased advocacy among fans, conversion of friends, etc.  So many other benefits.

Give it a try.  You might as well start now.  It will never be perfect. Never.  So no need waiting.

If you need help and guidance in assessing the success of your various social campaigns (or any campaign), please do not hesitate to reach out to me.  This is my specialty.  Note I do have some ROI calculators available for FREE and are located on my web site dedicated to marketing test design and analysis at www.confidenttest.com.  Check them out.

I hope you enjoyed the post and that it gave you some great ideas as to just what can be done here.

PS  the studies cited in this post are listed below.


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