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Know what ROI really means and get faster executive approval for your social business and media initiatives.
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www.kathyherrmann.com©2010 Kathy Herrmann
What social business ROI really means
Who is using social media to gen revenues and cost savings?
And the reason is because…
Don’t be “myth”taken…
Avoid social media myths that will torpedo your initiative.
Social media is free.
That would be never…Even a small program has personnel costs.
Larger programs? Add in higher people costs plus technology.
Social media is exempt from Business 101 fundamentals.
Hmmm….that would be no…
Social initiatives are among a field of other corporate initiatives. Make the business case like you would for any other.
Metrics = Return On Investment
Web visitationsPage views
RegistrationsCustomer Satisfaction
Etc.
Metrics are important…But as leading
indicators of revenues (or cost savings).
Big honking no.
What executives really want to know
about a corporate initiative.
The purpose of business is to generate revenues or increase
profitability.
Get executive attention by showing them the money
associated with your social initiative.
Convert social benefits (like influence, loyalty, engagement,
etc.) into monetary terms….
…yes, really.
Social media can and should be valued.
The secret is to couple
defendable assumptions with appropriate risk.
Perform valuation
hand-in-hand with the strategic
vision and definition, as well
as tactics.
Strategic definition =
verbal or written expression of what
you plan to accomplish.
=
Valuation = numerical view of
the strategy.
1. Start with cash flow…
…of Gains and Costs.
NPV = Time-value of cash flows.
Incorporates risk via discount rate
(also known as cost of capital).
2. Determine Net Present Value
ROI =Gains - Costs
Costs
3. Determine ROI
Determined from the NPV of Gains and Costs.
What cash flows where?
Money out =
Social Media Costs
People costs…
• Social team staff:– Strategists - Execs &
managers.– Tacticals -
Community participants.
– IT.
• Third-party consultants.
Tech costs for social business platform…
• CRM, traditional (E.g., Salesforce, SAP, Sugar, RightNow).
• SCRM (same – via add-ons).
• Community solution (E.g., Jive, Lithium, SF Chatter, INgage).
• Premium web analytics solution (E.g., Radian6, Attensity 360, ScoutLabs, Clarabridge).
• Misc.
Money In = Social Media Gains
Revenues due to social initiatives =
x xReach
How many are you connecting
with
Impact
Who’s paying attention
Yield
How much is their spend
And then there’s Cost Savings from social…
• Call center savings:– Fewer incidents.– Fewer contacts per
incident.– Shorter time needed to
close incident.
• Cost of Sales savings:– Lower cost for lead
acquisition.– Shorter sales cycle.
Now you’re ready to be an executive champion helping them make an informed decision
about investing in social business.
Go forth and make social!
About
• Leading expert on social business and change management.
• Practice centers on business process design and definition, valuation, and the user experience.
• Valuation expert and designer of the ValueRight methodology and tool for social business valuation (and ROI) determination.
• Active participate in the SCRM Accidental Community on Twitter, a premier group of social business thought leaders.
www.kathyherrmann.com
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