7 Apr 2023

Social Media Return on Investment Workshop

@HughStephensToday’s wireless ‘MCTC’ is brought to youby the password sentry23.Tweet on #smroi

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• Strategy, risk and advisory services– Risk management products: eLearning,

monitoring– ROI products – in development!– UPVOTE – company magazine (?next week)

About Dialogue Consulting

Strategy // Risk // Advisory

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7 Apr 2023

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• Introductions• Part 1• Afternoon tea (~2:45)• Part 2• Finish (~4:30)

Agenda

Questions & Tangents welcome!

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√Σπμ (!!!11!!

1!)

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Primer: stats and numbers.

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• When we estimate, we are making assumptions on the true population mean.

• If you don’t have every piece of information (e.g. from every person), you are estimating.

• Sometimes you are confident that your estimate is good, others not.

Confidence in estimations

We usually estimate things. Our confidence varies.

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Number line

0

$$$$$$

$

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• “I am xx% confident that the true population mean falls between yy and zz.”

• Measurements reduce uncertainty.

Confidence intervals

Measurements aim to narrow a confidence interval.

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• Monte Carlo• Basic concept:RETURNSOCIAL = [n(conversion traffic referred from social) * av(value sale) *

P(social actually drove them there)] +[n(customer acq through social) *

av(value of socially referred cust)]Estimatesn(sales) == 2,000 av(val sale) = $110 (sd 25)P(social drive) = 0.1– 0.7 n(cust acq) = 400-1200Av(value social ref cust) = $340 (sd 90)

Simulation is important

Simulation helps model uncertainty & its impact

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• Midpoint estimate: $338,000 • Monte Carlo estimate: $359,590

(n=1k)• Similar, yes. But very few numbers

estimated!• Often used to work out

P(ROI>0)…

Monte Carlo Estimates

Monte Carlo simulates across many variable values

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The summary.

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1.Why are we conducting an ROI evaluation?2.What are the costs and benefits of doing

so?3.Do we understand our social media

strategy and uses?4.Do we have the required analysis and data

collection skills?5.Are we aware of the SMROI principles and

framework?

Fast Five

Ask these questions before you begin

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1. Understand the objectives2. Involve stakeholders3. Understand the platforms4. Identify which metrics and KPIs change5. Be selective in what is valued6. Understand the valuation process7. Make reasonable assumptions8. Do not over-claim or over-fit9. Be transparent10.Verify the result

10 key SMROI principles

Following these principles will increase the SMROI integrity

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• Business Strategy AvenueEvaluating social media based on the costs and revenues of executing business objectives

• User Lifetime ValueEvaluating social media based on the users connected to your social media accounts

• User Network AnalysisEvaluating social media based on the user network and amplification model

• Opportunity Cost EvaluationEvaluating social media based on available alternatives

Remember the models

There are four main models to evaluate SMROI

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Agenda

1• What is SMROI?

2• Why should you evaluate

SMROI?

3• Why isn’t it more common?

4• How can you calculate

SMROI?

5• How does Dialogue

Consulting do it?

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What is SMROI?Defining what we don’t know.1

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• Ratio between costs and revenues • 100% ROI == (?success?)– $1 expenditure, $2 made in revenues

SMROI?

SMROI is simply ROI applied to a social media context

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Common examples include:• Sales• Advocacy –Word of mouth– User generated content

• Leads• Donations

Revenues

There are many sources of social media revenues

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Common examples include:• Personnel• Social media budgets e.g. Facebook Ads• Time• Hardware• Software• Other resources

Costs

Social media costs are more easily identified

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Determining SMROI

1

Context

2

Model

3

Calculation

4

Evaluation

5

Reporting

Dialogue Consulting uses a five phase SMROI process

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Why evaluate SMROI?The business case.2

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• Understanding use• Justify expenditure• Gain insights into Fans and Followers• Identify where value is generated• Identify cost reduction opportunities• Modify and optimise social media use

The SMROI rationale

Return-on-investment evaluations bring many benefits

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Quantifying use

SMROI helps identify where social media generates value

• Financial tangibility – is the return monetary (eg sales) or non-monetary (eg brand equity)?

• Time – is the return made in the long or short term?

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The Social Media Exchange

adapted from Larson & Watson,

2011

Modelling use identifies value sources and opportunities

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Some examples:• Modelling optimum marketing mix with

social media• Determining best customer service

delivery• Identify most efficient HR recruitment

methods• Utilise most effective communication

channels

Applications of the SMROI evaluation

SMROI findings can be used in multiple ways

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Why isn’t it more common?

The usual suspects.3

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• No ‘stock’ formula or method• Many different social media uses• Difficult to link and quantify revenue sources• Need to understand the process• Requires financial and statistical knowledge• Not considered important to evaluate

Barriers to SMROI evaluation

Tangibility, skill, and knowledge barriers prevent evaluation

“too hard”“unnecessary”

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• Misunderstanding• Miscalculation• Misinterpretation

Where can SMROI evaluations go wrong?

Three main errors may occur during the SMROI analysis

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• Model inputs• Appropriateness and

exhaustiveness of the model• Use of Proxies

1. Misunderstanding

Occurs before the SMROI is calculated

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• Over-valuation• Combined platform valuations• Metrics• Future value of the platform

2. Miscalculation

Occurs during the SMROI process

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• Comparing ROIs• Application to different platforms• Accounting for risk• Changes to platforms and users

3. Misinterpretation

Occurs after the SMROI is evaluated

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How do you calculate it?

Numbers and mathemagic.4

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The Dialogue Consulting Process

1

Context

2

Model

3

Calculation

4

Evaluation

5

Reporting

There are five main stages to determining SMROI

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It’s impossible to measure something you don’t understand

1 Context

A problem well stated is a problem half solved.- Charles Kettering

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1 Context

Understanding your social media use is crucial

Assessment

•Why and how is social media being used?

Hypothesis

•What is the SMROI evaluating?

Cost-benefit•How

extensive should it

be?

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Use Assessment

Identifying social media use has two perspectives

Business Perspective

What are your goals, objectives and strategies

for social media?

User Perspective

How are Fans and Followers engaging with

your presences?

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• Decide what to calculate• Different approaches require different processes– extensiveness – models – data– reporting

• Helps clarify SMROI objectives• Determine the value and costs of evaluation

Determine hypothesis

Establishing hypotheses shapes the SMROI process

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Hypothesis examples

“Customer service delivery on social media generates a positive ROI”

(…therefore we should use it more and ask for more resources)

“Social media marketing isn’t generating positive ROI”(…therefore we need to identify why, and modify our use)

“If we used social media, it would yield a positive ROI”(…if so, we should implement a presence)

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SMROI Cost-Benefit

Hypotheses identify the ‘value’ to compare with SMROI costs

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Extensiveness of SMROI

SMROI extensiveness depends on resource availability

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• Model choices: which models can be used?

• Fit to SMROI purpose: does it apply to what is being measured?

• Available data: do we have the right information?

• Impact: does the data accurately reflect social media use?

2 Model Identification

Four main factors determine appropriate model selection

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2.1 Models

There are four main way of quantifying social media

Business strategy avenue

User lifetime value

Network Analysis Opportunity Cost

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• Common Examples– Customer Service– Marketing– HR

• Value and cost drivers depend on strategy– Savings– Revenues (sales etc)– Time– Resources

2.1.1 Business Strategy Avenue

Social media value comes from executing strategies online

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• Users are ‘assets’• Assumed to generate future revenue– Sales, advocacy etc

• Compare revenue to cost of acquisition and retention

2.1.2 User Lifetime Value

Fans and Followers have value for businesses

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2.1.3 Network Analysis

Social media can be valued by the connectedness of users

• Users connect to businesses and each other

• Users may share your content or mention you online

• Word of mouth and advocacy yields value

• Need to model user connectedness

• Weight users by value• Approximates value of network

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• Social media isn’t the only way!• Examines the value of the next best option• Value a strategy– Marketing or customer service on social

media?• Value a platform– Customer service on Twitter or by phone?

• Value of social media– Quantify losses of not having a presence

2.1.4 Opportunity Cost

Social media can be valued by its best equivalent alternative

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• What data is needed?• How to collect it?– Surveys and questionnaires– Observation and tracking

• Reaching users• Representative samples

2.3 Data Collection

Ensure the right data is sourced for the model and evaluation

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• Non generalizable findings• Biased samples• Non-responsiveness• Badly phrased questions• Unusable data• Ethics

Issues with data collection

These main considerations impact on data collection

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• Determines how much of an outcome relates to social media

• Outcomes indicators are metrics which explain costs and revenues

• Errors arise from assuming your social media activity accounts for 100% of outcome indicators

2.4 Impact

Determine how costs and revenue factors relate to social media

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• Alternatives to social media activity which may better explain outcomes

• Compare these to determine impact

Benchmark Indicators

Comparing against indicators reduces attribution errors

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• Deadweight: the outcome may have occurred regardless

• Displacement: increase in social media activity may decrease other activities

• Attribution: other factors may be contributing to the outcome

• Drop-off: the outcome may reduce over time

Determining Impact

Four factors explain the difference between indicators

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3 Calculation• Build the model: does it reflect your

social media use?• Calculate the ROI figure: what is the

return?• Apply a sensitivity analysis: what are

the most influential factors?• Forecast changes: how might the ROI

change in the future?

Determining SMROI should include sensitivity and forecasting

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4 Evaluation• Compare ROI values: how did social

media perform?• Improvements: how can social media be

used better?

Implementing findings can optimise social media use

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• How does investment in social media perform against traditional channels?

• Modify social media use accordingly

Compare the ROI figures

Determine how social media and other investments compare

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• How to gain more positive ROI?• Remember the ratio!• Examine current processes• What could generate higher return?• Where can cost savings be achieved?

Improve the SMROI figure

Examine current activity to increase ROI

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5 Reporting• Format: Who is it for?• Process: How was it calculated?• Rationale: What outcome is intended?– Increased budget–More resources and personnel– Greater social media scope

• Assurance: is it accurate?

SMROI findings must be communicated appropriately

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• Who conducted the SMROI • Why the SMROI was calculated• Stakeholder involvement• SMROI evaluation methodology• Rationale of proxies, assumptions, estimates or benchmarks

used• Explanations and demonstrations of calculations• Review of the sensitivity analysis and the impact of

changing variables• Recommendations based on findings

What to include in an SMROI report

These key areas should be covered in your report

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How do we do it?A case study…5

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Move to part 2 of your workbook!

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• Train provider for large city

• Two presences• 12,000 Facebook Fans• 33,000 Twitter

Followers• Frequent social media

posting• Dedicated social media

team (two employees)

Connectro Case Study

Dialogue Consulting completed an ROI evaluation

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1. Consultation with Connectro2. Determine what they wanted to evaluate– Customer service– Marketing

3. Examine how they use social media4. Data collection and analysis5. Calculation and evaluation6. Findings and recommendations7. Reporting

Process

Application of the SMROI procedure to Connectro

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• Justify expenditure• Identify potential value from social media• Quantify current revenues and costs• Optimise use of social media• Identify opportunities for social media use• Focus on marketing and customer service

strategies

Objectives

Connectro and Dialogue identified key objectives

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• Provide service updates

• Other Connectro and train usage information

Information channel

Connectro keeps users updated via social media

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• Encourage train usage• Promote Connectro

services• Frequent social media

campaigns• Some paid promotion

Marketing Strategy

Connectro uses social media to promote their services

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• Respond to user inquiries• Focus on quick resolution• Guaranteed response• Gain feedback from users

Customer Service

Connectro uses social media as a customer service channel

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Overall Marketing Customer Service

Costs• Time and

resources• Software

Paid promotion

Value of lost use due to customer dissatisfaction

Revenues

• Efficiency and cost savings

Value of increased use

due to campaigns

Value of increased use due to user satisfaction

Cost and Revenue Identification

Dialogue identified cash flows related to social media use

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• Positive figures• Every $1 gained

$1.34 return

SMROI Results

Dialogue found Connectro had an overall ROI of 34%

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Customer Service ROI

44% ROI on customer service in the last 12 months

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Marketing ROI

21% ROI on marketing in the last 12 months

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Identify the value drivers

Significant cost and value drivers provide opportunities

Greater utilisation and increase

efficiency of social media

BothSavings/Resources

Focus campaigns to encourage

behaviour change

Improve user satisfaction

MarketingIncreased train use

Customer serviceUser satisfaction

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• Increase and focus on customer service satisfaction– Implement proper training and processes

• Transfer additional customer service delivery to social media– Scale the customer service team and investment as required

• Focus campaigns to encourage behaviour change– Reduce paid marketing on other channels– Apply demographic targeting strategies– Better utilise specific platform features– Research and target high value customer segments– Increase user awareness of their social media capabilities

Improving Connectro’s SMROI

Apply SMROI findings to optimise social media strategy

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• Focused on key stakeholders• How to best communicate findings• How to implement recommendations • Provided assurance

Reporting

Dialogue produced tailored SMROI reports for Connectro

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Dialogue recommends...

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Identify and understand your strategic purposes of

maintaining a social media presence

Recommendation 1

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Recommendation 2

Social media presences should be evaluated regularly.

Its use should be justified, cost-effective and add value.

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Recommendation 3

SMROI should be evaluated and help direct improvements to

better extract value from social media.

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Recommendation 4

SMROI should be undertaken carefully to ensure models, metrics and calculations are

accurate.

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Recommendation 5

To be valid and accurate, ROI models should remain fluid to reflect changes in social media

platforms, uses and users.

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Questions?