2013 Exacttarget Socialmediaexplorer

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2 2013 exacttarget.com socialmediaexplorer.com

The Mathematics of Social MarketingWe’re more than a decade into the movement known as social media, but businesses continue to struggle with this new construct ofcommunication. The numbers show that most businesses are not fully leveraging, or even understanding, the world of social media marketingand social business.A 2012 Zeno Group report found that 45% of small business CEOs do not consider social media when thinking about their company’sreputation. Question after question is asked at conferences, in blog comments, and even on Twitter by businesspeople from around the world:How can I drive business with social? How can I measure social media’s impact? How can I convert social networking contacts to customers?The easy answer is that it’s not that easy. But it’s not impossible. Social media marketing is a thriving source of web traffic and revenue formany companies. But how have these companies turned social into commerce?I propose here that the businesses that are taking the fun-and-gamesspace of social media and turning it into revenue are those that studythe Mathematics of Social Marketing. While your brand’s personality andinteractions with fans are more qualitative, there’s an entire universe ofquantitative data that can turn social strategy into something that looksa whole lot like search engine strategy. This movement from marketingto math can help the struggling social marketer move into a set of habitsand actions that drive top- and bottom-line revenue, thus changing theoutcomes of his or her social programs.While industries, verticals, and categories of companies vary,understanding the Mathematics of Social Marketing can propel your socialefforts from experimental and frustrating to calculated and profitable in amatter of days or weeks.Jason FallsFounder, InstigatorSocial Media ExplorerReady to do some math? 2013 exacttarget.com socialmediaexplorer.com3

The Mathematics of Social MarketingCalculating Conversion RatesSuccess1000 WEBSITEVISITS200 LEADS20 PURCHASES20% ACTIONRATE2% CONVERSIONRATE4 2013 exacttarget.com socialmediaexplorer.comin most digital marketing channels can be demonstrated bymathematics. Ask good ecommerce or search marketing professionals how theybuild successful programs, and they’ll point to conversion rates. Conversionrates are the percentage of a total audience that takes an action.To keep the nomenclature clear, I like to reserve the term “conversion rate” fora monetary transaction. For other activities you’re trying to motivate (filling outof forms, social shares, answering questions, and so on), I like to use the term“action rate.”For instance, if you have 1,000 visitors to a web page and 200 of them fill out aform, and 20 of them actually purchase the product in question, you have a 20%action rate (200 of the 1,000 filled out the form and took the action) and a 2%conversion rate (20 of the 1,000 actually “converted” to become a customer.)Search engine optimization and ecommerce experts live in this math. They knowhow many visitors to a given site or page it takes to produce one action. Theyalso know how many of those actions they need to produce one conversion. Theyfocus their energies on two areas: Drive the requisite numbers to the page to result in the projected conversionsfor their business’s success Optimize the site or page so it takes fewer visitors and/or actions to achievethe same outcomeThe more efficient the action and conversion rates on the back side of thesite or page, the less work there is on the front side to get people there. So, inessence, this math is a microcosm of an effective business: Reduce costs andmaximize revenue.

The Mathematics of Social MarketingAnalyzing The Front SideIn general,two kinds of people are in digital marketing:communicators and technologists. Some individuals are talented enough to havea bit of both, but these two roles are generally distinctive when assembling adigital marketing team.The communicators are good at strategic and creative thinking, bring a humanperspective to the table and, most of the time, are the extroverts and social types.The technologists are good at analysis and problem-solving, offer a data andmathematics perspective, and are often the introverts of the bunch.Of course, these generalizations are not always accurate, but they do helpprovide insights into the places our marketing efforts sometimes fall short.Filling the top end of your digital marketing funnel has always been the task forthe communications folks. Many think just launching something on the internetmeans people will see or find it. They have an “if you build it, they will come”approach to launching initiatives.The technologists are experienced enough to know this isn’t how the internetworks. If you build it, then promote the hell out of it, even manufacture traffic toseed it, then people might come. The technologists make sure the backend ofthe site is functional and helps increase traffic, often by a pay-per-click (PPC)advertising budget. Capitalizing on the closely relevant keyword searches ofmillions of internet users each day is one way that technologists find an initialaudience for the communicators’ efforts.Think about the digital marketing initiatives you’ve been a part of in the pastthat failed. Now think about why they failed. There’s a good chance they failedbecause the idea wasn’t initially seeded or promoted well enough to providean initial lift. Sure, there could be other reasons, but “launch and hope” is anunfortunate habit of many content producers.Conversely, think about the initiatives that have been successful. There’s a goodchance they were such because advertising was used to seed the idea with anaudience that could then push it to their friends and networks.Virality is seldom organic. It is typically manufactured.This is frustrating to small businesses and communicators because they eitherdon’t budget for the manufacturing of traffic, or have some spirited belief theprogram is so good, you shouldn’t have to pay for people to see it.Spirited beliefs are almost always misguided.Until the concept of content marketing began to be applied to the digital realm,this is how the internet world operated. You needed X number of site visitors (let’ssay 100,000) to drive Y number of actions that produced leads (let’s say 10,000)that could produce Z number of purchases (let’s say 1,000). With an averageorder value in the hundreds or thousands (for B2B companies), digital marketingcould be supremely lucrative. For retail and consumer-facing businesses,average order values of 10 and up produced at least a viable revenue stream(even with these benchmark numbers).And then social media arrived.Virality is seldom organic.It is typically manufactured. 2013 exacttarget.com socialmediaexplorer.com5

The Mathematics of Social MarketingMeeting The Social CustomerWhen the front side of your business proposition was simple, youspent what you needed to go get traffic. Perhaps you went all-in on paid searchand hoped for some organic search lift as icing on the cake. Maybe you mixedpaid and organic to get your traffic. Or you may have added in other directionalmethods like direct mail or email marketing.The promise of social media (albeit mistaken to a degree) in the mid-2000swas that businesses could just join these social networks and suddenly see aninflux of not just new customers, but more qualified ones. The myth was thatparticipation—joining the conversation—was the only prerequisite for success,and this new socially connected consumer would convert better. They were yourfriends!But marketers didn’t think it through. Social customers were interacting with brandson human terms, not conversion terms. Think about it: a PPC advertisement ispresented to a human being who has just typed in a particular keyword or phraseinto a search engine. They know exactly what they are looking for. They aresearching. Provided your PPC ad messaging delivers on the promise of givingthe searcher what they’re seeking, you have your traffic. If the subsequent landingpage delivers on that promise, you have your action or conversion.Now consider how the customer interacts on social channels. They aren’t thereseeking anything in particular. They’re having conversations. They may beasking questions. They may be telling stories. They may be just watching othersdo the same.Better yet, they’re likely there to talk to other people – their family, friends, orpeople with similar interests. The concept of talking to brands and companies isalien in this context. You talk to a brand if and when you want to buy something,not when you don’t. If a brand enters the field of vision and drops the “Click herefor a coupon!” message, it’s a message delivered in a context that is not ideallyrelevant to the customer.So if a company’s engagement efforts are such that these social conversationsattract customers to click through or find interest in an action or conversion point,they are going to convert very differently than the searcher who knows what heor she wants and is seeking it.Simply put, your conversion rate for social traffic will be different than that of otherchannels. It will likely be lower. This doesn’t make it bad. It only makes it different.Now consider how the customer interacts on social channels. They aren’t thereseeking anything in particular. They’re having conversations.6 2013 exacttarget.com socialmediaexplorer.com

The Mathematics of Social MarketingHow Different Can Be BetterThe premise of social marketing is much like loyalty and reward programsof old. Your focus is on customer retention, with customer acquisition as aconvenient side benefit. Sure, you can acquire customers by saying, “We havea loyalty program where you can earn rewards, discounts, and the like.” But it’sfar more effective to position those types of programs to existing customers. “Wewant to treat you really well to thank you for being a customer. Here’s a rewardprogram just for you.”Loyalty programs are measured on repeat purchase and lifetime value of thecustomer, not average order value and percentage of new customers purchasing.Why, then, would social media, an avenue used for nurturing friendships withcustomers, be primarily leveraged to acquire customers?Treating social customers as loyal and/or repeat purchasers puts a new spin onyour conversion math. For example, let’s say my acquisition strategies lead to a2% conversion rate and the customer spends an average of 25 with my brandover his or her lifetime. But my customer retention strategy via social media leadsto a 0.75% conversion rate, and the customer spends 25 per quarter (and doesso for six years).Last-touch attribution, until recently, was the only metric website analyticssoftware provided. Now metrics platforms have the ability to track a certaincustomer (based on IP address and browser cookies) through sometimes weeksof internet activity and intersection with your brand so they can appropriatelyreport how often and where that customer met your messages before they tookaction or converted.“We want to treat you really wellto thank you for being a customer.Here’s a reward program just for you.”Lower conversion rate means a higher value.Of course, social media as a marketing outlet is still in its infancy. Even sociallymature businesses find it difficult to prove this theory.There’s also the complication of multiple consumer touch points. Your socialcustomers may also be your search customers, or those separate channels maymix to lead certain customers to a conversion point. How you attribute which getswhat credit is difficult. 2013 exacttarget.com socialmediaexplorer.com7

The Mathematics of Social MarketingPlaying The Numbers GameOnly now that we understand the differences in conversion rates betweenthe social customer and the traditionally acquired one, can we adequately planand enact social media programming and measure its effectiveness well.Above all, it’s a numbers game. Like the 1,000 visitors to get 200 actions and 20conversions scenario, your social marketing activity is all about understandingyour numbers.Let’s say you have 1,000 Facebook fans. You engage them in conversation,handle light customer service issues there, and get a modest level ofresponse. It’s time to learn your social conversion rate, so you post a messageFANS ACTUALLY SEEFACEBOOK OFFER1%16%VIEW RATE( 10 / 1000 FANS )( 160 / 1000 FANS )10FANS CLICK8We know that an average of 16% of your fans see your offer. (This is a metricreported by Facebook in February of 2012 to illustrate how its Edgerank and thenumber of connections the average user has impacts the visibility of your brand’sposts.) Out of those 160 people, let’s say 10 click through.Notice that the passive connection who isn’t searching for something specificjust became an active prospect. They knew they were clicking on an offer for aspecific discount. They want it, so they click! Now let’s assume 10 also claim theoffer, though in some instances there will be an attrition rate.So your view rate is 16% (a number that is a sad fact of life on Facebook and oneyou can only nominally affect organically) and your action rate is 1% (10 out of1,000 fans clicked through), but your conversion rate is also 1% (assuming all 10claim the offer or turn in the coupon with a purchase).160ACTION RATEwith an offer: “Click here to claim a 10 coupon for your next order.”(Note that Facebook terms may prevent you from conducting certain promotionswithout using a third-party application. Contests and sweepstakes fall underthis umbrella. Organically driving your audience off-site to claim an offer orcoupon, however, is not currently prohibited by the site’s terms of service.) 2013 exacttarget.com socialmediaexplorer.comYou could also calculate your action rate at 6.25% (10 out of 160 who saw it)and conversion rate at the same clip. Unfortunately, Facebook’s Edgerank forcesmarketers to treat the math here differently.Using this math – the organic approach – in order to drive 10,000 from yourFacebook offer, your average order value needs to be 1,000 or you need toparticipate in activities to drive your fan count to 100,000. The only other optionis to get your offer in front of more than 16% of your fans. Facebook advertisingcan help with that.

The Mathematics of Social MarketingAdding in the Value of Facebook AdvertisingHere’s where Facebookadvertising and sponsored storiesbecome valuable to a brand. Let’s set your average order value at 25. You knowbased on your organic conversion rate of 1% that you need 4,000 people to seeyour message to convert and earn 1,000. For higher average order values (orhigher price-point products), you’ll need to be in front of fewer to make each 1,000 of revenue.You only have 1,000 fans, so you need to either grow fans or pay to get yourmessage in front of Facebook users that aren’t fans. So you click the “Promote”drop-down on a Facebook post and place a sponsored post ad on Facebook.This option allows your organic “post” (not advertisement) to now appear in thenews feeds of not just more of your fans, but their friends as well. This is whereyou can target the 4,000 users you’ll need to drive 1,000 in revenue. But youhave to keep in mind that sponsored stories still carry with them the stigma ofbeing an ad. They will likely convert at a lesser rate than the opted-in fans whosaw your post.Certainly, you can also take out standard Facebook advertisements (in otherwords, a sidebar ad instead of a sponsored story) and target a far greater numberof people. Doing so simply means you’re mixing social conversion rates withtraditional advertising buy conversion rates. The math gets more complex, asdoes the attribution.For other social networks, the math isn’t as complex, either with or withoutadvertising added on. But the opportunity to get the message in front ofmore people is limiting on these other social networks as well. While Twitterhas sponsored tweets, YouTube has pre-roll ads, and other networks makepromotional opportunities available, few are disguised as organic content theway Facebook’s opportunities are. Thus, those opportunities (paid, not organic)can be grouped and measured as advertising acquisition and conversion, asopposed to social conversion.25 AVERAGEORDERVALUE4000/ 1%VIEWS NEEDEDTO EARNORGANICCONVERSIONRATE1000 SOLUTION:GROW FANS OR CONSIDERPAID ADVERTISING 2013 exacttarget.com socialmediaexplorer.com9

The Mathematics of Social MarketingTweaking The Back SideThe math of social marketing is really more focused on thefront side – getting people to the page or site in the first place. But the backside is critically important, too. By the “back side,” I mean on-page or on-siteoptimization. You can get millions of people to see it, but if you’re only gettinga 1-2% action rate, and thus a much smaller conversion rate, then you have anincredible opportunity ahead.With a little bit of testing, ideation, user-experience design, or even change ofcopy, you can make incremental changes to a landing page and drive two, three,maybe even five times the conversions. This makes the traffic you’re alreadygetting more valuable. Start with these techniques to vet your site’s optimizationand functionality: Be sure your CTA is obvious, whether that’s a large “checkout” button or asuccinct “subscribe” form. Don’t leave customers guessing what they should do once they hit yourlanding page; they’ll bounce.With a little bit of testing,ideation, user-experience design,or even change of copy, you canmake incremental changes toa landing page and drive two,three, maybe even five timesthe conversions. This makes thetraffic you’re already gettingmore valuable.10 2013 exacttarget.com socialmediaexplorer.com Keep it clean—avoid overloading your landing page with too much copy ortoo many distracting images. All of the focus should be on your CTA. Mobile-optimize your web pages, including the landing page, so that allcustomers are enjoying the same user-friendly experience. Test different landing pages to see what converts best. Never stop aiming for improvement. Keep optimizing, even when your adsand landing pages seem to be converting well.It’s not just about what’s getting customers to the top of the sales funnel. Takethe time to check out analytics and traffic data to see how users are behaving onyour online properties. Use that data to update or tweak the back-end coding toget your conversion rates as high as possible.

The Mathematics of Social MarketingThe Math Comes Full CircleSo you want to drive 10,000 per month in revenue from Facebook?Work backwards and do the math to discover how many eyeballs you’ll need,based on the testing and establishment of your own action and conversion. If youhave enough organically grown fans to convert at an average order value andaccomplish 10,000 in revenue, congratulations – you don’t have to manufacturetraffic.However, you’ll likely have to implement the same types of digital marketingtactics your technologists have been implementing for years, just now on a socialnetwork. Your math will show you can drive a certain portion of that 10,000organically, but you need to put the message in front of more eyeballs to meetyour number.Like good ecommerce and SEO practitioners have done for years, you’ll need tofactor in an ad spend to each of your revenue-driving Facebook posts to seedthe audience and achieve the 10,000 goal based on your conversion rates andyour average order value.If this is your first time running Facebook ads, you’ll be happy to know that asponsored story campaign is one of the easiest ad set-ups that the internetcan muster. Sponsored stories simply let you capitalize on a good thing: theconversion-generating Facebook posts you’re already creating.Your ecommerce and search engine optimization team can help by focusingon social placements as well as search placements. Your communicator-drivensocial efforts and your technologist-driven search efforts will complement andbenefit one another.Chalk it up to mathematics.However, you’ll likely have toimplement the same types of digitalmarketing tactics your technologistshave been implementing for years,just now on a social network.And if this is your first time doing math since college, don’t stress about that,either. It’s a matter of simple multiplication and division to get to a calculation thatworks for your brand and supports your social efforts. And once you start yieldingimpressive conversion numbers that prove social media’s ROI, you might end updeciding that math is your new favorite subject. 2013 exacttarget.com socialmediaexplorer.com11

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2013 exacttarget.com socialmediaexplorer.com 3. 4 2013 exacttarget.com . methods like direct mail or email marketing. The promise of social media (albeit mistaken to a degree) in the mid-2000s . of social marketing is much like loyalty and reward programs of old. Your focus is on customer retention, with customer acquisition as a

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