The million dollar question that has long haunted the field of social media has always been: What is the return on investment? How much money can a business expect to make back for every $1 they invest into social media?
Unfortunately, that number has been exceptionally difficult to pinpoint. One part of the problem is that between each and every brand and business, there is a huge level of variance — both in the objective of social media for that brand or business, and in the return related to the pricing of their services.
Beyond that, it has become increasingly difficult to measure the value of social media because success in social media is about more than just increasing sales and driving new business — success can also be found in shaving costs, in finding niches, and in stronger customer relationships. Here’s why.
Saving Huge on Product Launches
For every business, launching a new product or service can be a terrifying endeavor. They might ask themselves, will this fit in with my other products and services? Even if I think it’s a great idea, will my customers?
And before social media, that was extremely difficult to gauge. Maybe, if you had an extensive e-mail list you could perhaps gauge interest in a potential new product by announcing it through that e-mail list, and checking the data as a result, but not really. It wouldn’t have nearly the same impact in the long-run.
For example, Cisco, a huge multinational networking corporation, set out to determine the value of social media when launching a new product. And what they found, ultimately, was pretty inspiring.
Choosing to host a live-event through the online Sims-esque social simulator, Second Life, Cisco managed to receive an absurd amount of press and social media response before, during and certainly after the event. Those numbers, they found, were easily exponentially greater than any standard product launch, resulting in millions upon millions of impressions through social media, thousands of blog posts, and piqued interest of potentially millions of new customers.
And the cost? About one-sixth of what they would have spent on a traditional product launch.
Driving Customer Loyalty, Happiness
But beyond cutting costs, social media also generally leads to customers that are more loyal, happy, willing to recommend — basically, take your normal customer, make them super amazing in just about every way imaginable, and that’s what social media has the capacity to do.
Don’t believe me? Syncapse, a company that specializes in social media data integration and analytics, performed a study that looked at the empirical value of a Facebook fan. They looked at the value of a Facebook fan versus a non-fan as it related to big brands including Adidas, Starbucks and McDonalds, and based that value on such factors as loyalty, brand affinity and willingness to recommend a product.
And what they determined was that in every scenario, fans of brands were overwhelmingly more likely to express empathy towards brands and recommend products from that brand to their friends. Surprising? Probably not. But valuable information, and something that shows the importance of social media in driving interest towards brands? Definitely.
Relative Still Means Relative
Of course, determining the value of a Facebook fan across many different brand pages is still a lesson in relativity, because the value of those Facebook fans, as Syncapse also notes in their study, can be as negligible as nothing. If that particular page or feed isn’t engaged with its audience, chances are it isn’t really driving value for that particular brand.
On the other hand, individual fans can be worth as much as hundreds, if not thousands to particular brands.
But whether or not that value is estimated to be $3.60, $136.38, or more, it’s clear that social networks have had an impact on consumers and brands as a whole. Whether it’s in changing the way consumers consume advertisements, or how brands market themselves, the value is undoubtedly there.
And as Cisco and other brands have has shown, that value doesn’t necessarily have a ceiling. Social media can result in substantial changes to the brands that use it effectively, whether that change be as minor as being able to gauge interest in a new product before it’s released and make any recommended changes, or as substantial as completely reinventing how they handle customer service.
Has your brand effectively used social media to cut costs, drive interest?