Archive for roi

Why brands should ignore ROI in online and social media for now.

Posted in Bill James, roi, social media, social media engagement, social media marketing, Social Media ROI, social media strategy, we engage with tags , , , , , , , on April 23, 2011 by monozygote43

Management seems confused about why they need to deal with social media.  Most of those with responsibility for profit performance are missing the point when it comes to new media and ignoring the history of past media revolutions.  Consumer markets are going through a transition phase regarding their media preferences.

Right now, ROI isn’t necessarily about new revenue and new sales.  It’s more likely to be measured as the market share a company doesn’t lose.

All other things held constant, the rise of online and social media hasn’t created new markets or consumers (with the exception of those buying and selling stuff needed to engage in social media).  Social media is a new communication preference for existing customers in existing markets to engage, assess and choose the brands with whom they will transact business in future.

Future being the key word.

One facebook account may take over 4 hours a week from the available time of a mother of 2 children.  That’s 4 hours a week less one mother has to spend in other communication channels in future.  Less time in stores, magazines, newspapers, TV and radio.  The same goes for the mobile platform and the sms/mms channel.  Time is a finite resource.

So, not only are we moving into new online and social media, we are moving out of pre-existing communication channels.

Spare us all the engagement and authenticity romanticism.  Spare us all the finger wagging and pious recrimination over brands being unable to demonstrate concrete ROI from social media.  It’s all either pseudo ethical or pseudo academic drivel.

The reason brands must market and engage in online and social media is that the customers they already serve are shifting their preferences as to how they will engage with all brands in future.  If a brand’s existing customers arrive in online and social media and find the brand they have been dealing with is absent, alternative brands with comparable offerings will take future market share.  End of story.  That’s why every media revolution is an opportunity for new brand start ups in mature consumer goods and services markets.

This always starts off sounding like a distant cry until marketing programs through traditional communication channels start showing reduced ROI.  By then, the damage is already being done.

It must have sounded like a distant cry in the early 1950’s when TV appeared on the horizon with few channels, limited broadcasting schedules, little content and small audiences.  I still remember watching the ‘test pattern’ as a kid while waiting for the screen to come to life in the early 1960’s. By 1979 there were 300 million TV set in operation.  By 2001 there were an estimated 1.75 billion TV sets worldwide.  The most notable observation we can make here is that the move into online and social media is much faster than was the revolution into TV.

TV broadcasting licenses and advertising must have seemed expensive and unsupportable investments for some time in comparison to radio, newsprint and cinema.  But look at how market share changed hands after the transition phase to TV got going, and look at the monumental consumer brands that were forged from advertising in the early years of television.  The curse is on the laggard.

That’s the catch with social media ROI.  During this transition phase between traditional, web 1.0 and web 2.0 communication channels, ROI in social media isn’t necessarily measured in new sales revenues.  It’s significantly measured in avoiding the loss of existing market share as existing customers shift their communication preferences to new media.

For new brands, it’s an opportunity to take share from established brands lagging behind in the transition.

If you decide to stay largely out of online and social media until clear evidence of ROI is on the table, you are making a mistake.  You’ll pay for it with lost market share.

The next phase of this revolution will be the competitive phase where the fight for market share will be between those who have entered social and online media.  Then we will see a more relevant and conventional assessment of ROI from within new media channels.

Until then, as the song says, “don’t count your money while you’re sitting at the table”…especially when other players are moving to new tables.

Social Media Strategy: The Principal Reason for Failure.

Posted in social media strategy with tags , , , , , , on August 16, 2010 by monozygote43

The most common reason for the failure of good strategy in social media is the failure of implementation.

Of course there is a lot of bad strategic thinking out there as well, but no strategy is better than its implementation.

The most common reasons for the failure of implementation are:

1. The failure to align brand goals, strategy, tactics and tasks with action;

2. The failure to align action plans with forecast costs and returns;

3. The failure to manage the process of implementation with a short interval focus on the metrics of financial ROI (the only type of ROI that is real).

 Let’s talk about number 1.

Like it or not, the following words have specific meanings and are interrelated:

Goal

• Strategy

• Tactic

• Task

• Action

There is an incredible amount of ‘lore’ floating around in the ether on the subject of Social Media Strategy.  Mention the words “strategic goal or strategy” and everyone falls prostrate before the God of intellect and sublime insight.  Companies spend a fortune for advice on ‘strategy’.  People who can allegedly ‘facilitate’ strategic thinking programs are managing $2,000-$5,000 a day in consulting fees.  With no exception I am aware of, none of them will take responsibility for implementation and delivery of ROI.  Tell me if you know of one who is 100% contingent billing (charging for delivery of results only).  It’s so easy to say you can’t be held responsible for the quality of implementation.

What about the other words: Tactic, Task and Action?  These words fall more to the action oriented among us…the people who cross the line between thinking and doing.  How often is the task of implementation short changed, and pushed down to levels of management where $5,000 would pay the mortgage for 3-6 months?

Let’s face it, strategy is much more sexy than putting rubber on the road, and often the first step of implementation is totally assumed to have been undertaken by senior mangement.

The first step of implementation is to translate brand goals into tasks.  Task is the precursor of action. 

 Take this simple example of a restaurant called the ‘Cheesecake Temple’:

Brand Goal:

• Lift share of the weeknight dinner market by 50% before end 2010;

Brand Strategy:

• Become the preferred restaurant of patrons eating in company of children;

Brand Tactics:

• Target customers of competitors, ‘Trixies’ and ‘Rainbow Cave’ in Twitter and Facebook;

• Text discounts and promos to clients;

• Provide kids web based games at tables;

• Use Foursquare to reward frequent use;

• Giveaway hosted birthday & play credits via FB wall.

 Brand Tasks:

 For the tactic: “Target customers of competitors, ‘Trixies’ and ‘Rainbow Cave’ in Twitter and Facebook”:

 Tasks:

  • Offer promos to their followers in Twitter and fans on Facebook; 
  • Search negative mentions of Trixies and Rainbow Cave in real time, 24/7;
  • Create and use Standard Response Procedures (SRP). Position in company wiki;
  • Create and use discount table to calculate discounts. Position in company wiki;
  • Create and use daily available capacity charts. Position in company wiki.

Simplistic?  Go to the groups who are supposedly implementing your newest social media strategy and ask each one to tell you what they are doing and how it connects to goals strategy and tactics.  Get ready for the disconnects.  My guess is they will be doing ten things that aren’t called for and only half the things you would want them to do.  Ask them if they have any idea of the underlying cost versus benefit projection for the work they are doing.  Love to hear how you go out there.

More detail?  Sure, there is heck of a lot more detail, especially in moving from task to action or project planning.  But you don’t have to go much further than this to highlight where most social media programs fail to deliver the goods, and why most programs managers think  (albeit very socially unacceptable for them to rubbish ROI in public) measuring ROI is difficult and a waste of time.

The ROI for social media engagement is increased sales revenue…the same as it ever was…

Posted in Uncategorized with tags , , , on August 3, 2010 by monozygote43

Lately, there has been some serious mumbo jumbo presented in models and blogs talking up the complexity of measuring social media ‘ROI’.  You know…a quadrant for this and a quadrant for that…with arrows going in every direction accompanied by an opaque consulting jargon and expensive reports to explain the opaque jargon. Suddenly, we are hearing an old siren’s song.  “non financial ROI”. 

Anyone else experiencing déjà vu?

When the young priest in the movie the Exorcist claimed he heard the voices of many demons coming from the possessed body of Regan, the old priest replied dismissively…”there is only one”!

The only ROI for engagement in the social medium is revenue from sale of product and service.  That is of course, unless you are not in the business of making money. 

David Ogilvy famously said “let’s not forget, the purpose of advertising is to sell product”.  Amen brother.  That’s the purpose of engaging in social media too.

You can measure anything you like on a balanced scorecard.  If expending funds to deliver those goals doesn’t coincide with an increase in net earnings over some specific timeframe, your shareholders will trample you in the rush for the door. Remember, capital has other places to go and competing returns and risks.  

Clayton Christensen  reasonably justifies investment in social media engagement as investment in disruptive innovation.  By its nature, disruptive innovation may or may not provide immediate or even downstream financial benefits.  Christensen gives excellent justifications for engaging anyway.  They just aren’t ROI justifications.  They play more to the strategic competitive risk of not engaging a new technology.

If there is no immediate ROI, no amount of intellectual masturbation around new evaluation metrics will change that fact.  You can justify the cost of engagement in social media anyway you please at the end of the day.  That justification doesn’t necessarily amount to an ROI.

The problem with calculating an ROI for social media engagement only arises if engagement has little or nothing to do with improving sales revenue or retaining customers now.  If that shoe fits, then wear it.  Let’s not start a new cult of flawed investment logic like those which characterized the dot-com era or the recent housing bubble.

Drill down one level and ask, does my engagement in social media do anything to either reduce the attrition of existing customers or increase the number of new customers acquired?

If the answer is “yes”, your engagement, including basic brand management and simple customer service initiatives should produce a measurable ROI.  The next task is to forecast the impact you expect to have on revenue over a specific timeframe, and the costs you need to expend in order to deliver that ROI.  This will give you a forecast ROI.  Putting the sanity of that forecast aside, you will ALWAYS be left with the actual ROI….actual revenue and actual costs of engagement over any period.

Where the evaluation of actual ROI is concerned, the devil is always in the detail.  Depending on the nature of the business, evaluation methodology will always hit hurdles when it needs to separate the revenue contribution of multi-media campaigns across product.  Suffice to say there are numerous methods for determining the impact of each campaign medium on the financial result.  Often, history holds the key. Staggering the campaign elements can help distil the ROI from an investment in any medium.

Customer service and brand awareness campaigns may not be aimed at immediate sales, but if they don’t ameliorate the attrition of existing customers or bolster sales over extended periods, what good are they?  Again, determining the impact of service and awareness campaigns can be achieved by looking back into history for ‘before and after’ results.  You can run a million polls and surveys, but what do they mean without an increase in sales over some specified timeframe?

It is always better to engage in a campaign where the means for evaluation of ROI are imbedded in the design, than to launch a campaign and then start asking how to determine whether it is making a difference to sales. These are hardly new challenges for companies that believe in measuring real ROI.

Without a forecast ROI, you may as well say, “I don’t have any idea of what financial return I expect to see as a result of investing in social media engagement”.  Again, you can waive the requirement for a financial justification for engagement.  Just don’t try to morph ROI into something it isn’t.

The bottom line is; Don’t engage until you have a financial evaluation methodology defined.  Know why you expect an ROI to result.  Know the time frame over which you expect to see results. Know how you intend to measure the ROI inside the campaign term.  Engage for other reasons if you wish…but don’t call it ROI.

When the novelty , excitement , vagaries and idiosyncrasies of social media subside, or are better understood, ROI will be seen to apply to this new medium just as it did in every preceding medium.  In this context there is nothing new under the sun. The definitions for earnings, revenue, profit, expense and assets will retain the same meanings over time.  Of that I’m sure.