Social Media ROI

Social Media ROI
Mumbrella Talk September 6th 2011

Monday, 5 September 2011
Hi I’m Tim Evans, Ogilvy Group Melbourne’s Digital Strategy Director.
Before I get started I’d like to thank Mumbrella for inviting me and thank all of you for coming along.
There are some great speakers here today covering lots of interesting topics - and for the next 20 - 30 minutes I’m going to give you my thoughts on Social Media ROI.

Agenda

• Say hello
• What is ROI?
• How can you measure social media ROI?
• Questions

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I’ve prepared an agenda for my chat. First I’m going to say hello, so hello.
Then I’ll explain what ROI is and how it can be measured in social media.
Afterwards I’ll open the floor and take some questions.

What is ROI?

3

So ﬁrst - what is ROI? What does it stand for?
Let me start by explaining what ROI is not.

4

ROI is not return on interest, return on interactions or return on impressions. It is a business measurement with non variable values. And it stands for...

ROI does not stand for
return on interest

4


return on interest
return on interactions
4


return on interest
return on interactions
return on impressions
4


5

Return on Investment. It has a concrete formula that goes like
this...

ROI stands for
return on investment

5

Return on Investment. It has a concrete formula that goes like
this...

ROI =
(gain from investment - cost of investment)
cost of investment

6

the gain minus the cost divided by the cost.
that’s it.
and because everything you put into your social media program costs money - from head hours to technology - the gain must also be measured in money.
For example - if Mumbrella paid me $100 to be here and it cost me $50 to get here - well that’s a 100% return on investment.
Let’s apply this simple formula to a typical social media program.

Social Media ROI
An example program

INVESTMENT ACTION REACTION SOFT GAIN GAIN

• Financial investment • Socialise the • Customers served via • 10% more customers • $15,000 cost
in social media customer call centre social media served reduction in call
program for Q1 is • Introduce electrical • Customers respond • 30% increase in centre
$30,000 buyer’s guide on positively to buyer’s positive sentiment • 5,000 more
Facebook guides transactions =
• 5,000 likes $45,000
• Track interactions • 10% increase in time
spent on site • $60,000 gain for Q1
• 10% increase in
trafﬁc

7

1st - The client invests $30k in their social program.
For that - the agency socialises the call centre, introduces etc.
Next the public responds. They like the buyer’s guides and they get service via social media.
The agency is proud to report on what I’m calling ‘soft-gain’ success. These are non-financial metrics like -
All this results in hard gain - which is money. 15k cost reduction in the call centre and 45k worth of sales for a grand total of $60,000.

Social Media ROI
An example program
This is money


• 5,000 likes $45,000
• 10% increase in
trafﬁc

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Just to clarify - this is money
and...

Social Media ROI
An example program
This is money


• Financial investment • $15,000 cost
in social media reduction in call
program for Q1 is centre
$30,000 • 5,000 more
This is marketing transactions =
$45,000
• $60,000 gain for Q1

9

this is marketing. Marketing is still very important, but if your cost of investment is measured in dollars and your gain on investment is measured in facebook likes - well you’re doing it wrong.
So in this example - the client invested $30k and gained $60k. Let’s plug those figures into our trusty formula and...

($60,000 - $30,000)
$30,000

ROI = 100%
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hey presto - another 100% return on investment!
Now if it’s so easy to calculate ROI...t

Why aren’t we
doing it?

11

hen why is it such a hot topic? If it’s so easy - why am I here talking to you about
it?

Social Media ROI
What usually happens Most measurement
stops here


• 5,000 likes $45,000
• 10% increase in
trafﬁc

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Because the fact is - most measurement stops at the soft gain. It usually goes a little like this...

Social Media ROI
What usually happens


• Agency asks client to • Agency writes a • Agency reports on • Client and agency • Calculating real ROI is
pay for a social strategy with soft program against soft celebrate soft gain put into the too-hard
media program gain success metrics metrics success basket
i.e. 5,000 likes or • Program is optimised
service level to produce better soft
agreements such as gain metrics
5min response times
• Client signs-off on
strategy

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Agency gets client to pay for social media program
The agency writes up a strategy with soft gain success metrics like 5,000 likes and service level agreements such as 5min response times
Client signs off and the agency reports on the program based on the soft gain metrics, so the program keeps being optimised to produce better soft gain metrics and we all celebrate our soft gain success. And that crucial last step where
we convert our non-financial impact into real financial gain is simply put into the ‘too-hard’ basket. But it doesn’t have to be that way...

Measure social
media ROI
in 3 steps

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Iʼm going to show you how to make the leap and measure social media ROI in 3
steps.

Step 1.
Find the starting line

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the first step is finding the starting line.
because...

Social Media ROI
Step 1. The starting line

Start social media tracking
The Electrical Dept

30

22.5

15

7.5

0
Q2 2010 Q3 2010 Q4 2010 Q1 2011 Q2 2011 Q3 2011

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...you need to start somewhere. This is often the hardest part for agencies - because it means getting your hands on your clientʼs ﬁnancial data - and keeping it. But once you
have access, you need to draw a line in the sand. This is where you start step 2...

Step 2.
Track your social
media activity

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tracking your social media activity. You can measure whatever makes the most sense to you...

Social Media ROI
Step 2. Track social media activity
Negative Mentions Customers Served
Positive Mentions

Customers Served
50 40
Mentions

37.5 30
25 20
12.5 10
0 0
Q2 2010 Q3 2010 Q4 2010 Q1 2011 Q2 2011 Q3 2011 Q2 2010 Q3 2010 Q4 2010 Q1 2011 Q2 2011 Q3 2011

Traffic to Site from Facebook Impressions
Interactions

Facebook Activity
Likes
Site Trafﬁc

40 400
30 300
20 200
10 100
0 0
Q2 2010 Q3 2010 Q4 2010 Q1 2011 Q2 2011 Q3 2011 Q2 2010 Q3 2010 Q4 2010 Q1 2011 Q2 2011 Q3 2011
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Some examples are mentions - which can be split into positive and negative, customers served via social, site trafﬁc driven from social or data from facebook insights. This is
probably stuff youʼre already doing to measure your soft gain success. Itʼs the stuff you put in case study videos.

Step 3.
Prove the relationship
between social media
activity & ﬁnancial
performance
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the 3rd step is where we take the client’s transactional data and layer our social media activity across the same timeline.

Social Media ROI
Step 3. Relationship of sales & social media

Likes Interactions
Impressions Sales Revenue Start social media tracking
No. of Transacting Customers Mentions
Customers Served Site Traffic
Conversion Rate
200

150

100

50

0
Q2 2010 Q3 2010 Q4 2010 Q1 2011 Q2 2011 Q3 2011

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Once we have all the data on the same timeline we look for patterns, isolate them and try to prove or disprove
correlation...

Social Media ROI

Likes Interactions Test & prove correlation
Impressions Sales Revenue
No. of Transacting Customers Mentions
Customers Served Site Traffic
Conversion Rate
200

150

100

50

0
Q2 2010 Q3 2010 Q4 2010 Q1 2011 Q2 2011 Q3 2011

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between social media activity and your clientʼs P & L.

Social Media ROI
Increase in customers serviced
by other customers in your
Increased conversion community
rate from customers who =
used the Facebook Demand reduction in call
buyer’s guide centre

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Sometimes this will be clear - like an increase in the conversion rate from social media.
Other times - it will require some further calculations. For example maybe you notice that as more customers get service on your Facebook page - there is less demand on your
call centre. To calculate the gain on this youʼd have to...

Social Media ROI

1.Tally the number of Qs
answered by community
5,000/m
2.10% are deﬂected
5,000 x .10 = 500
3.Multiply by avg. cost of call
500 x $20 = $10,000/m

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First, you need to tally the number of questions answered by your community.
Then you times that by 10% which is what salesforce tells us is the average amount of calls deflected after being served via social
Then you times those deflected calls by the cost of a call to get your average amount of gain per month.
In fact - socialising your call centre is a great way to project ROI and get some budget. But that’s a story for another time. Cos right now it’s time for my favourite part...

And so,
in summary

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The summary! Do y’all get that
photo?

Social Media ROI
Summary

• ROI=(gain - cost)/cost - So if cost = $ then gain = $
• Don’t settle for soft gains - you can’t measure ROI in ‘likes’
• Get that financial data
• Layer your social efforts on top of financial data
• Prove correlation between social efforts & financial gain

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Thanks.
Questions?
@tim__evans

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Digital Strategist

Learned ‘likes’ aren’t $
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Social Media ROI

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