Getting beyond cost-justification of Social Media
McKinsey Quarterly has a great article that provides a much-needed context for senior executives to evaluate social media. The reasons why social media remains an enigma wrapped in a riddle for many executives, particularly nonmarketers, include the difficulty of pinpointing the role social media plays in purchase decisions and the resultant difficulty of determining ROI. Such executive confusion is one reason why McKinsey estimates that social media accounts for only about 1% of marketing budgets.
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One reason that executives have a hard time wrapping their heads around social media is that they are seeing it through the wrong prism. Rather than the Marketing 101 sales funnel that starts with awareness and ends with a sale, the purchasing decision journey is a circular path with multiple stages for evaluation. The power of social media, compared to traditional media, comes from the ability to influence each stage of this new purchasing journey.
Social media has three primary payoffs. First, it can create buzz that can lead to additional sales. It can enable closer collaboration with customers, helping to create products that better align with customer requirements. And it does a good job of targeting.
Companies use social media for four primary purposes:
- Monitor: Companies can listen to social media to learn about consumer requirements and customer perceptions, as well as for the negative commentary that can burn a brand
- Respond: Responsiveness can be judged in terms of customer service or setting the record straight. When an online rumor about McDonalds charging blacks a service fee, the fast-food giant responded quickly, shutting down the rumor mill before it had time to snowball.
- Amplify: Amplification means creating opportunities for consumers to experience the brand and then share that experience.
- Lead: Social media can be used most proactively to lead consumers toward long-term behavioral changes.
What does it mean?
The article has some great case examples: Online menswear company Bonobos, for example, provided an incentive for it's Twitter followers by unlocking a discount code after it's messages we're resent a certain number of times. As a result of this effort, almost 100 consumers bought products from the site for the first time. The campaign delivered a 1,200 percent return on investment in just 24 hours.
However, the article doesn't say anything new about social media. Yes, the worlds biggest companies are using it for multiple benefits and, yes, ROI justification is difficult. The articles biggest payoffs result from getting senior managers to re-evaluate the consumer purchasing journey (and hopefully other outdated marketing constructs like positioning) and from pointing out that the real challenge is no longer recognizing the value of social media but from establishing internal capabilities to manage it effectively:
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Posted in Publishing and Printing Post Date 01/03/2015