The way social media is valued by businesses has been a hot topic of debate since social media leapt onto the business scene a decade ago. We’re frequently asked how it’s possible to measure the value of social media in commercial terms, and indeed whether such measurement is even possible. In recent years, these questions have developed into something of a heavyweight contest between commercial specialists and online experts. The likes of Lon Safko’s book ‘The Social Media Bible’ is a testament to the weight of discourse that has been produced on the subject.
On the one hand, there are those who believe that the success of online engagement should be gauged by the number of customers it brings in directly. In this case, it’s pretty easy to quantify the value of social media as it’s a relatively straightforward financial calculation. On the other hand, there are those who maintain that social media benefits are much harder to measure, and that benefits are to be found in establishing trust and a voice of authority with customers and peers. In our experience, the value of social media to a business varies greatly depending on the nature of the industry and the commercial strategy of the company in question. In this blog, we’ll look at some of the evidence and some of the arguments.
The value of social media for different client types and commercial strategies
The impact of social media on a brand depends on the type of business in question. It can also be influenced strongly by the company’s commercial strategy. One of our B2B clients is a large software company that provides cloud-based software solutions to major organisations. In this case, the profit available for finding a single new customer through social media can be substantial. The cost of customer acquisition, in this case, can be far greater than the cost of using Thank Social services for several years. Indeed, this company has been with us for three years and reported a single and direct customer acquisition worth millions through our social media management. In this instance, the value of social media can be pretty clearly validated and justified.
We also have clients with significantly lower customer acquisition costs. One of our B2C clients provides an app that enables consumers to gift low-value confectionary items to friends. The commercial model of the gifting service relies on acquiring customers who repeat purchase again and again – and through those purchases constitute an aggregated profit and so customer lifetime value. In terms of their acquisition model, they are a wholly different kettle of fish from our software client. The company doesn’t have a huge advertising budget and has an exit goal of being acquired – that’s why it’s just as important for them to show themselves to be a vibrant, engaging and successful consumer service. Social media strategies have been effectively implemented by Thank Social to satisfy those goals.
…turn off social media and they see a gradual drop in repeat sales
When it comes to direct repeat purchasing, it can be very difficult to measure the influence of social actions. For example, the technology required to track from the web to an app is limited and can be cumbersome for users, but we do know that the social feed for our app client keeps the service ‘front of mind’ for consumers. Social media for the gifting company needs to help with repeat purchasing, and our campaigns and strategies reflect that goal. Coarsely, turn off social media and they see a gradual drop in repeat sales and new customer acquisition. Like the software company, we’ve had the gifting company as a client for three years now. The way the two clients gauge the value of our services though is very different.
Social media and financial success – cause or correlation?
The less measurable benefits of social media to a business are not limited to those with low acquisition costs. The software company is increasingly treated as an authority in their field because of the quality of the topical content we produce on their behalf. They have won numerous awards from Microsoft as the partner of the year, for example, and our strategy has helped target and attract a relevant audience with that goal in mind. Many colleagues of that organisation make reference to knowing that company through social media, and we see this time and again with our clients reporting such benefits heard at conferences and so forth. It would seem that the company’s influence and reach through social action are at least correlated with part of their success. They command a status as a ‘thought leader’. However, it remains impossible to ever really know the extent to which this success correlates with social media activities or is, in fact, causal.
Let’s look at another case study. A B2B fine wine company we act for often receives plaudits from their US winery clients on how well they present their wine. We see strong engagement from both the supplied restaurants and major stores. The fine wine company has also been with Thank Social for many years and is now recognised as a digital thought leader in their space. Their profits are growing, with hospitality and retail businesses now approaching them specifically because they demonstrate high online engagement from winery to final consumer. When possible, we facilitate social dialogue between restaurants and wineries stimulated through the wine company’s social channels. The value of serving as such a facilitator is impossible to measure in purely financial terms. It’s clear here that the types of behaviour associated with this social activity can be vital to the success of a brand, priceless even.
The scorecards are in…
So, who comes out on top in a ‘value of social media’ prize fight? After twelve rounds of slugging it out, we’re calling it a draw. Ultimately, the question of acquisition from social media comes down to the question of return on investment (ROI). Organic social media shouldn’t be considered as an advertising channel, and the cost of customer acquisition varies across organisations and clearly affects the capacity to gauge worth in purely financial terms. The value gained from becoming an authority in a field is often impossible to quantify, but there is a great deal of evidence to suggest such value can be vital to businesses across all sectors, whether B2C, B2B, or B2B2C. It seems that the value of social media to a brand is a complex question with no single or simple answer except that there is clearly value worthy of commercial investment. Value exists in both ‘hard’ immediate returns and ‘soft’, long term benefits. The key is tailoring a social media strategy to increase the potential for both.