Why Measuring ROI is Important and some Tips

Interesting article on Media Post about how marketing departments lack data and also don't measure Return on Investment.

First read Fred Wilson's blogpost on ROI.

All areas of business need to measure this. The best run businesses make decisions to maximize the return of the money they invest. Do I spend more on TV advertising or what if I hired a direct sales person instead. Which brings in the most profit and revenue? You should choose the one that does and invest there.

Marketing is tough. Numbers are vague. Nielsen might say 2 million TVs watched a show but they can't prove anyone was in the room. We can just estimate. We can prove how many banner ads were viewed and see clicks but unless they buy something then and there, we have no idea the true impact.

How can you allocate your precious financial resources if you don't have the data to make these decisions. For marketers you first need the data. 

This includes where you spend your money, the estimated results, and any actual results you can measure. You might place an ad with a coupon in a print newspaper. You know the cost. You know the circulation they claim to have. You can count how many are redeemed.

Next is agreeing what the value of certain activities are. How much is free publicity in a Magazine worth? You can estimate based on readership and the cost of buying an ad what you feel the value is. The same for coupons. If it brings in a new customer vs an existing one coming more often. How much is that worth? Social Media is free? No you have your own time invested or employee time.

Then you can create some spreadsheets and track this data monthly. Then correlate to sales in some ways. What if that print ad ran once a month vs every week? You can test what happens. Do you have a sales increase or not. What if you don't and coupon redemption is the same? You know to place your ad just once a week and then use the extra money elsewhere.

This doesn't have to be an exact science like stock investing. Trust me estimates are better than not having anything. Try different media channels and marketing techniques. Track this and start comparing results year over year and month over month.

And if you lack data....find it. Don't say 'I don't have it'. Say 'I need it and how can I get this data'. Your business's health and success depend on it.

So Chief Alien Why Do You Hate Facebook? I Don't.

Very complicated question. Let's remove the ethics issues and the slimeball management. 

Let's remove the IPO hype and inflated deceitful activity number portrayal.

Let's get down to Marketing. I don't hate Facebook for Marketing. I am a realist when it comes to using Facebook to Marketing.

1] View Facebook like Yahoo. A giant display ad network. As I noted here on Spin Sucks, Facebook sells display ads. That is their business. And as you will see further in this post that is what you should be viewing Facebook as if you want to reach a lot of people. Buy Facebook Ads.

2] Brands Pages are great for insight but be careful! I find feedback, ideas, and getting to know some customers including handling customer service issues is really what these pages are about. But just because someone comes to your page doesn't mean they are your demographic as I prove here. 

You will be lucky if you can engage with 1% of your customers and 0.1% of your potential customers.

But you can still garner a lot of info from that small percentage. What they like or don't like. Ideas for improving service and products. Ideas for new products and services. In the past this cost a lot of money with surveys and focus groups. Now you have customers offering this info for free.

3] There will be 150 mil US Consumers visiting Facebook this month. 27-35mil will be active on the site today. While you can't reach many without Facebook Ads they are there. Just remember most of their time will not be spent on Facebook.

But this does not mean don't have a presence. Quite the opposite you should include Facebook in your Integrated Marketing Plan. But use that presence with a goal in mind,

4] Don't blow off Brand Ambassadors. Many people hate this term and it is much easier grooming them on Twitter, but any you can groom are a boon to your business. They will tell other people. Online and offline. I am a Brand Ambassador for Chobani Greek Yogurt. I actually convert people in the Dairy Aisle of every supermarket I go too. When I am online at checkout and see Chobani I cheer the people checking out. If they have Yoplait or Danon I try to get them to return the product and get Chobani. Who doesn't want a Chief Alien Brand Ambassador?

So as you can see with the right perspective you can use Facebook and use it well. Just beware of trusting anyone's advice if they:

• Wrote a book about Facebook
• Are Facebook Marketers, work for Facebook Agencies like Vitrue or Likeable, or make Apps for Facebook because they want you to use Facebook vs what is best for you.
• Anything you read on Mashable. Fanboy sites tend to be Fanboys.

Facebook is Not Where People Come to Engage with Brands

Oh nooooo....Timeline for Brands! What shall we do?

I know I am talking to marketers vs people today. Sorry you aren't people. You are marketers. You want to help clients or your brand sell to the masses. You or your clients have a Brand page and a Twitter account. You are trying to connect directly to your customers.

We have a problem in Oz. Your customers view Facebook as a place to connect with Friends and Family and a handful of Brands they love. They might LIKE all the Brands they have a positive view of but they will engage with just 2-5 regularly.

Facebook with their upcoming IPO need site traffic. They want Brands to buy Facebook ads. They want Brands to think Facebook is about connecting with their users. Because even though Facebook ads are so much less effective than Digital Ads off Facebook there is this lure of 'People spend all their time here'.

So instead of some lengthy discussion with stats like I normally go way deep on:

People watch over 4 hrs of TV per day.

People spend almost the same amount of time online.

The average Facebook user spends just 20 minutes on the site.

Only 25% of the people who log into Facebook today will do more than read (meaning click or upload or like or share).

You can not reach 80% or even 90% of your customers using Facebook. The ones you can you have a slim shot today. That is it. This means have a Facebook page. But focus on your website traffic. On your product and service. On traditional marketing methods like TV, your store sign, location location location!, your customer service, etc. You need an integrated marketing effort. Because Facebook is really a communication platform for people to connect with people. It is not where people come to connect with brands.

Little fact: MTV now has 100mil total Fans. The main MTV Facebook page has 32mil. When they post they get from 1,000 to 7,500 comments + Likes. Which is 0.005% to 0.02% engagement for fans worldwide. Remember Facebook is global. MTV needs to reach probably 25mil people world wide each day and at least 10mil viewers worldwide each day. Are they succeeding in reaching their viewers via Facebook? No.

For Brick and Mortar Real Life Data Trumps Online Data

Do you know who your customers are? How do you know? There is a lot of easy data you can get from places like your Facebook Fan Page Insights. But what do these Insights tell you? They only tell you who Like's your page. Since your pages will always be a fraction of your customers, don't rely on this data to determine who your demographic is. If you are brick and mortar, you can study your customers in real life to determine this.

Here is the Insights page for my a client. They are brick and mortar business. My client knows from working with me that Social Media helps her business but does not drive her business. We did a study in December that showed that over 80% of her customers do not follow on the Twitter or like her page on Facebook.

Here is her demographic page:

Looking at this you would think this is the demographic breakdown for her real life customers. In fact over 50% of her sales are Male 18 to 34. This is why services such as Klout have limited basis in reality. You do not know who is behind the computer or interacting with you in reality or their true influence in their world.

If you really want insights into your customers you should observe them in person. Talk to them in person. And learn from them in person. Nothing is better than Real Life.

Start with your Goal

I read so many blogs, articles, and pitches that tend to be focused on one segment of marketing/advertising. Everyone has their specialty such as Social Media, Digital, Email, etc. Use theirs, that is the best one. How to succeed with Facebook marketing. How to create memorable mobile marketing campaigns.

None of these folks care about you. They care about making money for themselves and you of course. But first and foremost for them. And if you were to grab a magazine, watch TV commercials, view digital ads or social media activity each brand has different degrees of Return on Investment (ROI). 

What I mean by this to make this simple. Take a magazine. Leaf through the ads. Each brand will have different returns on their ad based on: 

• Their fit for the media channel (demographic of the readers)
• Their creative/design/message
• Their location/placement in the magazine

Most businesses have a limited marketing budget. Often this get's consumed by your website, marketing collateral (catalogs, brochures etc for print and digital). Whatever is left is like your dessert. You can spend it on any activities you wish.

But start with a Goal and work backwards. 

Maybe it is 'My goal is increasing sales'. Or 'My goal is increasing my brand's awareness in my markets' or 'Driving traffic to my website'. Or something warm and fuzzy like 'community involvement'. Once you do this you can then work out an Integrated Marketing Plan that will achieve your goal. And this usually means a variety of activities not just one.

For example you opened a new sporting goods store focused on non-traditional sports like surfing or mountain biking. You want everyone within 10 miles to know and you plan a big grand opening sale. Depending on your budget you can do everything from local cable TV and radio spots, to a paid circular via direct mail or the local Sunday newspaper.

Have less of a budget? Pay for an ad/coupon in the local To Do/Happenings paper like the Easy Reader that is just for your town/towns. Buy Facebook or Digital ads that match your demographic. Find out what local Surf or Mountain Bike events happen each year and pay to sponsor or donate gar for part of the prize packages.

Have even less of a budget? See if there is a local Surf or Mountain Bike Club via Meetup and join the club and get some locals to check your store out or go surfing/riding with them and show off the gear you carry. Print up a bunch of discount coupons to give out wherever you go. Start a Facebook, Twitter, Google Places, Yelp! presence.

But all activities need to be connected to your Goal. And they should be integrated in a way that they 'funnel' all actions towards your Goal. This is a great reason to work with a Marketing Strategist who will keep you focused and not spend your money where it should not be spent. It is important to have someone on your team because the other team(s) just want your money, which btw is their Goal.

How can Klout Measure Influence With So Much Private Communication?

In thinking about 'Social Communication' vs 'Private Interpersonal'. I think of how much I converse via email and SMS (1400 texts per month) vs 10 Facebook comments, though my tweets might be upwards of a few hundred a month. Cell phone 800 minutes a month. In person to person...whoa a lot. I email some very influential people I have gotten to be friends with. Ad Age 100 Bloggers. People who run Social and Digital for Fortune 100 companies and other well known National Brands. People I view as Brains and not the Zombie type. We discuss lots of Social Media fraud and hype in private at length in detail. One friend and I spent time dissecting the Facebook Brand Page Insights and how wrong they are (though better now they are still poor). This is someone Facebook actually kisses ass to because the company he works for is very important to Facebook's success.

So how can Klout or Peer Index measure my influence when visible communication online is so small vs how much I impact others overall. 

They don't see any of these discussions going on that are more important and influential than anything happening on the Twitter.

I still slam and destroy Mashable less in public now days but fully in private. I tell people verbally and via email almost daily that if you want to get real coverage of social media never use their site except for informative things. If you want to see a new Facebook feature go to Mashable. If you want to know if marketing on Facebook is working why would you go to a fanboy site. I mean Pete Cashmore obviously is infatuated with Mark Zuckerberg to a point of having posters of mark in his bedroom walls. (ouch that hurts Pete!). But Klout will never catch this. They won't catch how many eople I convert away from Mashable.

Or how many people I have converted in the supermarket dairy aisle into Chobani customers. I talk Chobani in that aisle there almost every week. My folks were asked the other week by the guy who works dairy 'aren't you the parents of that Chobani guy'. Klout would never know I converted probably over 100 people easily in the last 12 months to diehard fans of Chobani. I email with the Chobani Social Media Community and Communications Manager because I love the brand so much hoping to keep them a huge success with my insights. Yes she can take it or leave it when I give it, but she is always appreciative. Like when I explained this week why I don't read Mashable....in an email. 

Many really really smart people are leery about using Social Influence as anything but a small tool to accent the bigger picture. They know 98% of our human communication is private and would never comb Twitter and say 'Oh they used the word Starbucks 8 times this week they much be expert influencers let's contact them to help promote our new coffee'. And when you work with Brands do you have time to do this vs say see what coffee blogs have the highest readership and just go to the owners of those blogs? Shortcuts do not exist and we need to stop trying to invent them.

Social Media Will Always Be Small Time For Most Major Brands

Sorry to burst your bubble all you Social Media Ninjas and Gurus. But this is a fact. You can't scale without Paid Advertising. Facebook with 800+ million users? Is one giant Paid Advertising Property no different than Yahoo.

I discussed this in 2010:

Why Social Media is not in the C-Suite for Major Brands (still isn't)

Can Social Media be Scaled for Big Brands (Not without massive hiring of people)

If I own a small business working Social Media to acquire 50 or even 1000 new customers can make my year. But imagine a company that has to reach millions or tens of millions of people every day. A McDonald's or Kraft or Nestle. You can not reach that many people guaranteed using Social Media. Or a Fan page. Not even close. Not ever.

You can't even converse with all your fans if you wanted to. How many people can I respond to if they called my Brand out in an 8 hour day. Granted each contact is not like a phone call. But you are looking at hiring thousands of people if you have tens of millions of fans and followers. You just can't talk with 10 million people each day even if they want to. You can't reach out and touch 100 million customers.

And it has been proven that while people might Like your page or Follow you on Twitter you come last in their life as this Ad Age article explains.

Unless you are a Power Passion Brand like Chobani where people LOVE the product so much they come begging to be your friend, you are at the bottom of our 'care to interact' list. Right below using a toothpick on our teeth. And even Chobani probably is only engaging with 0.01% of their daily customers. One thing we forget when we think of Facebook. So what if McDonald's has 17 million fans WORLDWIDE. They serve 26 million meals per day. So I bet they have 400mil to 500mil or more unique customers per year worldwide. So 5% are Fans. You are going to blow off 95% of your customers because 'Social is the way to go'?

What is Social to you then? One big Paid Advertising play. You can reach the 15 million daily active Tweeters in the US* with a Sponsored Tweet. You can reach the 25-35 million daily active US** Facebook users with Facebook ads. But you can't engage with them on the network for free. They will not see your post or your tweet. Chances are only 1% due to sheer volume of competing posts and tweets in our networks will see a post/tweet if you are lucky. Never mind react to one.

So for big Brands. Social is bundled into TV, Out of Home, etc. They have no choice. They will never have a choice. Social is about people to people. Think of the relationships you worked hard to cultivate. While I might be able to respond to 1000 tweets or posts for my employer to make friends I can probably only get to know 100 per day. That is huge costs and possibly not big returns. What will I buy 3 more packages of Kraft Mac and Cheese this year? Oh boy see that stock soar from Social Media.

*based on number of tweets per day and the fact 70% of users are not in the US this is the number of active tweeters (people who don't log in and just send one tweet not to be seen til the next day).

**based on the actual activity levels for Facebook (Status Updates, Log Ins, Comments, Likes) about 15% of the 150mil monthly users who visit the site in the US account for 85% of all daily activity.