neil woodcock’s marketing blog

For by far the majority of brands, the unequivocal answer to this question is…NO. At least, not yet.

Results of recent campaigns, some of which are public knowledge and some of which are not, are clear. On-line advertising on social media networks, in terms of product sales, does not return revenues of any significance to large corporations, compared to traditional channels. Click rates of 0.004% were being recorded on Facebook applications, but for a CPG we know, that click rate has just been (hung, drawn &…) quartered to c0.001%. In other words, you have to target 1,000 people to get 1 response – not a sale, just a response. Assuming a 10% conversion (rates vary from 1-50% depending on the product) then you will achieve 1 sale per 10,000 targets. So to labour a point, you will achieve 100 sales per 1m targets. Plug in your own margin %s to this equation to see what it might be worth to you – normally unconvinving ROIs! Sales are especially difficult to track for consumer product companies, whose consumers normally buy through 3^rd party channels.  But results are not all about click throughs and tracked sales.

As always, the answer is more complicated than YES/NO. Placing content (e.g. copy, advertising, widgets or experiential content) where your target markets chose to congregate on-line probably makes more sense than investing in super-functionality of your website as a medium term strategy. As mechanisms for building brand equity through digital PR or consumer engagement, these mechanisms make intuitive sense and their impact can be measured, but not by ’sales’.

It would be a wise man indeed who predicts accurately how social media will evolve; for instance, 1 in 4 users of social networks are already saying that social media sites could become the main way they access certain types of content in future [Entertainment Media Research's 2008 survey (pdf)]. However, the point is this; you cannot yet justify developing and placing content on social media sites using ROI logic. But we have to be smarter than this.  Intuitively, experienced marketers know that to be able to engage with your high value consumers where they hold their conversations on-line (or wirelessly at events, in bars, in the street, in the car, through mobiles) will move a consumer from awareness of your brand, through involvement and towards participation and even advocacy. If your consumer planning team are sophisticated enough to have believable brand equity-to-sales models, then maybe you have a chance of pleasing the Finance Director with an acceptable ROI. Otherwise, stop trying to use ROI measures to justify this activity. Instead, understand your target market better than you ever have before, trust your intuition, use PR and brand equity measures and develop a more robust method of modelling brand equity and sales.