Wednesday, March 31, 2010

10 common social media mistakes | Blog | Econsultancy

I just read 10 common social media mistakes and it's a good post.

Very solid, albiet, common information on social media.

The one that is really starting to irk me is ROI.

I don't know why this rankles consultants and strategists. It's simple.

Ask your client what your KPI is. If they say "Page views, followers and fans", ask them a simple question:

"Why do page views, followers and fans matter to you?"

That is what is the real KPI (Key Performance Indicator).

Maybe it's to increase registrations. Maybe it's to increase sales conversions. Maybe it's to increase brand awareness, scope or customer responsiveness.

Each is very easy to tie back to ROI.

1) Increase registrations: The reason an increase in registrations is important is because a registered user is worth more than a guest.

So the first place to start is finding out what a registered user is worth.

The next step is to tie Twitter/Facebook/whatever into your analytics tracking. URL referrers and tracking codes are a great place to start.

From there, you need to find out what percentage of followers or friends convert to registered site users. So, if a registered user is worth $10 monthly, and one out of every 10 followers or friends ends up registering, a friend/follower is worth $1 monthly.

That number is extremely high. The actual figure is more like a penny for most sites. But the principal is same. From there you have two options: Increase the sheer amount of fans/followers or increase the likelihood they convert to registered users.

Working with management, you should be able to estimate the cost of a campaign and how many fans/followers it will get you.

Again, these are estimates, but stick with me here.

You estimate that a one month campaign will get you 40 new Twitter followers and cost $100. From above, we know that 40 followers equals roughly four registered users and a registered user is worth $1 each. So you stand to make $40 that month, so you're in the hole $60 for the campaign.

The last step is to figure out retention. If your registered user base is loyal, that $60 loss in month one is acceptable because the CLV (or customer lifetime value) will far exceed that number.

2) Sales conversions: This one is easy. Follow the first few setups to setup analytics integration and find out how many followers/fans buy a product. If you have a $100 product and one out of 10 followers/fans converts on that product, your campaign will have to add 10 followers/fans well costing less than $100 to be successful. Or add 20 followers/fans and cost less than $200 to be worth it.

3) Customer responsiveness/Brand awareness: These are the trickiest. For brand awareness, I suggest a company like ViralHeat to measure whether the sentiment is positive or negative and see how your campaign affects that sentiment. For customer responsiveness, you measure feedback and returns. If you have a product that averages two returns out of 10 sales, and you launch a campaign to increase customer responsiveness and your returns drop to one out of 10, you have an indication of positive ROI if the cost of the campaign is less than the cost of a returned product. If you're a service organization, do the same, but see if the number of complaints drop or satisfied customers rise. Stick a number on that and compare it to the cost of the campaign.

It's really not brain surgery. It just takes some thought.
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