The ROI from Social Media – email Marketing

I want to frame this social media ROI discussion with thoughts of Francois Gossieaux who I listened to on Social Media Today's panel. Francois feels ROI is a poor indicator for social media because it is a trailing indicator that does not tell us enough about future benefits. He identified a few more valuable measures like customer equity. I am a firm believer in this position - business benefits from social media need to be measured through a new lens, not traditional ROI. But. . . slow to change companies will be managing participation and measuring benefits of social media via ROI initially. I start laying those benefits out in this first post:

Ravit Lichtenberg from Ustrategy.com follows this logic stating, "While the definition of ROI is evolving to better fit the world of relationships and networks, the ability to demonstrate ROI in hard numbers -- not in followers or fans -- will become a baseline business requirement in 2010."

My initial research immediately identified linking email marketing and social media as a means to tie ROI directly to social media efforts. Email marketing can be valuable; the DMA's October '09 Power of Direct Marketing report shows commercial email returns of $43.62 for every dollar spent. The argument will be that if we can accurately tie social media involvement to an uptick in email marketing benefits, then we can start quantifying social media ROI.

Interestingly enough, consumers have clearly indicated their current preference for email marketing over social media - they overwhelming choose email over social media to share marketing offers and overall communications with businesses; a MarketingSherpa study showed that 78% of consumers share online information via email, versus 22% who prefer social media. A Harris Interactive poll found that an even higher percentage of consumers choose email to communicate with marketers over social media. Thanks Kara and Kristin for sharing this email marketing info.

But, a recent Nielsen study found that the more people use social media, the more time they also spend with email. Sure, there is a shift in the quality/content of these emails as more social media sites use email to keep members updated of new content updates and other changes. The key is that company marketing information continues to proliferate – just establish metrics that tie the sharing activity back to an e-mail database record. Then activity can be tracked across social engagement sites and back to the consumer that posted, e-mailed or tweeted about your brand. Tied with enterprise data on that customer, companies can measure ROI associated with the social media activities. I used Ryan Deutsch's notes for thinking about these metrics:

• Invitations shared: Solutions that allow sharing within a campaign offer the ability to track invitations distributed via social engagement; companies can measure the value of each social engagement site.
• Invitations accepted: Of the invitations sent out on a company's behalf, the company can identify the portion that drives actual participation.
• Conversions: Whether defined as a sale or a subscription, track conversions at the customer/recipient level to enable contribution scores at the individual and social engagement site level.
• Contacts: Social media sharing tools may cite the number of contacts per customer; companies can go one step further to establish a customer's influencer potential.

Case Study: StrongMail, a provider of online marketing solutions for email and social media, worked with CSN Stores, the third-largest online retailer of home furnishings and housewares in the U.S., to improve the performance of an existing email referral program by three times using email, blogs and popular social networks. For every 1.8 customers initially engaged, one new CSN Rewards account was created, and one in ten of those new members went on to complete a purchase. CSN believes the success of the program was due to StrongMail's technology that enable customers to easily control how and when to share CSN with their friends and family via their favorite social networks. Their approach included:

• Encourage customers to invite their friends to join the CSN Rewards loyalty program and shop with CSN
• Incentivize current Rewards members with a Reward credit for each friend that enrolled in the program and made a subsequent purchase
  • Referred friends were also rewarded with a credit for extending the offer to their networks
• Identify "Super Influencers" within recipient lists (customers who already have a defined web presence within a specific vertical like "Discount Bloggers" and already have a following relevant to a specific space with people looking for new content or the next great deal) for an optimized campaign; the targeting impact was off the charts. Here is what the CSN Stores saw:
  • 420% Increase in loyalty member subscriptions from the initial campaign
  • 326% Increase in purchase conversions from the initial campaign
  • Thousands of additional subscribers and hundreds of new purchases

WOW!

But on the other side of the argument, StrongMail survey conducted by Zoomerang this November reflects a more moderate view. The survey captured the attitudes of more than 1,000 business leaders in regards to their planned marketing budgets, preferred marketing channels, social media adoption and anticipated customer revenue in 2010. Reflecting on 2009, only 28% have seen a 5% or greater lift in email marketing campaigns through integration with social media. Even lsee optimistic, 23% were not sure or able to measure the lift and 35% say they saw no lift through social media integration.

Maybe to Francois point above, though, the survey respondents did identify "Integrating social media and email marketing," as the 4^th most important email marketing initiative. For 2010, 69% plan to integrate social media into their email marketing campaigns with 51% already having a strategy to do so.

So, seems like there is some value here that requires deeper analysis – especially around the metrics and measuring of direct ROI. And this is just one potential area of measurement. As I continue to seek out the best, I'd love to hear more from you – how can we best tie social media efforts to traditional ROI or new metrics of business benefits?

Cheers

Comments

[Stacy Charles]

Very insightful.

As I move closer to launching a home furnishings retail site, I'm having questions around best practices for consumer engagement and striking the right balance with UGC within luxury branding. Most of the old guard in the design business have yet to get board with Social media and are slowly converting to email marketing.

Luxury design Newbies like www.Decorati.com and www.1stdibs.com have shown that online luxury product SELLS with limited need for the touch and feel experience provided by a showroom visit. It will be interesting to see how quickly online marketing strategy changes as more high end brands close their brick and mortar locations.

[easiegmann]

Thanks for the comment, Stacy. I'm familiar with 1stdibs and will have to check out Decorati. I'm always interested in how socio-economic status differs across folks' web and social media adoption. In terms of web use, there is no question the wealthy is there - they had high numbers by 2007 according to a Luxury Institute Survey: http://tinyurl.com/yj6pvf9

But you hit the right question. . . what about user generated content. . . here, an LI survey shows increased social media adoption, http://tinyurl.com/yeonbej, which is a start to answering the question. I'll look forward to hearing about your continued experiences!