A study done by Bazaarvoice & The CMO Club this January looked at what metrics CMOs used for social media in 2010, and which metrics they will use for 2011. The big story from this comparison? As the platforms and tools to measure them mature, marketers are becoming increasingly more ROI-focused in their social media.
The two most dramatic changes over the past year illustrate this trend most clearly: in 2010, just 32.6% of CMOs cited conversion as a key metric; in 2011 that number grew to 65.7%. Similarly, while just 29.1% of these CMOs cited revenue as a key social media metric in 2010, that number rose to 49.7% for 2011.
Interestingly, while 79% of these CMOs do some form of their social marketing on Facebook, just 15.4% claim to realize any significant return on that investment (20.6 % see an average return, and 8.6% claim to have no ROI whatsoever!). Given these dismal results, perhaps it’s not surprising that, despite its vast reach, 20.6% of these senior marketers have yet to invest in Facebook to date.
The problem lies in the fact that despite the trend for marketers to become more ROI-centric in their social media properties, many continue to limit their social marketing programs to merely establishing a Facebook presence. By stopping there, they leave significant returns from their social media investments on the table and miss out on the real value from Facebook: tapping into its social graph.
What does this mean? Conventional marketers know that referral programs (where customers refer products and services to their trusted friends) leads to higher margins, retention and overall ROI. This is outlined nicely in a July 2010 Wharton Business School post, which discusses how existingcustomers know both the seller (they’re already buying the seller’s products!) and the buyer (their friends), giving them “superior information” to create good matches. In some industries, the impact of referrals can be quite significant: McKinsey research shows that word of mouth generates over twice the sales of paid advertising in categories ranging from skincare to mobile phones.
The power of referral marketing rises exponentially when it is matched with social channels such as Facebook, where trusted networks can be identified and utilized almost immediately – and on a scale far exceeding a bricks-and-mortar, analog world. Case in point: Roku, the market-leading streaming entertainment provider, increased its referral-based sales by 30% after adopting Extole’s Social Recommendation Marketing (SRM) solution, which enabled them to maintain their own branding and generate over 10,000 referrals per month.
Of course, marketers must think long-term as well as short-term. They must not only drive transactions, but attain them in a way that builds – rather than detracts – from their brand. Therein the beauty of marrying online marketing with social referrals: acquisition and retention are no longer at odds, as trusted referrals in a social media context bring unprecedented opportunities for scale.