Miscalculating the ROI of Social Media

In Ed Schipul’s Personal Brand Era presentation to the PRSA Georgia crowd yesterday, he cited stats about the of success of small business owner Gary V’s venture into social media marketing as highlighted in popular Social Media ROI: Socialnomics video. The issue I discussed with Schipul afterwards is how the example perpetuates the idea that social media is free. Here’s the mathematical flaw:

$15,000 in Direct Mail = 200 new customers

$7500 for a billboard = 300 new customers

$0 on Twitter = 1800 new customers

Wow! Who wouldn’t jump to twitter with that math? But we have to recalculate the costs here to find the dose of reality.

While $15,000 probably includes design, production, list rental and postage not to mention possible test marketing efforts, it is still a lot, especially if the value of a new client is only $25/each. 

$7500 for a billboard could be a one month rental in a prime area or design, skins and a multi-month rental in a lower rent market (I currently have a client spending just $500/mo for a board in a suburban market). New customer value at that same $25 and you’re breaking even.

1800 new customers with no cost? 18000 of those $25 clients is a fabulous return. But wait a minute.

How did you get the content on twitter? Who wrote it? How many tweets were involved? What did you tweet? Where did your tweets send them? To a website where you had to develop content? Who recorded or wrote that content? What was the cost of the person monitoring your tweets or tweetdeck? What was the cost of the developer creating landing pages for your tweets? And for the copywriter writing your content?

The idea that social media is free is a bit of a smoke-and-mirrors proposal. Social Media has great potential to promote your company, especially with the right offer and to the right audience. But don’t kid yourself into thinking it is free. Budget and plan for it accordingly and you will reap far greater ROI than if you treat it as a “free” medium. And remember, sometimes direct mail and outdoor still have a place in your mix.

Deal or No Deal: How Would You Spend the Banker’s Money?

Admittedly prime time television must have soured in mid-December when I found myself repeatedly watching the Small Business Owner edition of Deal or No Deal on Wednesday evenings. Unlike the original version of the show, this one features no lovely, leggy ladies with briefcases. Instead the contestants as well as the briefcase models are all real business owners. At the beginning of the show, one lucky business owner gets to compete while the others cheer him or her on.

If you’ve seen the original edition of the show, you know how the rest works. But this little twist is what held my interest.

Each business owner would talk about their dreams and aspiration for investing their winnings in their business. Of course every one wanted the million dollar suitcase but even the $25,000 case had the ability to significantly impact their business.

Smartly HP tagged on as a show sponsor for a $5k briefcase, recognizing the value of this very targeted audience. As a marketer, I started thinking of other sponsors that would benefit from a similar involvement — Staples, Kinko’s, Capital One — but it is the exercise of deciding how to spend the winnings that merits further discussion here and has generated fodder among my clients.

If a million dollar prize would allow you to double your payroll, would you take the gamble and see if you could get and maintain the incremental sales required to pay their salaries in year 2? Would a half million dollar prize allow you to purchase that new office condo you’ve dreamed of? Could $250,000 allow you to take a gamble on a new product line? Would $100,000 allow you plow all of your revenues back into the business for a year instead of taking a salary? Might $50,000 afford you the training you need to increase your rates? With $10,000 could you hire the patent attorney you need to protect your design?

The hypotheticals could of course go on and on. The importance of this exercise is having the confidence and the creativity to dream. While it is unlikely that you’ll ever be presented with the banker’s briefcase, any day could bring you the opportunity to spend a similar windfall if you’re prepared to ask for it.

What does it say when UK advertisers spend more on web than TV?

The WSJ reported yesterday that the percent of UK advertising dollars spent on internet advertising has surpassed those spent on TV advertising. Surprised? I was. That’s a huge difference from the US where reportedly internet advertising still captures only 13% of f all advertising dollars.

So what does that say about their marketing efforts? Is it a result of the mediocre quality and limited opportunities to advertise during UK television programming? Or is it just because their advertisers have become savvier about their spend?

Internet advertising represents a much more targeted opportunity to pursue eyeballs. While you may get several hundred television stations from your cable or satellite provider, that same fat line is bringing you jillions of internet advertising opportunities. The question is how accurate and successful you can be with those internet ad dollars.

For reaching mainstream consumers, Yahoo, Google and Bing do a good job of allowing you to buy search sensitive advertising opportunities as well ads within their contextual network. Facebook is quickly gaining in this playground, too, but what about the other seemingly limitless advertising opportunities alongside non search related sites where display ad opps are available by the month or the click?

Some of these are fantastic (and cheap) opps for reaching a difficult to target market but the effort is still significantly less sophisticated that the decision making model developed by the big agencies for TV. That doesn’t mean you shouldn’t follow the ways of English advertisers. Heck, be a pioneer. I’m sure by this time next year that 13% will have ramped up significantly. But be wary. The science behind it is still developing and you don’t want to find that you’ve bought a big ticket campaign and wasted your previous advertising dollars on something that isn’t bringing the promised results.

Inappropriate Advertising in the Miami vs. FSU Football Game

You don’t have to be a football fan or even an FSU alum to appreciate the really poor taste exhibited by the media buyers for Monday night’s game on ESPN. What were they thinking allowing a movie about the murdering of sorority girls sponsor a game at a university where not so many years ago Ted Bundy took lives from the Chi-Omega house?

I’m fairly certain that the media buyer probably didn’t attend FSU and didn’t understand the insensitivity of the context of this placement but somebody should have been watching. This is a great example of why national buys and national messaging doesn’t always work in individual markets. A local test of this ad would certainly have raised objections from this media audience or at least in this market. But perhaps in an era of tightening budgets and hurry-t0-market campaigns, people aren’t taking the time to think and that is a problem.

It goes back to the old adage of one happy customer will tell another but one UNHAPPY customer will tell three or five or ten (depending on which survey you read).

How many irate FSU alumni will it take to prevent this ad from running again? Or perhaps prevent this movie from seeing theaters in Tallahassee?

I’m not certain and that isn’t really isn’t the point of this post. The point is that marketing mavens in other mass media markets don’t know your customer in your backyard the way that you do. That means if you’re a large brand, you need to take the time to localize. And if you’re a small business, you have a leg up on the large brand who won’t take the time or expense to be authentic in your space.

Happy marketing and Go Noles!

Increase in Advertising Spending = Recovering Economy or Desperation?

About six months ago I started encouraging clients to take advantage of the pull back in advertising spend to make their dollar go further by taking advantage of greatly reduced rates. My clients don’t do a lot of display but the same mantra held true for most of the available media at the time.

Over the summer I noticed an uptick in marketing spend in my business serving the SMB space and subsequently confirmed the same was true with my counterparts serving the medium enterprise and global corporation space. Conjecture might say this signals a turn in the economy, but is that true?

The WSJ reported this morning that the dental market is seeing a 10% drop on average in patient billings largely due to unemployment rate. People without dental insurance stop going and those high brow vanity treatments don’t seem as important when we’re counting our pennies. The article goes on to describe how dentists are having to get creative with their marketing efforts and spend less time seeing patience and more time recruiting them. The old reminder postcards aren’t bringing patients in as fast and thus dentists are trying the same tricks as everyone else: email campaigns and twitter.

So perhaps the increase in marketing spend is just a sign that business are finally having to do what we marketing folks have told them all along: focus on your best prospects, show love to your best clients, identify to your competitive advantage and then promote it in more ways than buying one ValPak envelope a year and putting your initials on the door?

I think what in fact what is happening is that certain businesses are preparing to thrive. They’re establishing a robust infrastructure, staking their claim on their space and working harder to protect their brand. It’s not just a marketing investment that will help them succeed. It’s their overall investment in their business from people to technology that is helping them ramp up and prepare to take market share from the competition who instead of investing has squeezed every available dime out of their business and hidden it under the mattress.