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By January 4, 2010

Want to Know the ROI of Social Media?

Volume button with red light turned on maximumKinesis clients are asking the big questions:

“What is the ROI of Social Media?

and

“How do I measure the ROI of social media?”

And these are great questions that companies should be asking.

Unfortunately, there is no one answer. While we can certainly obtain some metrics through tools like Twitter Search and Google Analytics, some of social media is simply about building goodwill and nurturing relationships. Like the good old-fashioned golf game and the “Let’s Do Lunch” strategy, people like connecting with people.

That said, to start determining your ROI on social media, you must know your baseline and define your goals. (from Mashable): “As a standard formula, ROI is pretty basic, ROI = (X – Y) / Y, where X is your final value and Y is your starting value. In other words, if you invest $5 and get back $20, your ROI is (20 – 5) / 5 = 3 times your initial investment. In the financial sense, ROI is measured purely in the context of dollars and cents, however, the principles can really apply to any type of investment — monetary or not.”

“Having concrete goals and concrete baselines is crucial to calculating your return on investment. So before you set out to measure and monitor your social media returns, you need to have a clear idea of what it is you want to accomplish.”

“Once you have your goals defined, you need to gauge the baseline for your levels before starting or changing your social media strategy. For example, if your goal is to increase social media mentions of your company, in order to measure the ROI of any actions taken toward that goal, you need to know where you stand now. You can’t evaluate the ROI accurately without a baseline.”

“Although ROI ≠ metrics, traditional web metrics like traffic counts, number of comments, Twitter followers, Facebook fans, etc. are an important component when calculating your ROI.”

“The trick is to not rely solely on the numbers, but on what the numbers end up leading to. For instance, does your increase in website visitors correlate with higher sales? Are people that find your website from Twitter or Facebook then clicking on your product pages or going to the e-Commerce section of your site? That’s the sort of data you want to be able to look for.”

Erik Qualman of Socialnomics has put together another fabulous video that breaks down the staggering numbers of social media into an absorbent format. (See our post, The Social Media Revolution, for his first video.)

Social Media ROI

Erik writes,

While the video uses familiar nomenclature like ROI, many pieces of social media behave so differently than anything we have ever seen, that I prefer to use “What does or will success look like?” rather than “What’s the ROI?” After all, why are we trying to measure social media like a traditional channel?  Social media touches every facet of business and it should be viewed more as an extension of good business ethics.  Which, if done properly, will harvest sales down the line.

Social Media ROI Statistics

Here are some key statistics pulled from the ROI of Social Media Video:

1.  Over 300,000 businesses have a presence on Facebook and roughly a 1/3 of these are small businesses.

2.  Gary Vaynerchuk grew his family business from $4 million to $50 million using social media.

3.  Vaynerchuk found first hand that $15,000 in Direct Mail = 200 new customers, $7,500 Billboard = 300 new customers, $0 Twitter = 1,800 new customers.

4.  Lenovo was able to achieve cost savings by a 20% reduction in call center activity as customers go to community website for answers.

5.  Burger King’s Whopper Sacrifice Facebook program incented users to give up ten of their Facebook friends in return for a free Whopper.  The estimated investment for this program was less than $50,000 yet they received 32 million media impressions which roughly estimated equals greater than $400,000 in press/media value.  Which to put in context is somewhat like reaching the entire populations of 19 states (understanding this doesn’t account for unique vs. repeat visitors, etc.)

6.  BlendTec increased its sales 5x by running the often humorous “Will it Blend” Videos on YouTube blending everything from an iPhone to a sneaker.

7.  Dell sold $3,000,000 worth of computers on Twitter.

8.  Naked Pizza, a New Orleans Pizzeria that specializes in healthy pies, set a one day sales record using social media.  In fact 68% of their sales came from people “calling in from Twitter.”  And 85% of their new customers were from Twitter.  So, yes, social media does work for small businesses.

9.  Tweets for a Cause sent out a tweet from Atlanta to encourage support of Susan G. Komen for the Cure.  As a result of retweets, the Atlanta Chapter site received 11,000 visitors in 24 hours as a result of this initiative by ResponseMine Interactive.

10.  Intuit introduced “Live Community” into their TurboTax® products 2 years ago.  Due in part to the resulting word-of-mouth, they have seen unit sales increase +30% each year and have now integrated “Live Community” into their other products like QuickBooks, Quicken, etc.

11.  Software company Genius.com reports that 24% of its social media leads convert to sales opportunities.

12.  During Barack Obama’s rise to the White House, he garnered 5 million fans on social media and 5.4 million clicked on an “I voted for Obama” Facebook button.  Most importantly this resulted in three million online donors contributing $500 million in fundraising. An astounding 92% of the donations were in increments of less than $100.

13.  The University of Texas MD Anderson Cancer Center witnessed a 9.5% increase in registrations by using social media.

14.  Web host provider Moonfruit more than recouped its $15,000 social media investment as their Website Traffic soared +300% while correspondingly sales increased +20%.

15.  eBay found that participants in online communities spend 54% more money.

16.  71% of companies plan to increase investments in social media by an average of 40% because: a) Low Cost Marketing b) Getting Traction c) We Have To Do It.

Supporting articles:

Lee Oden, “Book Review: Crush It by Gary Vaynerchuk,” Online Marketing Blog

Jan M. Rosen, “Be It Twittering or Blogging, It’s All About Marketing,” New York Times, 3/11/2009

Jon Swartz,  “More marketers use social networking to reach customers,” USA Today,  8/28/09

Let’s talk about your company’s social media strategy. Small investments in Internet Marketing lead to big ROI (as you can see): 503-922-2289

ABOUT Wendy Maynard

Wendy Maynard is the co-founder and former Strategic Director of Kinesis, an award-winning marketing firm and business consultancy. She has over two decades of experience as a marketing strategist, business consultant, and executive coach.

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