return on investment Archives by Mark Murnahan

Social Media Emphasizes “Pay Now, Play Later” Mentality

Have you ever heard the term “Pay now, play later”? Sure, it probably sounds familiar, right? It means that you pay your dues, and then, cash in your rewards later. Just ask a successful business person about this, or ask a parent. Most parents try to instill this mentality in their kids with something like “Do your chores, and then collect your allowance.”

This old school work ethic is a popular way that success is taught, even at the lowest levels of education, but we have a new school, now. We have a school that teaches success in overtly misleading ways.

It is astonishing how many people approach me with their marketing concerns and have this all backward, so I decided to share some thoughts with you. Not just thoughts, but experience … earned experience. I see it a lot more in small companies, but no size of company is immune, and we can witness this in Wall Street news stories every day. It is the needle that makes economic bubbles of all sizes burst.

Is Your Company a Job, a Career, or a Slush Fund?

Let’s have a glimpse at reality. You are probably not wealthy. Oh, you may even be “rich”, but I am a numbers guy, and I’m betting that you didn’t just send your butler, Charles, to bring you another chilled bottle of Dom Peringnon and a dish of beluga caviar.

The fact that you have read this far should perhaps tell us both that you have some serious moments of introspection, trying to figure out why all of the purchasing public does not understand the things you see so clearly. Your stuff is the best on the market, but yet, Charles is still just bringing you another Bud Light and some pretzels.

What in the heck is wrong with this picture? Well, here’s a tip: Charles isn’t messing it up … you are!

Yes, I know How Easy it Can Be

I am amazed and amused by how often I see business leaders rip off their own future to have some of that fun right now. They are playing now, and paying later. It is a lazy formula for disaster, but very popular.

I’m not going to claim that I am innocent. I have wasted more money than some small countries, so I know how easy it can be to rob yourself. I am trying to warn you and encourage you, so I hope you take this seriously.

People who treat their company this way are often paying quite dearly for it, with “opportunity cost“. It is worth being conscious of this, whether you are that business leader, or just a random employee behind the scenes. Either way, it can significantly screw up your future to ignore this behavior in a company.

Let’s Think About Opportunity Cost

Opportunity cost is the cost of all the missed opportunities that companies endure, and the examples are abundant. In simple terms, just try to add up the lost potential for referral business for every customer that goes elsewhere. Then, imagine the loss of market share over time, as their referred business sends referrals to the competition … and so on.

I see a lot of people damn near stroke out and die right in front of me when I tell them how much money they should logically be investing in their marketing. It really scares the heck out of a lot of people. Why does it scare them? Probably because, based on their limited experience, they imagine a marketing budget as risk capitol, rather than understand it as the most mathematically and scientifically sound thing they can do for their company. Many people are fantastic at their job, but if you throw them into marketing, they get ripped to pieces. They already saw failure, and they don’t need another financial bloodbath like that!

In case you missed that link I offered up a moment ago, let me tell you what Wikipedia says about opportunity cost. If you think about it, this should be what really scares companies. Brain-up for a bit … here you go:

Opportunity cost is the cost of any activity measured in terms of the best alternative forgone. It is the sacrifice related to the second best choice available to someone who has picked among several mutually exclusive choices. It is a key concept in economics. (more about opportunity cost)

When you look at it this way, it really sounds expensive to ignore the best possible alternatives, right? You bet it is! It is money that is flowing right on by and floating somebody else’s yacht while Charles gets your canoe ready for you.

How Does Social Media Add Emphasis?

Social media marketing is so frightening to some businesses that they are afraid to invest in it. Others are taking great advantage of the medium. If you look at the vast difference in potential opportunity cost between the two options, you can see how it emphasizes the loss or gain at both ends of the spectrum.

I want to be fair here, and give you an upside and a downside look at this. There is an amazing assortment of people to meet, interact with, and socialize with in the realm of social media. There are a lot of creative ways to gather market data and promote products and services using social media, as well. It can lead a company to great opportunities of all sorts. It can land you a great new customer, employee, or even a wife, three kids, and a corporation.

Social media is also very misunderstood by many, and from a marketing standpoint, a lot of people would like to imagine it as “free marketing”. Even just today, I was introduced to somebody, and I couldn’t make this up if I had just dosed myself like an under-aged hooker in a war zone … an exact quote was “The beauty of Mark is that he is the best and he’s free!”

Are you kidding me? I don’t even begin to market a company without a bare minimum … and I mean an “I owe you big time for saving my life from that charging grizzly bear” retainer fee of $5,000. It is usually a boot full of bear piss and swollen underpants full of “oh crap” more than that.

Now, although I would argue that she may have meant “free”, in the sense that I will not take money from a company unless I am confident that we can work well together and that I can provide them a huge return on investment … I’ll give her that. If she meant that somebody can get a lot of value by sucking up some of my experience like drinking free grape soda through a garden hose, that’s cool by me. She means well, and she knows that I do, too!

The cost of business is frightening and often frustrating, but only until you understand that a business is an investment. It requires tough decisions, and a good investment and reinvestment strategy. Making money takes money, and continuing to miss opportunities by seeking a cheap solution is like trying to dig your way out of a hole.

Social Media Can Destroy a Company

There, I said it … social media can destroy a company. It may not hit all the major news outlets, but I would put a good bet that it has helped more than a few into an earlier bankruptcy, or a complete failure.

It sounds crazy, right? This amazing saving grace we call the Internet could actually do harm to a company? It is very true, and it really happens. It is often a last refuge of absurd hope that setting up social media profiles will help a company out of trouble, or that this magnificent Internet can absolve a company from making good business decisions.

When I see people with starry eyes about the easy money online, it really brings back days in the early 2000’s when I was marketing for an Internet services company. It sounds a lot easier than it really was. I was marketing wholesale services to Internet access providers and web hosting companies. In the instance of my most satisfying online success story, I frequently had to lift the CEO by the ankles and shake him for every coin in his pockets to get the investment money needed to ensure his success.

A few years into the project, he could actually make better decisions about the corporation. He eventually even set his sails toward a young retirement, and after many years of paying heavily, he started playing (like a rock star). He paid himself handsomely. The corporation allocated $250,000 per year to fund his race team, $50,000 per month for “other miscellaneous business expenses”, and set him up pretty nicely. When he decided to buy a new home and asked the banker and accountant if he was spending more than he should, they literally said “If you want to buy every house on both sides the street, we will be happy to finance it for you.”

So, surely with an income in the top fraction of a percent of money earners in USA, and worldwide, that is a reasonably sensible time to stop investing in your company and soak in some significant leisure. A leader must eventually enjoy the lion’s share of the rewards someday, after all.

Oh, but there is still an “Unless Clause”, which explains that unless you are zombie-stupid, or high on arrogance, you must keep investing it well.

Damn it like mad, but the worst scenario still happened to my client. Corporate suppliers started laying off, killing services, and slaughtering his customers. He ended up losing millions in corporate equity, going back to working hard to earn a living, and teaching people like you to invest well in your company … even until the point when it nearly breaks you.

If you wonder how important it is to invest wisely today, to see a good future tomorrow, just ask that CEO about it. He has built many companies into huge successes. Best of all … well, aside from the fact that he is absolutely not free, you can reach him right here.

If you want to know how much it really takes to be successful, or how much it can hurt to stop looking ahead, you need to read the book “Living in the Storm“. If you were paying any attention at all, you will recognize the author. 😉

Photo Credit:
Playing in the Fountain by Tim Schapker via Flickr

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Social Media ROI, Marketing Cost, and the Willingly Confused

Social Media Sends Mixed Signals

Many people have a very confused view of social media, and I can understand why. If you just look at all the ways social media is used, there should be little wonder how people confuse the issues. Some of the most bewildering concerns I notice surrounding social media are the return on investment (ROI) and the cost of social media marketing.

Millions of the world’s businesses understand by now that an investment in social media is vital to their success. Tragically, many of the same businesses are generally clueless about how and why they spend money with social media, and how to optimize their spending for the best results.

These same confused companies are further complicated by misguided notions that social media is limited to, or primarily intended only for personal socializing. They are the companies who question why a business would use Twitter, because that is where people announce what they had for lunch, LinkedIn is just for job-hunters, and Facebook is where old high school friends swap stories. That is social networking, and networking is important, but it is only one facet of social media. If you confuse this, and think that social networking is the basis for social media marketing, you will waste a huge amount of energy trying to sell to your friends, and others who already know you.

Believing that social media is just for personal socializing is a costly absurdity. It is the kind of absurdity that some companies will only discover after competitors have stolen away enough market share to demand attention.

Because of a lot of confusion, some people will say that the return on investment (ROI) of social media marketing is difficult or impossible to accurately calculate. I don’t think that is the case at all. If you have the right variables, calculating the ROI of social media becomes just another mathematical equation. The trouble is that so many people neglect or overlook the measurable data that really counts.

Social Media ROI Causes for Confusion

A first step to calculating the ROI of a social media campaign is to have a clearly defined campaign. That means having a strategy in place, and not just a list of tactics. It means producing a plan with a set of measurable outcomes. It requires creating and collecting customer modeling data, and using that data to reach your target audience.

Read the Social Media Signals

I have read and participated in a lot of conflicting discussions and possible answers about social media ROI, and most of it is very inaccurate or misleading. Many people will intentionally leave it open for a lot of confusion. After all, if people are confused, it is a lot easier to charge them money for things that are of little or no benefit. Calculating the ROI of social media is actually very basic, but that’s not what the failed real estate agent turned instant marketer wants you to believe. If they can convince you to just wait a little longer to see measurable results, they get paid more. Because of ignorance and greed, the debate of return on investment may never end.

In order to try and bring a little more clarity, let’s address two huge variables.

Social Media Branding vs. Increased Sales

Two very popular considerations for growing a business using social media are branding and increased sales. The two should work well together, but let’s face it, a brand can be really popular and still have a bigger drain hole than spigot. Even the most brilliant branding does not always make the sales hose filling your bucket as fast and powerful as the money drain leaving your bucket. There has to be a balance in order for the efforts to be sustainable and valuable to the company.

I find it very common for companies to lean too far in one direction or the other in their goals and attempts for successfully reaching their market. Confusing the value and cost of branding with the value and cost of increased sales is often when measuring social media ROI becomes completely muddled. Producing a balanced strategy is simply not as intuitive as most companies expect.

Building your brand name is extremely important. It builds recognition, trust, and sets your tone among the many other competing brands. It does not always have a proportionate result in sales. If you doubt it, look at it like this: You have probably encountered many great brands via social media, while it still didn’t bring you closer to buying from them.

In many instances, building your brand recognition will seem like it takes on a life of its own. When it gets to a certain point, it will grow and change, even without your input. People will talk about you more, and they will pass along your virtues by way of social media. They share your brand on Facebook, tweet about your brand, and they will become an influence to your brand (if you are paying attention).

Now, what about building those social-media-induced sales? All of the touchy-feely great branding and kind words about you can still lack a good reason to buy from you. There are a lot of companies I really like, but I am simply not their target audience. When I know somebody who can benefit from those brands, I pass them along. The brand reaches their target through me, and others like me, who become their connectors to their ideal target audience.

This is a fantastic outcome, but let’s face it, it is not always as efficient or as easy to come by as you may wish. It takes a lot of effort, and a lot of brilliance to produce a sustainable and self-propagating level of branding. It is a highly effective strategy for long-term growth, but it is also a very ambitious and frightening marketing endeavor in the beginning. Thus, a need for a balance between short-term and long-term marketing strategy.

Social Media Marketing is Branding, Advertising, and Much More!

I believe that some of the worst points of confusion in social media marketing come back to what marketing is, or is not. Both branding (long-term) and advertising (short-term and long-term) are extremely valuable when they are done well, but they require very different measurements to accurately calculate their respective ROI.

Which Way is the Right Way?

Companies often skip steps in their marketing, and then wonder why it is not measurable. This is especially common in smaller companies, because it is nobody’s full-time job to understand, monitor, and measure the company’s successes in this area. Instead, a lot of companies will try and “wing it” by assigning marketing tasks as an add-on to other job descriptions.

This is most profound as it applies to social media, but often because the people actually writing the checks have never had somebody explain the value and potential of social media from a marketing perspective. So they often just pin a badge of “Marketing Expert” on an unsuspecting employee who seems to have some aptitude (has a Facebook account).

When you decide how to set your prices for something, it is marketing. When you perform a market feasibility study, it is marketing. When you accumulate customer modeling data and use that information to better understand what people want and need from your company, it is marketing. When you set up a new Facebook or Twitter account and cross your fingers and hope for amazing business results, that is not marketing. That is dreaming. Dreaming is not measurable, and only seldom is it profitable.

Aside From Being Social, Why Should People Buy From You?

Without an expressed reason for people to become your customer, efforts will generally fall into the category of branding. This includes when they are right there on your blog, where you want them to be. As an example, I use my blogs and social networks for reaching out to be helpful, and that emphasizes my branding. When I say “I take coffee and cigarettes and turn them into better SEO and social media marketing.” … that is my brand. All of that helpfulness and broad recognition in my industry is great. It leads to many opportunities, but it is not what actually makes the sale.

On the other hand, when I say “Call me to find out how I can help you to grow your business with a measurable return on investment” … that is advertising, and that is also marketing, but it is not branding. It is how I earn a living, and it is what improves my social media ROI. The branding is just what makes more people comfortable to call, and confident when they write me the check.

As you can imagine, when it comes to spreading a word far and wide, branding statements and being useful to others will often reach further and faster. This is because they are generally non-threatening to anybody. While, although this information is good food for thought and useful to many, I have already diminished much of its social media reach by making an advertorial statement (above).

Regardless how useful what I wrote here is, many people will be far less likely to share it with others. Part of that is due to cynicism, and part of it is due to competition. It takes a lot of branding to make up for and repair cynicism and people’s disinterest and distrust toward advertorials, even within a useful context. This is why I say that a balance is very important.

If you do not understand and differentiate the value measurements of branding and the value measurements of other areas of your marketing, calculating your return on investment will always be a bit cloudy and confusing.

Am I wrong? Go ahead and tell me why and we will hash it out until one of us agrees. 😉

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Photo Credits:
Confused Traffic Signal by caesararum via Flickr
Confusing Signals by Luis Argerich via Flickr
Confusing Signage by Tara Hunt via Flickr

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Improve SEO Return on Investment (ROI) With Simple Math

I share a lot of information about marketing topics and SEO (search engine optimization), but I realize that many people still wonder if SEO is real or just make believe. I have a pretty good idea of why this is the case, and I will share that with you. It is usually due to a history of low return on investment (ROI) for their SEO efforts, or a fear of low ROI for future SEO efforts. This pretty well covers it in basic terms.

Let’s face it, if you knew that you could hand a dollar to the search engine optimizer and they would hand you three dollars back, you would go to great lengths to get your hands on more dollars … to hand over to the SEO. So, what in this world would ever hold you back from that? I will venture an experienced guess. It is mostly a concern of whether you can actually see a return on investment, right? You want to know there is profit in the future, before you spend money on something you may or may not fully understand.

I am going to give you some simple math to help you understand and improve ROI of SEO in your business. I will also provide tools to help you measure your market potential. I hope that you will pay attention and use this to your benefit.

A big step to achieving this good math I speak of is to use mathematical logic in your marketing and stop fussing about low budgets, drained bank accounts, or anything else outside of these more important numbers of how to grow your profit. You see, this math will be lost on deaf ears unless you can overcome your own obstacles surrounding effective marketing. If it is mathematically sound, and a better answer for your business, it is your job to do what it takes to achieve better results.

The first thing to understand will be the potential value of SEO to your business, and then realize that SEO is extremely measurable. Thus it carries a very low risk when it is done well, and done completely.

How Much Potential Business is There For You Online?

If you are not yet aware of your market potential, we must get past this part. Do you have something worth marketing? I wrote an article on this not so long ago titled “Things You Cannot Sell Online“, but the list is pretty small. My wife even sells wedding cakes online … and lots of them! She does not take the orders online, but because of her online presence, she is busy enough to turn away customers every day.

If you are not clear on how much business is available to you, try using a tool like SpyFu, WordTracker, or Google’s keyword tool to find out how many people are searching for what you offer. Once you have some idea of the potential, which is likely more than you would expect, and even more than you will discover in just a few minutes of effort, it is time to turn it into an increase in your business.

Turning Market Potential Into Real SEO Numbers

Using basic figures, let’s consider this: If your average customer is worth an extra $50 to your business and you know that one in every 1,000 exposures to your business will bring you a new customer, you can see how 100,000 exposures to your business will be worth $5,000. This is easy so far, right?

Now, what if you could relatively easily raise some of these numbers? Which will you raise first? Maybe a better marketing message could reduce that one in 1,000 exposures to one in 700 that becomes a customer. That same number of visitors would be worth over $7,100.

What if there was an even easier way to improve your ROI? What if you had better market segmentation and a more targeted audience searching for exactly what you offer? Then, it may mean you earn a customer’s business once in every 500, 250 or even fewer exposures. That could add up pretty big.

Now, let’s consider increasing volume. What if you could realistically multiply your traffic just by moving up one or two positions in search results? Do you think that is impossible, improbable, or just doesn’t happen to people like you? Well, let me comfort you a bit by saying that it is clearly definable in the math, and it is quite achievable, too. Somebody will be there at the top of every search, and it is not just by luck.

It is true that where you are listed in search engine results for any given user’s search will have a huge impact on your reach and your ROI. Just how much does your search engine position relate to exposure to your brand? Allow me to explain it with math.

Using Simple Math to Improve SEO ROI

Let’s consider some very reliable numbers to help you increase your SEO return on investment. These are not sketchy make-believe numbers. These are numbers which are widely accepted and observed across the industry.

First, second, and third positions returned for a search receive over 50 percent of users’ clicks.
First page search positions receive over 90 percent of users’ clicks.

Now think about this: It means that if you are in the top three search results, you can expect that over half of the people visiting a website when performing the particular search will land on your website. On the other hand, if you are on the second page, you can expect a website visit from only a minuscule number of people searching for the given term. The way the math works out, if you are number seven and there are 10,000 monthly clicks to websites from searches for a given phrase, you can expect 2-3 percent of the search users to visit your website on average. That means 200-300 visitors for that search phrase each month, whereas the top of the list can expect over 5,000 by being just six spots above you. Now try plugging that math into the examples I gave earlier about value per customer, reaching a better audience, and the potential profit.

It really is true that you can have many times the number of people looking at your website and checking out your offerings, simply by moving your search engine rank upward. Sometimes, it is just a small move that keeps you away from success, but do you know which terms you are almost successful with? I hope this is some pretty serious thought for you, because you may actually be on the edge of success, but you do not know it or know what to do with it.

If you are concerned about the ROI of search engine optimization, the first place to look should be whether you are almost there already, but only doing it part-way and ending up somewhere down the list. If you budget and plan for top 20 ranking instead of top three ranking, you will often waste money and risk wanting to slash your wrists sometime down the road. On the other hand, if you plan and budget for top three ranking, you will shoot coffee from your nose while laughing on the morning you walk into your office and see all the new business coming in.

Reducing the Competition Can Raise Your ROI

Another place to look for better SEO ROI is in the pieces your competition left behind. If you are only focused on highly competitive keyword phrases but only making it to the second or third page of search engine results, you are likely thumbing your nose at a lot of money. Two reliable solutions are to do more of what it takes to reach the top, and also refocus some of your effort toward lateral keywords which are more achievable and can be snatched up by the thousands. Yes, by the thousands!

For example, searches for terms like “lateral keywords“, “SEO meta tags“, or “how to sell SEO” (which, by the way, has a lot to do with being able to do it well) will show my articles in the top of search engine results. Although these items receive a lower volume of searches than other keyword phrases, they are valuable because there are thousands of phrases like these where users find my websites … and your websites, if you choose to embrace your lateral keywords.

Less competitive lateral search terms are often very specific to the users’ search, which means they are more precisely getting what they want. It is a winning solution which can often dramatically increase the ROI of SEO. Oh, and I want to repeat that there are thousands of these potential search terms just ready for you to sweep in and rank at the top.

ROI Requires Investment

Yes, return on investment requires investment. Are you surprised?

I see it every day how a potential client will flinch at the cost of good SEO. In fact, depending on how serious they are about increasing their business, I am lucky that some of them don’t stroke out and lie dead before me. I would really hate to administer CPR to somebody before the check is written, but I have come close a few times. So to minimize the risk, I try to have some good numbers to explain the process and benefits of SEO done well.

If you do not have an investment, you surely cannot expect a return on investment (ROI). This is pretty simple to understand. I realize how scary an investment can be. It is especially scary when it is something that you do not fully understand. I hope this has given you some thought on how you approach your search engine optimization efforts and how to increase the ROI with some very basic math.

Now after all this math, can you believe there are actually trained and experienced SEO for hire who can do all this for you and minimize your loss of ROI? It is a crazy thought for some, but you want to increase your SEO ROI, and I am sure you will try to use this information wisely.

Here are two more articles you may appreciate that discuss marketing cost:

Please be sure to add your comments.

*Photo Credit to Acid Wash Photography via Flickr

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