It is with sadness in my heart that I write my last post (for a while) on enterprise 2.0. From next post, I will be writing about other topics such as travel, fashion, politics just to change things up a bit. We have been talking about social media technology and how it adds value to organisational business functions.
With that information out of the way, today we will be looking at social media Return On Investment(ROI) calculation i.e.looking at how these organisations actually measure the benefits of social media. ROI is the measure of the ratio of money gained or lost on an investment to the amount of money invested and is usually expressed in percentage. My initial reaction the first time I heard about social media ROI was, the old and traditional way of calculating ROI will definitely not be applicable to social media. But, Steve Schmidt said that, ” measuring social media ROI is possible so long as the efforts are focused on building network of engaged customers, meaning that non-monetary goals achieved by the organisation can be translated into money and calculated. Some of these goal are;
- Increase brand awareness
- Increase leads and sales
- Improve online reputation
- Retain clients
But the non-monetary goals above is useless and wouldn’t make any difference to the organisation if they don’t know how to turn them into paying customers in order to be able to calculate the Return on Investment (ROI). To do this, they have to tie the results from their social media use to actual monetary business value. In the example given by Priit Kallas, the organisation may have 1,000 Facebook fans and get 100 visitors per month from their Facebook fan page. 25 of those visitors make a purchase that gives 500 dollars of profit. So if the quality of fans is constant, each additional fan will generate 50 cents of profit per month. They could use up to 49 cents per month acquiring more fans through advertising or other activities and still have a positive ROI.
I will be looking at Starbucks’s social media ROI calculation. Starbucks is a good example of an organisation that have invested a lot of money in so many social media technologies. A few posts ago, I talked about how Starbucks launched “my Starbucks idea.com” in 2008, a forum for consumers to make suggestions, ask questions and, in some cases, vent their frustrations. The founder of Starbucks, Howard Schultz did this to turn the dying business around. The website now has over 190,000 registered users with over 150,000 ideas submitted and over 900 of these ideas implemented.
As of December 2012, Starbucks serves 60 million people per week in over 55 million countries generates a total revenue of 13.3 billion dollars, over 22 million Facebook fans, 1.5 million twitter followers. With the launch of their loyalty card and mobile payment app, Adam Brotman Starbucks’s digital officer said that they now have 51 million monthly visits across it’s mobile platform, 25% of store transactions are prepaid with 2.1 million mobile payment transactions done per week and also the amount of dollars loaded on customers Starbucks cards increased by 20%. Brotman said that as for their Return on investment, the combination of their web, mobile, and social efforts gives them “a lower cost of marketing per customer“.
Though they (Starbucks) did not exactly say what their return on investment was or how much was invested developing and managing these technologies, it is evident (from 2012 annual reports) that their net revenue increased from 10.4 billion dollars (in 2008) to 13.3 billion dollars (in 2012).