Given the infancy of the medium, direct ROI is not something most companies have a handle on with social media although you can find a number of case studies. Those that report numbers are logically bigger companies that have the resources to do deep analysis, and report on it. But high level numbers are everywhere – almost every business using Yelp or that has added User Reviews can tell you that it increased their sales, average order, or other KPIs.
90% of consumers online trust recommendations from people they know; 70% trust opinions of unknown users. (Econsultancy, July 2009)
67% of shoppers spend more online after recommendations from online community of friends. (Internet Retailer, September 2009)
83% of all holiday shoppers are influenced by customer reviews. (ChannelAdvisor “Consumer Shopping Habits Survey”, August 2010)
Rubbermaid found that, when they added reviews to their free-standing inserts (ads included in newspapers), conversion for the coupons increased by 10%. (Rubbermaid Case Study, April 2010.)
Social breaks down into two real areas: Response Driven and Engagement Driven.
The first (response) is most ascertainable. Brands that are using social to push out offers (Dell, JetBlue, etc) have proven return with millions of sales. The plus side is that if you have a following it’s fast and easier to track [coupons & links].
However offer based promotions are less social than they are simply using a social channel as a broadcast tool. They also lack in scale; people won’t act on an offer every day simply because it comes via Twitter any more so than they would if it came via email.
Somewhere in the middle is validation content like user reviews which have very direct benefits but do not come overnight. Testing has shown brands that implement reviews increase metrics across the board (goes back to those quotes I put up above).
Then you have the soft, and newest, forms of social where the real opportunity lies and that’s in engagement to both talk to and hear from customers & prospects: dialoguing. This can be with the brand or between users. ROI is much harder here as there’s no immediate call to action that’s sales related most of the time. No link has to be clicked.
Of course many of these issues exist in other mediums too. TV and Print advertising is tracked based on the lift to the business knowing that most people won’t call an 800 # or fill out a survey marking their originating source. Even web advertising has evolved rapidly as studies show that banner ads can lead to clicks or searches hours, even days, later causing an indirect but still very important impression.
People are more likely to buy from brands they recognize and even more so ones they trust. If you only marked via DR (and are not selling a commodity for one day and one day only) you would have a tough time growing. Even the big DR shops will admit that buying enough media under any name comes with a branding and awareness benefit on the side.
The issue we run into is when people try to use social engagement to have a typical DR conversion. Social Media is not all about DR, it is not an overnight, scale it up on a dime, explode it because you want it channel and that’s something many marketing executives and business owners have a hard time to grasp. Then you go back to that Yelp example, something which almost everyone on the web has done themselves, and it becomes clear – the opinion of a stranger is more influential than any single ad or coupon – and when they go together what you get is true power… a brand you know, an offer you want, and a company you’re willing to trust.
In a different world I’d share some of my own specific stories with you, but as the companies I have had the fortune of working for wish to keep making a profit [as you said, doing it again and again]. But sufficient to say, while I don’t foresee giving up my paid media channels, I look at social as an opportunity cost more than an additional ROI point. If you are not well represented in this world I’m not buying from you and the numbers prove that.