Calculating Social Media ROI for Wine
Wineries are more and more considering the extent to which they ought to really embrace "Social Media" and incorporate its use into their daily sales and marketing. I know this because no week goes by without running into a question that generally goes like this: "What's the return on investment of social media"?
This question isn't really what questioner wants to ask. What they really want to ask is this: "Will I increase revenue by utilizing Social Media."
That fact is, asking about the return on investment of utilizing social media is akin to asking this question: "Should I communicate with my customers and potential customers"?
As a publicist and media relations professional, I'm going out on a limb and saying, "YES", you should be communicating with your customers and potential customers. I offer that bit of snark in order to get to this question: "Which communication tools will most effectively deliver my message to folks I want to hear it that will result in more people trying or repeat purchasing my wine"?
When the question is asked this way, then you realize that Facebooking and Tweeting are placed in a lineup alongside things like
-Opening a tasting room
-Attending wine events
-Mailing out offer release letters
-Sending Samples to Media
-Using a Megaphone on busy street corner
All of these communication techniques, including Tweeting, Facebooking and other SM activities, will get the message out for wineries and nearly any other business I can think of. But, each must be evaluated for their expected ability to increase brand value because it is unlikely any winery or wine business has the financial means or the time to invest in them all. So how do you evaluate any given marketing tool?
This equation should help:
E = Effectiveness
C = Cost
Think of "E" (effectiveness of marketing activity) as a combination of 1) likelihood that the activity will result in a paying customer (PC) and 2) the repeatability (R) of the marketing activity. So if we put "E" into the form of an equation, we might get something like this: PC x R. Rank both PC and R on a 1-10 scale and you get this equation for (E) Effectiveness:
PC (1 to 10) X R (1 to 10)
The marketing tool that results in greatest effectiveness would receive an E SCORE of 100 (10 x 10), where the higher the value the better.
Now, think of Cost (C) in a similar way. Cost is the combination of 1) the demand on your time (Ti) to carry out the activity combined with 2) the monetary expense (Me) associated with carrying out the activity. If you put "C" into the form on an equation, we might get something like this: Ti X Me. Rank both on a 1-10 scale and you get this equation for (C) Cost:
Ti (1 to 10) x Me (1-10)
The marketing tool that that has the lowest overall cost in time and money would receive a C SCORE of 1 (1×1), where the lower the value the better.
Now, divide E by C and you get a crude, but not altogether ineffective way of measuring the the value of a given marketing tool.
Let's look at a couple of examples.
PC=1 (my view is that tweeting has only a very slight possibility of creating a paying customer)
R=8 (my view is that tweeting is HIGHLY repeatable as a marketing activity)
So, E = 8
Ti=3 (my view is that tweeting effectively does not take much time)
Me=1 (Tweeting has no monetary cost)
So, C = 3
TWEETING SCORE: 2.6
PC=7 (It's likely you will get paying customers by hiring a Telesales company)
R=2 (Repeatability is low, unless you repeat the call)
Ti=2 (you are hiring someone to make the calls. You expend little time)
Me=4 (It's commission based, so expect lower margins)
TELESALES SCORE: 1.75
MAILING OUT RELEASE LETTERS
PC=9 (assuming the list is good, you will sell wine!)
R=5 (It's repeatable, but not often)
Ti=5 (Doing a good release letter can be time consuming)
Me=2 (Assuming the release letter is via email, the cost is slight)
RELEASE LETTER SCORE = 4.5
SHOUTING WITH A MEGAPHONE ON A STREET CORNER
PC=2 (You are going to scare people, making them unlikely to buy wine)
R=7 (It's repeatable, but it may be difficult because you will likely be in jail)
Ti=8 (You really have to commit time to this activity)
Me=8 (It's gonna cost a lot to get bailed out of jail and stand trial)
SHOUTING ON A STREET CORNER SCORE: .22
(I'd go with tweeting over standing on a corner and shouting)
Now, not being a statistician, my crude equations could probably be improved upon greatly and they may be somewhat worthless. But more importantly, the key understanding ROI through this method is being able to assign an accurate value to the Effectiveness and Cost of each activity. But, the point is that there is good way of thinking about ROI and Social Media just as there is a good way to think about the ROI of ANY marketing activity. Those many people in the wine industry currently thinking about the ROI of Social Media are at the starting line and that's where you first need to be.
However, if you do your homework, evaluate what kind of assets you have and understand the real costs of each marketing activity at your disposal, you should come up with a idea of whether or not you ought to pursue that activity. If Tweeting or Facebooking are calculated to build your brand and sales in a cost effective way, then get going. If you calculate that these activities will not help you, don't let anyone tell you you are missing the boat.