Commentary

Why Marketers That 'Like' Results Must Spend With Care In Social Media

There is no denying that Facebook has changed the very nature of engagement on the web. So, it is no surprise brands are looking to Facebook as a new, potentially fruitful channel for reaching consumers- as they should. So why haven't marketers put more significant resources into Facebook advertising and fan pages? The answer is in the numbers. 

Consider this:  1 million Facebook fans only generate 826 likes and 309 comments per post, according to  data from social-media brand monitoring platform Simplify 360, which examined "50 Facebook fan pages with a random mix of brands from all over the world from consumer brands, to sports teams, to celebrities" (Starbucks, Lady Gaga, National Geographic, Red Bull, Mashable, etc.).

There's a big ugly spreadsheet-like chart in the post you might (or might not) want to glance at, but one blunt take on the data is that the average "response rate" to a Facebook post is .00085 and the best is .0035.  To put that in perspective, the average direct mail (DM) response rate to prospects is just over .01.

As one commenter wrote,"OK. That is nice, but what about the number of 'likers' who actually buy something?"

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Yeah, good point!

Consider a typical DM response of 1% that generates 10,000 orders at, say, $50 per order. If the cost of putting out 1 million direct mail pieces is $410,000 (to cite one recent real-world example I'm familiar with), that's an example of direct mail being profitable -- not by a huge margin, but definitely worth the effort.  Also, these new customers have a much higher likelihood of rebuying, where the real value starts!

Which gets to why social-media marketing can seem so seductive: It's "free"! Well, not actually free from a human-resource management or planning or project-maintenance perspective, but a lot of marketers conveniently forget about all that stuff because, hey, if you're not spending money on printing and postage, that's great, right?

Sure, that's great. But back up: How many orders do Facebook posts or comments generate? Everybody keeps asking "What's the value of a Facebook fan?" and still nobody quite knows - but the Simplify360 data suggests: not much. That is, if you're willing to accept the (potentially dubious) notion that a Facebook "like" and/or a comment is a meaningful "response rate."

Even more to the point: In social media, what comes first, the chicken or the egg? By which I mean, do Facebook Fans like you because they are already spending on your brand, or because they desire to spend on your brand.  If the former is true, then Facebook likes are simply representative of existing sales.   This means that existing branding and marketing efforts need to be continually undertaken to drive revenue core to your survival.

And remember that businesses shed customers every day. In the real world, customers drift away, defect to competitors, etc. In the catalog business, for instance, the average re-buy rate of existing customers is about 50% -- so the pump constantly has to be reprimed just to stay even.

On Facebook, though, how many "fans" go through the trouble of un-fanning a brand they no longer care about? It might make for a nice PowerPoint slide or graphic for your annual report if you've got, say, 1 million Facebook fans for your brand -- but unless they all "fanned" you yesterday, chances are thousands of them (tens? even hundreds?) have moved on or are not truly engaged.

It's very tempting to drink the "free" social media Kool-Aid. But step away from the ledge.  Sure, social media is and will continue to be a tremendous medium for brands to connect with their customers.  But it takes very careful analysis before you shift spend from higher cost items that actually drive sales to wildly developing brand advocates in the hopes that they will light up their social graph on your behalf.

15 comments about "Why Marketers That 'Like' Results Must Spend With Care In Social Media".
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  1. Gordon Plutsky from 21 Advisors, June 1, 2011 at 10:10 a.m.

    Really great post. It is easy for marketers to get seduced by the "free" nature of social media. But, it does not appear to be a direct response medium for many types of companies. And, you need to have a continuous stream of quality content to engage customers via Facebook or Twitter. While all brands should have a social persona, it should not take the place of proven profitable marketing tactics.

  2. Brad Stewart from Molecule Inc., June 1, 2011 at 10:31 a.m.

    Gordon: you're bang on about the take-away for this post. 1) do social media, but 2) don't reject other media. It's exactly the same as the web circa 1995. Social media presence is something everyone needs in one form or another. Don't be invisible, but don't think SM is a magic bullet (there just aren't -or ever will be- magic bullets).

  3. Bruce May from Bizperity, June 1, 2011 at 10:51 a.m.

    Content is king in Social Marketing. Just getting fans to” Like” your Facebook page does little good. Building an audience with great content can lead to a whole new way of building relationships with potential customers. That process is about building your brand, building relationships, establishing credibility and trust, and only then, selling products and services. One of the great lessons of social marketing is that it is more effective for small businesses that are actively building their brand in a local community. Facebook rules at the local, community level. Enterprise marketing doesn’t fit well in this world. The numbers you report illustrate the challenge facing enterprise marketers trying to enter social networks.

  4. Bob Fetter from Pluris Marketing, June 1, 2011 at 11:44 a.m.

    Gordon (and all) thanks for the comments. I think your key point is "it does not appear to be a direct response medium for many types of companies." Imagine a cable company attempting to get all of its new subscribers through brand advocates. As we would say on Twitter #fail. Thanks again.

  5. Pamela Tournier from Focus: Productivity, Inc., June 1, 2011 at 12:14 p.m.

    Facebook doesn't deliver great conversion even for local businesses -- SM, and Facebook in particular, is a poor direct response medium. In terms of general awareness-building (never mind response), here again don't expect fabulous results because of Social Media's highly fragmented nature, the mindset of those engaged with it (buying and recommending products to one another are NOT top of mind) and the lack of any meaningful call-to-action associated with a Facebook "Like."

    No surprise that even those in the business of measuring social media have yet to make a business case for social media ROI. Most they'll admit to is "some interesting statistical relationships" and the conviction that there must be a pony under there somewhere.

  6. Will Larson from Ticketmaster / Live Nation Entertainment, June 1, 2011 at 1:38 p.m.

    Great article but we still don't know how to measure social-referred revenue (taking lift into account). Obviously there's no perfect methodology for getting at it exactly but has anybody had success estimating a floor or ceiling for incremental social ROI/ROAS? Without that we'll never know how much to spend on our social strategies.

  7. Bob Fetter from Pluris Marketing, June 1, 2011 at 2:23 p.m.

    Will, that's a great question and I am going to address that in the next post. Too little room here. Pamela, love the "pony under there somewhere." Made me laugh out loud!

  8. Steve Schildwachter from Enterprise CMO, LLC, June 1, 2011 at 3:43 p.m.

    Good article, Bob. A couple of responses. First, social emdia isn't "free". It may not be paid media, but it is "earned media" and you need money to make money. Second, there is an interesting trend afoot where shopper marketing is making social emdia more accountable. Walmart bought Kosmix. Tesco bought BzzAgent. Today Google announced its own version of Groupon. More on this at: http://admajoremblog.blogspot.com/2011/05/3-reasons-you-should-care-about.html

  9. John Porcaro from Metia, Inc., June 1, 2011 at 4:10 p.m.

    Problem here is comparing Facebook response to Direct Response. Think more in terms of PR, or customer service, or non-direct advertising (like TV) and you're looking at something more comparable. The value of building and retaining relationships is hard to quantify, as anyone in PR can tell you.

    The key is to build a good marketing mix, with different media hitting customers in different ways. Social Media is just one way to get a message to a customer.

  10. Kevin Horne from Verizon, June 1, 2011 at 4:10 p.m.

    Boy oh boy, this will be news to the "three-quarters of small businesses [that] are already active social media marketers, according to online marketing services firm Constant Contact, which surveyed 1,572 small businesses during March and April."

    Especially since "Facebook was the social medium of choice for 95% of the small businesses doing social media" per the same survey.

    And really especially because within that cohort, "82% of Facebook users [find] it effective as a marketing tool..."

    The stuff in quotes comes from a MediaPost article dated May 16, 2011.

    This would translate to roughly 14.6 MILLION SUCCESSFUL small business Facebook company / fan pages.

    How come no one challenges THESE measures?

  11. Bob Fetter from Pluris Marketing, June 1, 2011 at 4:32 p.m.

    Great stuff. Kevin, agree with some aspects of the Constant Contact survey. But in a different post <a href="http://www.commcreative.com/blog/2010/01/facebook-ad-roi-vs-traditional-media-case-study"> here </a> this business placed 2.1mm Facebook ads over a 5 week period, with 773 clicks and 17 signups. Sure it's successful for that small business, but if I needed 100k new customers paying an average order of $50, I just don't see how you get there from here.

    John, your direction is spot on, it's getting the mix right between core revenue producing activities and relationship enhancement activities.

    And Steve, I agree on the earned media aspect, but don't know if I consider daily deals to be social media marketing, as its primary marketing vehicle is opt-in email.

  12. Brad Heureux from Strategic Advisor, June 2, 2011 at 8:44 a.m.

    Keep focusing on limitations its a sure fire way to failure.

  13. Bert Shlensky from stretchandcover , June 2, 2011 at 1:09 p.m.

    great article and particularly the thoughts about measuring social media . I have become particularly turned off to social marketing consultants who simply have no clue about ROI and even the potential . That is the beauty of paid search even if I am finding it more difficult lately . You still get as much feddback as you want on performnance and ROI .

  14. Kevin Horne from Verizon, June 2, 2011 at 1:32 p.m.

    Sorry if it wasnt clear, Bob. I was mocking the Constant Contact stats, not defending them.

    I am on your side on this one... ;)

  15. Bob Fetter from Pluris Marketing, June 2, 2011 at 1:57 p.m.

    Kevin, in re-reading your comment I can see the mocking loud and clear! Sorry for the mis-interpretation and well done.. I always "mock" Constant Contact. Kind of like Dex Knows to me!

    And thanks Bert. Am attempting a little deeper dive on Social Media ROI next post here..

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