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A recent study by Forrester Research found that over half of global marketers will increase their spend on social media in 2010.  Of those who knew their marketing budget, 75% said they were planning to spend upwards of $100,000 on social media marketing. Where spend was already planned this would be on social networks, blogs and user-generated content.

The research highlighted that money being allocated to social media typically comes at the expense of other budgets, with the biggest proportion of respondents (35%) identifying the source as their corporate marketing coffers; while 24% said that it would come from the advertising budget.

The report includes recommendations for marketers. Here are some repeated for my blog readers:

• If you are a marketer interested in social media, use these stats to get management support and a realistic budget, then concentrate on measuring the results of your efforts to prove they work.

• If you are a web consultant, this is a growth area. To become successful, concentrate on developing expertise in implementation, management, moderation, or measurement of social media efforts; that’s where the need appears to be.

• If you are a technology vendor, case studies with proof of value will be far more effective than features, functions, and technology claims. If you can offer a consultative sale and hand-holding service, you’ll be a lot more likely to win clients and thrive in this space.

Forrester surveyed 145 global interactive marketers at business-to-business and business-to-consumer companies employing 250-plus staff. While we’re still not sure if the SME sector have as yet identified the benefits; for large companies and global brands the message is simple, and has been summarised by Forrester’s Jeremiah Owyang as simply that “Social Media Playtime Is Over”.

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.

Thanks to the web, people (aka your customers) are becoming better informed, smarter and more demanding of their favoured brands. They are using social media to do this and creating in the process something that is being termed ’socially networked markets’. As these markets organise themselves, companies that have traditionally served the needs of these people (your customers) face a real choice - join this conversation or risk missing out on perhaps the most exciting opportunity your business has ever had.

But how do you join this conversation? Is social media marketing the answer?

If you read the latest blogs by Windchimes, Doc Searls or Brian Solis or the Cluetrain manifesto you’re likely think, probably not; and here’s why.

Social media marketing is not …

Social media marketing is not about “delivering messages”. It does not involve “talking to” an “audience”, or “driving the conversation”. It does not include “demographic sectors”, “surveys”, “positioning”, or “announcements”. In short, it is not social media + marketing.

Social media is about conversations between people as equal partners. It’s about an open and frank exchange of experiences, ideas and personal opinions; and it uses a language that is natural, open, honest, direct and funny. It can be critical and shocking and is sometimes offensive. In other words, it has a human voice that is unmistakably genuine and can’t be faked.

Compare this to the vast majority of company communications, including your own marketing material, where the voice is usually a soothing, humorless, monotone that is both contrived and artificial, and has been selected and carefully managed to ensure a consistent “tone” across all touch points. It is a style of communication that has probably severed you well up to now; but to quote Dylan, “the times they are a changin”.

With over 500 million users on social networks, socially networked markets are the new markets; but they require a new form of customer relationship and a new tone of voice.

It will be the nature and form that these new relationships take that defines your profile in these socially networked markets, and is why “relationships are the new metric” for the return on your marketing investment. While the voice in these socially networked markets is unmistakably human. Do you speak it yet?

Credits: Thanks to Windchimes, Doc Searls, Brian Solis and the Cluetrain manifesto for the inspiration and some of the words