The proliferation and growth of social media has been phenomenal and has created a seismic shift in how people communicate and act. In New Zealand alone, Facebook alone has achieved 80% market penetration of individuals.
We now spend more time on social media than we do watching TV. We use it not only to stay in touch with people, but as a means of information, entertainment and, perhaps most importantly to business, as a way to find out about and research products to buy.
Unsurprisingly, businesses have followed people into social media to take advantage of this behavioural change. Social media is the fastest growing part of the marketing mix with expectations it will make up 20% of spend by 2020.undefined
While marketing budgets have shifted with human behaviour towards social media, organisations are yet to establish an approach to measuring ROI. According to the recently released US CMO Survey:
- Only a quarter (24.7%) of CMOs felt they were able to measure the impact of social media on their business quantitatively.
- 4 in 10 were unable to show any impact at all, via any method of assessment.
To understand the impact social media has on business growth, we undertook what we believe to be the largest ROI study in social media ever.
Utilising a dataset that combined daily social media data and daily sales information for more than 2,500 businesses over a period of 3 years (1 Jan ’16- 29 Aug ’18) – 25 million data points in total – we set out to understand ROI in social media.
The approach utilised regression modelling and was based on industry sector – to reflect differing buying cycles and behaviour and was able to derive a very statistically significant relationship.
- Social media drives sales. Across all industry models, social media contributed to an uplift in sales.
- Results vary considerably. While on average there was an uplift in revenue, some activity had no uplift while other activity had considerable success.
- Reach and frequency is only a starting point. While presence and activity in social media is important, just putting content out and investing in impressions will not see success maximised.
- Engagement drives returns. The stronger and deeper the engagement, the stronger the relationship with revenue uplift. While it’s great to get your post ‘liked’, content that generates positive sentiment and is shared enjoys far greater ROI.
- Cultural relevance drives engagement. Having analysed over 30,000 posts both manually and through machine learning, we have classified activity into different types of content. Results and success vary considerably based on the different classifications of content. Activity that connects the brand with what is going on in the person's world in broader culture terms has significantly higher revenue uplifts and ROI.
We have long established the link between social media activity and brand outcomes, and we are very excited to see the link established to end sales.
The key outcomes of the model open up a number of areas for enhancements that are likely to result in significant improvements to how business operate their social media marketing and their ROI.
The focus must be on driving engagement with people at a deep level. A focus on volume of posts and reach is the starting point. Our activity must then focus on connecting with people at a level that will encourage them to engage. Essentially, we need to create relevance.