Is Social Media Right For Your Business? Here’s How to Find Out
The goal of this article is to help people who are interested in developing a long-term, strategic approach to social media (as opposed to a short-term, tactical approach).
Here are some things you should consider before you dive into the world of social media.
Recently, a lot of people have been claiming they have a social media campaign simply because they’ve launched a Facebook page. Unfortunately, a Facebook page does not constitute a social media campaign. A well-executed social media campaign involves setting objectives, developing strategies, identifying tactics and executing a plan.
Some client’s business model may not be right for social media. Deciding whether social media is right for your business is deceptively simple. Here are a few things to keep in mind as you’re exploring the possibility of setting up, launching and running a social media campaign:
• First, acknowledge that social media is over-hyped right now. That doesn’t mean it isn’t a useful tool. It just means that you should acknowledge that it’s not a silver bullet that’s going to solve all of your marketing problems.
• Second, understand that social media is just one of many marketing tools. Before you decide to launch a social media campaign, you’ll do yourself a favor if you explore all the traditional marketing tools first. Have you looked into radio? Paid search? Outdoor? Collateral? They’re often good alternatives to a social media campaign.
• Third, recognize that your industry might not be right for social media. If you’re in the trucking business, social media may not be right for you. If you make industrial drill bits, social media may not be right for you. If you repair lawnmowers, social media may not be right. There’s nothing wrong with that. Really, there isn’t.
• Fourth, acknowledge that your brand probably doesn’t have social media magnetism. Social media magnetism is the power some brands have to draw people to their social media campaigns. Starbucks, Nike and Apple have social media magnetism. You’re probably not Starbucks, Nike or Apple, so you’ll have to push people to your campaign in order to get them to engage with you.
• Fifth, understand the 5 business models for social media. They include branding, research, customer retention, e-commerce and lead generation. For a more in-depth understanding of this, visit Social Media Business Models.
• Sixth, understand that social media isn’t free. Despite what you’ve heard, there are labor costs, production costs and even the occasional media costs associated with a social media campaign.
• Seventh, accept the fact that you can’t “set it and forget it.” You can’t come in every morning and spend 10 minutes on your campaign and then leave. Social doesn’t work that way. A good social media campaign requires people to consistently monitor and manage the campaign.
Behavioral Targeting
Have you ever shopped online at a particular site and noticed that, after your visit to that site, you’re seeing that company’s banner ads everywhere, almost as if they’re following you?
More likely than not, they are following you. If the store has a robust behavioral marketing strategy, then you’re being presented ads that are related to the pages you visited on the previous site you visited. They may also present ads to you based on what you may or may not have purchased on the site.
How does this work? The company has placed numerous “action tags” across its site—in category pages (or store isles) and through the shopping cart process. They know what you browsed, and if you bought the product, or if you abandoned. They can then serve you ads encouraging you to reconsider the product you didn’t buy. They can even serve you ads that are related to the products that you have just purchased.
The ads that you see are visible on their site, and throughout the web. If it’s a large corporation, they’ve probably purchased billions of impressions used to re-market to people like you for upsell and cross-sell purposes.
Do you have a site and want to do the same thing? The conversion rate lift is quoted by some at over ten times regular non-behaviorally-targeted ads.
Here’s how to do it: Identify pages in your site you want to “tag.” Usually, it is the homepage, the category top-pages and sub-pages and finally, the entire shopping cart process. You can overlay and mix/match the tags to define audience buckets. You can use either a third party action tag, or an action tag from an ad-network. Now, you’ll need traffic: Use all forms of media to drive site visits and you will soon be collecting “cookies” that you can segment and re-market to.”
How do you re-market? Go through the ad-network that supplied you the action tags and they can help you create your behaviorally-targeted campaigns.”
Behavioral targeting is one of the newer ways marketers can supercharge their marketing campaigns.
Pandora Internet Radio Station
If you’re like a lot of businesses, you’re constantly trying to find ways to connect with your prospects and customers. The more opportunities you have to connect, the more likely you’ll build brand loyalty with the people who buy your product and/or service. That’s the reason why companies like Starbucks, RedBull and Pepsi spend tens of millions of dollars each year sponsoring special events and activities.
RedBull is a company that’s done a fabulous job with their “outside the retail store” brand-building efforts. If you haven’t had a chance to check out everything RedBull is doing with their air races, you’ll want to check them out. They’re doing a great job building awareness and enthusiasm for their brand in an innovative way.
But what if you don’t have millions of dollars to spend on big, splashy events? What if you’re a small- to mid-sized business with a limited budget? What should you do then? That’s what I was noodling with earlier today when I remembered that Pandora, the Internet Radio Station, could be used as a way to connect with prospects and customers.
Pandora is a very, very cool website that allows you to create your own radio station. You can create your own radio station around an specific genre.
Create your radio station on Pandora and start sharing it. Ask your listeners what you think of the radio station. This is a great — and inexpensive — way to connect with prospects and customers.
Social Media and Measuring the Only Really Important Thing: Your Return on Investment
Understanding Customer Lifetime Value
Next you have to consider how much it’s going to cost you to service that customer each year for the time they remain your customer. Assume that each year, this amounts to $30 per month. The cost to service them over the span of time as your customer is $1,260 ($30/month x 12 months x 3.5 years). To calculate a straight-forward Customer Lifetime Value (that doesn’t take into consideration the cost required to retain an existing customer or the cost to win back a customer that has defected) you start with the revenue generated by that customer over the 3.5 years = $4,200 minus the cost to serve that customer over the 3.5 years = $2,940 ($4,200 - $1,260).
The next step is to figure out how much money you’d spend in order to acquire that customer. A figure a lot of Chief Marketing Officers (and Chief Financial Officers) are comfortable with is 10% of CLV. So, in the example of the cable company, you might spend close to $294 in marketing costs to gain a new customer. That’s considered your allowable Cost Per Acquisition (CPA), sometimes called Cost Per Sale (CPS).
A lot of companies spend a good amount of time analyzing their CLV and their CPA. On the low end of the scale, you might have a software company that sells its software for $49. Their customers may only purchase their software once every 2 years and they may only re-purchase when there’s a significant upgrade.
In this example, assume there is no recurring cost to service the customer once they have purchased from you. If that’s the case, their CLV is just $49 (since they only re-purchase when there’s a significant upgrade), which leaves just $4.90 for their allowable CPA. On the other end of the spectrum might be a car company that, as an example, sells a model for $40,000. If the average customer buys 2.5 cars from the car company before switching brands and it costs the car company $500 per year to service this customer, that’ a CLV of $98,750 ($100,000 minus $1,250) and an allowable CPA of close to $10,000. Not bad. The bottom line is that there are a broad range of ways to calculate Customer Lifetime Value and Cost Per Acquisition. The examples mentioned above will get you going on a good, basic formula for understanding the metrics of your social media ROI.
Using Social Media for Customer Retention Purposes
So when Frank saw people venting their frustrations with Comcast on Twitter, it hit pretty close to home. The good news (for Frank, anyway) is that he knew that a lot of the customer’s issues could be handled remotely. For example, when a customer loses internet connection, the solution is often to turn the modem off then back on again. If half the people Tweeting their frustrations were Tweeting about their internet connection, Frank realized that he could fix the problem via Twitter (e.g., “Hey, @60SecondTweets – if you’re having problems with your connection, turn your modem off then back on again. If that doesn’t work, call us at 1-800-COMCAST.”)
Let’s say CLV for Comcast is the $2,940 as we mentioned in the previous example. (By the way, that’s a guess, but it’s probably not far off.) The allowable CPA in that calculation came in at $294. If it costs 3 to 5 times as much to get a new customer as it does to keep an existing one, then Frank knows that every time he prevents someone from leaving Comcast to go to DirecTV, he’s saving his company anywhere from $882 to $1,470 Now, before you run off to your CFO with these figures, there are a few things to note. First of all, we don’t know for sure that the CLV for Comcast is $294. And the cost to get a new customer varies by industry, so the 3 to 5 times figure may be different for your company. Furthermore, not everyone who complains on Twitter about Comcast goes to a competitor. (In fact, only a small percentage do.) All that said, these metrics can give you an idea of how to create a model to calculate the ROI of one aspect of your social media program.
Generating Leads with Social Media
The challenge many people face when they use social media to generate leads is that they don’t go the final mile. In other words, they use social media to build awareness and generate demand for their products or services, but they don’t know how to take it the final step and turn it into a viable lead. One of the best ways to use social media to generate leads is to become an information station for people in your target market. That’s what BKV Digital and Direct Response did with the 60 Second Marketer.
But what if you could distill those white papers down to their essence? What if you could take the most important information and put it into a short, 60-second video that provided the key bits of information about the new tool, tip or technique to the marketing director? That’s exactly what was done with the 60 Second Marketer. It was set-up to be an information station for marketing directors and, in the process, to introduce them to BKV Digital and Direct Response. The leads captured through the 60 Second Marketer were nurtured along the sales funnel until they were converted into clients.
The 60 Second Marketer uses a hub-and-spoke system to drive prospects to the website and to capture their attention. When prospects sign up for the eNewsletter, participate in a free webinar or attend a 60 Second Marketer event, they get subtle, long-term exposure to BKV. The result is an engaged and loyal prospect base, some of whom convert to customers. You can do the same with your social media campaign. In fact, as soon as you’ve finished with this chapter (and not a moment before), we’d suggest that you sketch out a hub-andspoke of your own and use it as a way to analyze which social media tools you’re going to use to capture lead data for your business.
Converting Leads into Customers
Tracking Your Social Media ROI
The only truly important social media metric is ROI. Everything else – traffic, comments, followers, leads – is just a stop along the way. If you understand concepts like CLV, CPA, lead generation and prospect conversion, the rest is just a matter of tracking the data and using it to improve your results. There’s an old question that most people are familiar with – if a tree falls in the woods and nobody is there, does it still make a sound? The same question holds true for social media – if a social media campaign isn’t measured, is it effective? The answer, of course, is no. A social media campaign that isn’t measured isn’t effective because there’s no way to tell if it worked.
The specifics of measuring a social media campaign are going to vary with every company, but let’s use a basic example to illustrate the approach. Let’s say that you’re a lawncare company and your typical customer spends $80 per month on your service and stays with you for 3 years. For the sake of keeping this illustration straightforward, let’s also assume that you have no additional ongoing servicing costs while they are your customer. That gives you a CLV of $2,880 and an allowable CPA of $288. In the past, you might have used direct mail as your primary tool to generate leads and convert those leads into sales. If the conversion rate on your direct mail campaigns was 0.5%, you’d have to send out 200 direct mail pieces to acquire a customer. If your printing, postage, list and marketing costs for those direct mail pieces was $1.44 each, then the math works out perfectly to $288.
But let’s say the CEO and the CFO decide to test a social media campaign against the existing direct mail campaign. Now the math gets kind of interesting. Let’s assume that you spend $2.4 million each year to send out 2 million direct mail pieces that generate 10,000 new customers each year (2 million direct mail pieces x 0.5% = 10,000 new customers). If your annual revenue per customer is $960, that’s $9.6 million in incremental revenue each year brought in by new customers. (Don’t forget, you have some customer churn, so some of the $9.6 million replaces revenue from lost customers.) In any case, you’ll want to test your social media campaign against your control, which in this case is your direct mail campaign. If you spend $2.4 million each year on your direct mail campaign, a safe bet would be to spend 10% of that, or $240,000, on a test social media campaign.
The costs associated with setting up, launching and running a social media campaign are often under-estimated. Since the paid media for social media is close to $0, people assume that social media is inexpensive. In other words, since there are no media costs for using Twitter, YouTube, Facebook, LinkedIn or other social media platforms, people often assume that running a social media campaign is cheap. But the manpower involved in running a social media campaign can be significant. So can the costs for producing the
content for your social media campaign.
If you’re a large company with a brand to protect, you’ll want to create top-notch landing pages on your website. That costs money. So do well-produced YouTube videos and effective Facebook promotions. The point is that you’ll need to take a deep dive into some of the hidden costs of social media in order to get a good, clear understanding of the ROI of your campaign. In this example, we’ve said you’ve got $240,000 to spend on labor and production costs. In order for that $240,000 investment to match the ROI of the direct mail campaign, it would have to generate 1,000 new customers.
That’s not as easy as it looks. But it’s also not impossible. One of your objectives would be to drive, say, 100,000 people to your landing pages via your social media campaign. Assuming you were able to do that, it’s reasonable to calculate that 1,000 of those would convert to customers, which would match your direct mail campaign dollar-for-dollar. From that point on, it’s simply a matter of testing ways to grow your inbound traffic and testing ways to improve your conversion rate. The Bottom Line is that the most important thing you can do in all of this is to track your campaign down to the level of prospect conversion. When you’re tracking data at that level, you’ll be able to calculate your return on investment. And, assuming the ROI is positive, you’ll be able to grow your campaign and improve efficiencies over time. And that translates into profits.
Key Learnings and Action Steps:
Customer Lifetime Value is the revenue you’ll generate from a typical customer of the lifetime of your engagement with them. Calculate your Customer Lifetime Value using this simple formula: Monthly revenue x 12 months x average customer lifecycle = CLV.
Allowable Cost Per Acquisition is the amount of money you would spend to acquire a new customer. Find out what your allowable CPA is by calculating 10% of your CLV.
A lead or a prospect generates $0 for your company until they’re converted into a customer. Embrace the idea that a social media campaign is useless unless you convert your leads and/or prospects into customers. Track your data down to the prospect conversion level in order to generate a clear sense of your actual ROI.
Web 2.0: an upgrade to the first generation of the World Wide Web
Newcomers might not understand it, but if you’ve been online since the late 1990’s you know that the way we experience and use the web is very different today. Web 2.0 is new and improved version with more of everything – interaction, communities, voice, videos, audios and multi-media.
New technologies such as blogs, social bookmarking, wikis, podcasts and RSS feeds have been just a few of the technologies helping to shape and direct Web 2.0 and the communities of users.
The main difference between the old internet and Web 2.0 is that the old net had been driven and controlled by site owners and corporations. Web 2.0, on the othe hand, is largely driven by, created, and contributed to, by the millions of users of the internet.
This is the difference that makes today’s internet more user friendly, profitable, and accessible for everyone – not just the geeks or the corporations with a budget. It has been a power shift.
Once websites were built and controlled by only a few and were certainly not ‘interactive’. Today anybody with an idea, a few dollars, determination and a little know-how can build a Web 2.0 site that is completely interactive – proceeding then to turn it into a money-making enterprise, if that is the objective.
The technology exists. It is easy to use. It is accessible and relatively cheap.
Many websites – that began as static websites – are now adding interactive features, blogs, and forums; ensuring their past success endures into the future of Internet commerce. You could say they are designing their own social markeing strategy as they go.
On the other hand, websites who have done nothing to change with the times and users’ expectations, are falling further and further behind – in the search engines, in people’s minds, in effectiveness of the creator’s purpose, and in usage.
We have now entered an era where people expect to ask questions and get answers from corporate websites, community websites, and privately owned websites on just about every topic. Users expect websites to be interactive and informative. Yes, the Internet has always been a platform for information but Web 2.0 is a platform for participation in that information.
Web 2.0’s innovations
Blogs – Content and Interaction
The term ‘blog’ is derived from the blending of two words ‘web’ and ‘log’.
Early in the history of the Web anyone could build personal web pages, but not many did as the technology was cumbersome. Those personal webpages were static pages.
Then along came technological advances in blogging software. Those with personal websites could not only post about themselves, their interests, add their photos and videos, but they could also allow visitors to comment or ask questions about the content. It was a huge advancement and took off across the web like a wild fire.
Due to those technological advances – website creation accessible to a wider range of people – blogging is today very big business.
People visit and post to blogs all over the Internet about any and every subject that they are interested in. Owners of those blogs – with a wide reach and large audience – have figured out that they can make their blogs profitable – and have learned to make a living at it.
Social Bookmarking – Sharing The Best of the Web With All
Social bookmarking was originally a by-product of blogging, based on a similar technology, but has taken off into an industry in it’s own right.
Social bookmarking sites such as Delicious, Digg and many others, allow their users to upload or save their personal favorite website URLs so that everybody else in the world can see, use and visit those saved sites.
When a user has created an online bookmark, a backlink is created to that site. When enough people click on or save the link themselves, that site gains in rank by the popular search engines.
It is a form of user driven advertisement that, when done correctly, can be more successful than most paid advertising could ever be.
WIKI – Sharing The Knowledge of All and With All
A ‘Wiki’ is a piece of server installed software that allows visitors to freely create and edit web page content via their own browsers. Wikis support hyperlinks and have a simple text syntax for creating new pages and crosslinks between internal pages easily.
The best example of Wiki technology in use is Wikipedia. Remembering that in the old web days, only the owner of a website had control over the content. Wikis were another way of interactive Web 2.0.
RSS Feed: Sharing Content through Site Syndication
The acronym RSS stands for Really Simple Syndication and is yet another Web 2.0 feature that allows the web to be driven by people. Blogs, in the back end, are driven by and create RSS feeds.
Website visitors can subscribe to, read, or use these RSS feeds in a variety of ways. They may use a client based reader (aka aggregator) or service to access the feeds for new content, or a web-based reader or service to view the content on any computer or mobile device connected to the internet.
An RSS feed from one website can also be aggregated into other websites. An example of this may be a news related website that aggregates content from a variety of other sites, or a personal blog that aggregates offers from eBay (to gain affiliate commissions per sale)
Podcasts and Webcasts: Sharing Knowledge by Audio and/or Video
As high speed connections become more widespread, podcasts and webcasts are gaining in popularity.
You can find and tune into podcasts or webcasts on almost any subject imaginable today. Plus pod and webcasts are easily integrted into blogs for more widespread usage. Many are making use of this technology to sell products and to promote their own websites.
While people do still read to grow and learn, a large percentage of us are better at retaining that knowledge through visual and audio training. Hence the popularity of this type of knowledge share.
The internet was a one-way street. Those with the technical know-how to build websites posted what they wanted their readers to know and offered what they wanted to sell and nothing more. The Internet was relatively new and people bought into this one-way communication, not knowing there was a better way.
Fortunes were made and just as quickly lost. There are those who blame the dot com bust on nothing more than a technological break through, but it was really a societal uprising and coming of age.
As the advances in technology made building websites easier, more and more people built websites and learned how to monetize them. They sent out millions and millions of unsolicited marketing emails (spam) daily – and unfortunately for us, found it profitable.
SPAM got so bad that the Congress of the United States actually passed the CAN SPAM act in late 2001 and it became law in early 2002. Less than ethical parties still manage to find a way to skirt the law anyway. And since so many recipients click and buy from that spam, the unethical marketers are still making millions from sending off this garbage.
The Can-SPAM act states that marketers are required to get permission from a recipient before they can send out mass emails. Many companies couldn’t survive the extra restriction. Those who could, and those running reputable businesses and offers, began building opt-in lists. Opt-in lists are a big part (maybe the biggest part) of all successful Internet marketing operations that are alive and well today.
Website Promotion
Let’s begin with a blog and add an opt-in list. The blog attracts the visitor, the opt-in list ensures the visitor returns to view new content and offers. You can, of course, have a blog without an opt-in list, but it is of far greater advantage to have both.
Successful blogs are dedicated to specific topics. These topics are as varied as the people who own and keep them.
Strategy for Creating A Blog for Income Purposes
Many choices and decisions must be made before starting a blog for income. The first and most obvious choice is the topic.
If you are already an active Internet marketer in a niche market then topic selection is easy. But if you are just beginning your foray into internet marketing, the choice can be a lot more difficult.
Research is a necessity. It is important to choose a market that is viable. Not all niche markets are worthy of your time, investment or attention. Click here for a free introductory course on niche marketing.
Once your topic has been selected the next step is decide on a domain name, register it and to build the blog. You can register a domain name for less than $12/year on a variety of registrars. I personally have been using godaddy.com for the past 10 years and have never had a problem, on hundreds of domains over the years.
As for your hosting service, you’ll want to choose wisely. There are many web hosting companies out there and many of them offer blog building capabilities, but many are less than reputable with customer service, updates, add on costs, and so on. Start at Instant Installer for today’s best website host for point and click blog creation.
Once your blog website is up and running, then it is important to get the search engine spiders to visit the site so that it can become indexed and appear in user searches. This is the place where social bookmarking and RSS feeds comes into play.
There is software out there that makes it very, very easy to list your site with many social bookmarking sites and RSS feed aggregators at once – quickly and easily.
