Marketers are investing more and more in social media efforts, with significant 40% or more annual increases predicted by several market research firms over the next year. To validate the significant spending growth, marketers also understand that you must make an effort to deliver social media results and success, but what investments are required, and how much effort needs to be expended to deliver specific results?

1. TOM PISELLO, CHAIRMAN & FOUNDER
Blog: http://blog.alinean.com/
Twitter: @tpisello
http://www.alinean.com
http://www.fightfrugalnomics.com
Is there an ROI from Social Media Marketing?

2. Agenda
1. Need for Social Media Spending and ROI Trends
2. How to Measure Social Media Marketing ROI?
3. The Alinean Social Media ROI Calculator
4. Best Practices to Maximize Social Media ROI
© 2011 Alinean, Inc.
2

3. Social Media Spending and ROI Trends
http://www.fightfrugalnomics.com
© 2011 Alinean, Inc.
3

4. Social Media Spending on Rise
Social Media spending:
• Currently 6.4% of digital marketing
spending
• Increases of 50%+ in 2011?
• Growing to 18% of total marketing spend
in 5 years?
Greater spending = more financial
accountability and transparency
IDC Digital
Social
networks Marketing Program
Frugalnomics - decision makers more Search engine
5.4% Spend Allocations
2010 2010
optimization
empowered, skeptical and frugal than 7.6%
Display ads
ever before 21.0%
Company web
sites
CFOs taking more control 26.7% Search ads
13.6%
• 1/3rd of Marketing departments, budgets Email
and oversight marketing
18.6%
Digital events
7.1%
© 2011 Alinean, Inc.
4

5. Realizing ROI Important to Future Spending
• Respondents identified the top
digital and social media
execution challenge as
'measurement and ROI‘ - IDC’s
2011 Tech Barometer
• 48% “Creating ROI
Measurements” as most
important focus for 2011
• Current measurement efforts
are incomplete:
– 65% of corporations using only
Engagement Data as the top “Those that can effectively measure
measurement metric improvements can make the business case, and
– mere 22% capturing Product can truly obtain more budget funding.”
Revenue, a key element in
quantifying value and ROI
© 2011 Alinean, Inc.
5

6. How to Measure Social Media Marketing ROI?
http://www.fightfrugalnomics.com
© 2011 Alinean, Inc.
6

7. What is ROI?
ROI the formula
ROI = X 100%
Example:
• Investment = $100,000
• Savings + Incremental Value = $200,000
• ROI = ($200,000 - $100,000) / $100,000 = 100%
• For every $ invested, get back original $1 plus extra $1 in benefits
© 2011 Alinean, Inc.
7

8. ROI = Making The Case For Change
Start with Status Quo
Making the Case for Change
Revenue
AS IS
Business / IT Costs
AS IS
Project Timeline Initial Year 1 Year 2 Year 3
MICROSOFT CONFIDENTIAL © 2011 Alinean, Inc.
8

9. ROI = Making The Case For Change
Simulate Project Impact
Making the Case for Change
Revenue
TO BE
Incremental
Revenue
Revenue Benefits
AS IS
Project
Project Gross
Investment Value
Business/ IT Costs
AS IS
Cost
Savings
Costs
TO BE
Project Timeline Initial Year 1 Year 2 Year 3
MICROSOFT CONFIDENTIAL © 2011 Alinean, Inc.
9

10. Benefits: Turning Engagements into Incremental Value
© 2011 Alinean, Inc.
10

11. Value from Prospect Engagement – New Customers
New Prospect Benefits Quantifying Value
User Responds to Post / Campaign
Conversion of Lead to Opportunity
Marketing Campaigns Conversion of Opportunity to Customer / Sale
Monitor Identifies User as a Potential Prospect
Conversion of Lead to Opportunity
Marketing Monitoring Conversion of Opportunity to Sale
Sales Identifies User as a Potential Prospect
Conversion of Lead to Opportunity
Sales 2.0 Conversion of Opportunity to Sale
Cost per lead savings
Generate qualified leads via social media vs. other campaigns
Lead Cost Avoidance
© 2011 Alinean, Inc.
11

12. Marketing Campaign Benefits Example
Marketing Campaigns Searchers/Readers — converting like a typical
website visitor / direct marketing recipient, with a 3% to
5% conversion from a searcher/reader engagement to
an opportunity
Advocates/Influencers — 100% more likely to
convert to qualified lead than a follower, with 10% or
more conversion to an opportunity
Followers — at least 50% more likely to convert than
a less engaged searcher/reader, with an estimated 5-
8% conversion to opportunity
Engagement = 10,000 Followers
Conversion of Engagement to Opportunity = 5% Conversion * 10,000 Followers = 500 Opportunities
Conversion of Opportunities to Customers = 10% Conversion * 500 Opps = 50 New Customers
Average annual value per Customer = $1000 Annual Subscription * 50 New Customers = $50,000
incremental revenue
Net Value = $50,000 Incremental Revenue * 20% Net Margin (COS + variable SG&A)= $10,000
Incremental Margin 12
© 2011 Alinean, Inc.

13. Challenges to Quantifying New Prospect / Customer Value
New Customers Quantifying Value Challenges
User Responds to Post / Campaign Track leads to social marketing campaigns in
Conversion of Lead to Opportunity Lead Nurturing
Conversion of Opportunity to Customer / Track qualified leads to opportunities in CRM
Marketing Campaigns Sale Track opportunities to sales in CRM
Monitor Identifies User as Potential Track leads to social marketing campaigns in
Prospect Lead Nurturing
Conversion of Lead to Opportunity Track qualified leads to opportunities in CRM
Marketing Monitoring Conversion of Opportunity to Sale Track opportunities to sales in CRM
Sales Identifies User as Potential
Prospect Track sales qualified leads to opportunities in
Conversion of Lead to Opportunity CRM
Sales 2.0 Conversion of Opportunity to Sale Track opportunities to sales in CRM
Track cost of social media cost per lead
Generate leads via social media vs. other Compare costs to reallocated campaigns /
Lead Cost Avoidance campaigns spending
© 2011 Alinean, Inc.
13

14. Value from Existing Customer Engagements
Existing Customers Quantifying Value
Reduced Customer Churn Reduced customer turnover / churn
Increased duration of relationship with customer
Renewal rate increases on annual / recurring subscriptions /
services
Increased Lifetime Value
Increased up-sell / cross-sell rate
Increased Up-Sell / Cross-Sell Increased revenue per customer
Increased Share of Wallet Increased share of wallet
Customer Loyalty Campaign Cost
Avoidance Reduce spending on customer loyalty campaigns
© 2011 Alinean, Inc.
14

15. Reducing Customer Churn Example
Current number of customers engaged via social media = 10,000
Reduction in customer turnover rate = 15% current turnover * 10%
improvement via social media = 1.5% reduction
Reduction in lost customers per year = 150 customers
Revenue loss avoidance per customer loss = $1,000 / customer
Revenue loss avoidance per year = $150,000
Incremental margin contribution per year = 20% * $150,000 = $30,000
© 2011 Alinean, Inc.
15

16. Challenges to Quantifying Existing Customer Value
Existing Customers Quantifying Value Challenges
Measuring current customer turnover / churn
Measuring satisfaction / retention improvements
directly to social media campaigns / monitoring
Reduced Customer Churn Reduced customer turnover / churn Percentage improvement in turnover / churn rate
Increased duration of relationship with customer Tracking duration of customer relationship / annual
Renewal rate increases on annual / recurring subscription renewal rates
subscriptions / services Measuring incremental duration of relationships /
Increased Lifetime Value renewal rates
Tracking baseline revenue per customer and current
customer up-sell / cross-sell rates
Increased up-sell / cross-sell rate Measuring incremental up-sell / cross-sell / promotional
Increased Up-Sell / Cross-Sell Increased revenue per customer sales to social media campaigns / monitoring
Tracking current share of wallet
Measuring competitive wins to social media efforts
Increased Share of Wallet Increased share of wallet Tying share of wallet increases to social media efforts
Track cost of social media customer loyalty campaigns
Current customer loyalty campaign spending
Customer Loyalty Campaign Cost Savings from existing campaigns compared to social
Avoidance Reduce spending on customer loyalty campaigns media
© 2011 Alinean, Inc.
16

17. Value from Collaborative Innovation
Collaborative Innovation Quantifying Value Challenges
Measure current market research spending
Savings from current / traditional market Tally investment in market research via social media
Reduced Market Research Cost research spending Quantify difference from current spending
Savings from product suggestions
Savings from supplier suggestions Tracking related social media suggestions
Product / Operational Cost Savings from distribution suggestions Quantifying specific cost reductions to collaborative
Savings Suggestions Savings from process improvement suggestions suggestions
Savings from marketing campaign suggestions /
crowd-sourcing Tracking related social media suggestions
Savings from sales strategy suggestions / Quantifying specific cost reductions to collaborative
recommendations suggestions
Sales & Marketing Efficiency and Improvements in sales & marketing effectiveness Quantifying specific sales & marketing effectiveness
Effectiveness Improvements from recommendations improvements to collaborative suggestions
Tracking related social media suggestions
Measure time to market / velocity improvements from
suggestions
Time to market / velocity savings from Quantify the value to incremental revenue / reduced
Accelerated Time to Market suggestions cost
© 2011 Alinean, Inc.
17

18. Social Media Marketing Investments
• Setup Labor & Services
• Content Marketing Labor & Services
• Campaign Management Labor & Services
• Monitoring and Collaboration Labor & Services
• Tools
• Integration Labor & Services
© 2011 Alinean, Inc.
18

19. Social Media Value Map
© 2011 Alinean, Inc.
19

20. The Alinean Social Media ROI Calculator
http://www.fightfrugalnomics.com
© 2011 Alinean, Inc.
20

21. Alinean Social Media Marketing ROI Calculator
© 2011 Alinean, Inc.
21

22. Organization Profile
© 2011 Alinean, Inc.
22

23. Social Media Engagement Profile
© 2011 Alinean, Inc.
23

24. Social Media Value Map and ROI
© 2011 Alinean, Inc.
24

25. Graphs and Assumptions
© 2011 Alinean, Inc.
25

26. Value of Follower Details
© 2011 Alinean, Inc.
26

27. Review and Edit Key Assumptions
© 2011 Alinean, Inc.
27

28. ROI Analysis Report
© 2011 Alinean, Inc.
28

29. Social Media ROI Best Practices
http://www.fightfrugalnomics.com
© 2011 Alinean, Inc.
29

30. Social Media ROI – Engagement Effort and Success
• Most Engagement • Least Engagement
Success Success
– High Technology – Energy
– Consumer Products – Utilities
– Retail – Wholesale & Distribution
– Travel – Pharmaceuticals
– Media and Entertainment – Healthcare
– Hospitality – Chemicals
– Automotive – Professional Services /
Service Providers
600 Total Firms: Representative sample of Fortune 500, small and medium firms across 32 different industries
© 2011 Alinean, Inc.
30

31. Engagement Success
• Important and timely content marketing
• An interactive dialogue with an active and engaged user
base
• Special deals, discounts, contests and giveaways to
promote, targeting frugal buyers (both business and
consumer)
• A strong and passionate “lifestyle” brand connection to its
user base
• A natural demographic alignment with social media
participants.
© 2011 Alinean, Inc.
31

32. Engagement Success = Social Media Hierarchy of Needs™
© 2011 Alinean, Inc.
32

33. Tier 1: Content Marketing
Provide content to facilitate the buying lifecycle
• Ideas
• Value Loosening of
the Status
Quo
• Credibility Discovery
Committing to
• Personalization Change
• Entertainment Exploring
Possible
Solutions
Consideration
Committing to
a Solution
Justifying
the Decision
Decision
Making
the
Selection
© 2011 Alinean, Inc.
33

34. Tier 2: Campaigns
• Coordinated communications to connect to and engage new prospects or
existing customers via social media channels.
• Some campaign examples can include:
– Facebook fan contests to attract new fans
– Scheduled tweets to promote a webinar
– Research summary tweets to promote white papers
– Syndication of a blog post to LinkedIn Groups to gain new connections and
spur discussions
• The most successful campaigns:
– Have a content foundation
– Drive interaction (give and take) vs. pure promotion (push)
– Are more credible, often involving the voice of advocates, experts and/ or
third party validation
– Provide unique value to users, such as delivering special offers, exclusive
events, or important content
© 2011 Alinean, Inc.
34

35. Tier 3: Monitoring
• Actively listening by marketing and sales to social media channels to gain and
engage additional prospects or customers.
• The monitoring can include:
– Answering questions or queries about the company or products
– Assuring that campaigns are achieving the expected goals, driving the right
responses, reactions and results
– Gaining additional followers, connections and fans by tracking advocates and
advocate reach
– Monitoring for positive sentiment and use for promotion to gain additional
followers
– Monitoring for incidents / issues and negative sentiment to help mitigate
these issues and limit risks
– Monitoring for competitive mentions or requests, engaging users who might
be considering competitive solutions
– Providing feedback to fine tune campaigns and content to meet user needs
• Monitoring and Engagement Console essential for group success
© 2011 Alinean, Inc.
35

36. Tier 4: Collaboration
• Collaborative Innovation- Creating and participating in a dialogue with
prospects and customers to gain feedback and innovative ideas
• As opposed to the “push” oriented focus of traditional campaigns or the “pull”
orientation of monitoring, collaboration is an interactive dialogue.
• Collaborative Innovation can include:
– Market Research
– Product Improvements, termed “Social Sigma” by Forrester, such as market
opportunity, features and benefits, design, pricing and more
– Marketing Improvements, such as slogan testing, campaign and promotional
ideas
– Business Development, such as advice on go-to-market, channel or strategic
partners
– Advisory Advice, such as seeking and gathering advice on operational
improvements, and suppliers
© 2011 Alinean, Inc.
36

37. Measurement and Integration
• Measurement
– Conversation and Activity History / Archive
– Engagement Activity and Demographics
– Influence Measurement
– Lead and Transaction Tracking
– Tangible Benefits Quantification
– ROI
• Integration
– Campaign Management
– Content Management
– Lead nurturing
– CRM
© 2011 Alinean, Inc.
37

38. Next Steps
• Social Media ROI Resource Center
– http://www.alinean.com/socialmediaroi
• Social Media ROI Calculator
• Research White Papers
http://www.fightfrugalnomics.com
© 2011 Alinean, Inc.
38