Justifying the time I spend on Facebook
I recently read a Social Media Academy posting that claims to provide the formulae your Finance Director would use to calculate your company’s Return on Investment from Social Media Marketing, and here it is:
CM / IC = SM-ROI
Contribution Margin (CM) in currency generated from externally referred customers over Interaction Cost (IC) in currency for human interaction and other cost to manage and engage in the ecosystem = Social Media ROI (SM-ROI)
In essence this is simply ‘money earned’ (increased revenue from leads and referrals) divided by ‘costs’, so hardly rocket science; however I’ve a feeling this does not take everything into account.
This formula assumes increased sales is your only goal. There are in fact many other sources of value that can be derived from engaging with your customers. Here are some more suggested by Darrin Fleming in his response to the Social Media Today article:
- Revenue Enhancing Benefits:
- Shorter time to market for new offerings – you can perform real-time market research to understand the needs of the market, and launch quicker
- More revenue from new offerings – having that real-time pulse on the market you can better meet the needs of your target customers and sell your new offerings to more companies/people
- More revenue from existing customers (and less customer attrition) – by maintaining an ongoing dialogue with your customers you will be better able to address issues earlier and more apt to retain them and hopefully grow your share of their spend
- Cost Reducing Benefits:
- Lower cost of marketing campaigns – by redirecting efforts away from expensive media such as print
- Lower cost to gain market insight – you might be able to reduce costly and time-consuming quantitative primary research through social media research (very dependent on your target market and level of precision needed)
- Lower cost to provide support – reduce the need for costly call centres by allowing support team to interact both with each other as well as with customers
- Lower cost of travel – with your team able to interact both real-time and asynchronously with each other and with the market, you can lower the necessity or at least frequency of face-to-face meetings (don’t take this to mean that I am advocating the elimination of face-to-face meetings – they are critically important in many circumstances, just reduce the need for travel to non-critical meetings)
- Other Strategic or Intangible Benefits (not measurable but still important):
- Better customer satisfaction - by maintaining an ongoing dialogue with your customers you will be better able to address issues earlier
- Better brand management – monitor real-time what is being said about your brand and manage the dialogue appropriately
- Better decision making – gain access to information that previously would have been difficult and/or impossible to gather
- Better employee satisfaction – allowing everyone to engage in the dialogue is fun
Obviously all of these activities involve costs, but these should be compared to traditional approaches that deliver the same results. And here I suggest you’ll find the social media costs are likely to be lower.
While you might not win the argument that 5 hours a day on Facebook is time well spent; at least you can now confidently engage your MD and FD in a discussion on the benefits social media delivers to your organisation. Who knows, if you’re conviencing they may even approve this time and give you a social media marketing budget to spend - let’s all hope so.
Tags: Return on Investment, social media marketing, Social Media ROI