Does social media marketing work? Is it worth the investment? These questions are often top-of-mind for business owners who don’t yet use it. It can seem like a significant amount of time and money to put into something with an uncertain return. In fact, one of my latest conversations with a CEO of a small software company was exactly this – “What is the Return on Investment (ROI) if I invest in social media marketing?”
To answer this question, we took an in-depth look at how social media marketing affects the bottom-line for smaller business-to-business companies (revenue ranging from $2M to $50M). We analyzed it using sales forecasting methods with which they are already familiar.
In B-to-B companies, especially in the technology space, sales cycles tend to be longer – sometimes on the order of six to twelve months. Over that time, there are numerous customer touchpoints which help transition a potential customer from a lead to an opportunity and, ultimately, to a win (see figure 1). To determine your pipeline, and the ROI of any promotional campaign (be it direct mail, advertising, or other), you assign confidence levels as you move customers through the process.
Let’s say a customer is worth, on average, $20,000 ($10,000 sales plus another $10,000 for ongoing support). At each touchpoint, you assign a percentage based on your confidence level. For instance, with your first call you may have a 5% confidence that this will eventually close as a win, but at the quote stage it may be as high as 90%.
There are numerous other touchpoints within each stage which can elevate these percentages. For example, when trying to convert the lead to an opportunity you often avail yourself of marketing tools such as datasheets, white papers, third-party research, websites, webinars, case studies, and customer testimonials. Each of these touchpoints can impart a favorable impression, increasing the odds of a win. Placing a customer testimonial in the hands of a lead usually has more impact than a data sheet, so you would place a higher level of confidence on the lead after that has occurred. It’s the same with product demos.
The more times you can engage with them, the higher your odds are in closing the deal. Studies have shown that up to 90% of sales are made between the fourth and twelfth contact.
You’re probably familiar with the sales lead funnel where you first build awareness and interest, then engagement, action, and advocacy. It parallels the customer journey, as shown in figure 2.
No matter how many potential customers you start taking on this journey, many fall off along the way. That’s why it’s recommended to aim for a 5:1 ratio, filling the top with at least five times more than what you hope to capture. Opportunities to increase the pipeline through organic lead acquisition, such as followers recommending you to their friends, is one of the unique benefits provided through social media marketing.
In a recent blog , “Key Social Media Metrics Defined”, the writer did a great job of illustrating how this looks. One thing I really liked about it was how it not only used traditional terms such as prospects and customers, but also social media specific terms such as friends, fans, and followers. This can help you to quickly visualize how they fall into the mix.
Where Social Media Fits In
The above pictograph also gives you an idea of expected confidence levels as you move prospects through the funnel. Once you’ve led them to the engagement phase, you have about a 50-60% close rate and once you’ve taken them through to the point of action, you have at least a 90% confidence level. Something important to note is that friends/fans/followers have higher confidence levels than the general public/strangers. And if you can convince them to become a follower to your website, blog, video content, on-line newsletter or service, the confidence level also increases. Statistics show that 60-70% of customers who purchase today are already following that supplier on social media.
It’s important to remember that B-to-B sales are very much relationship based, more than likely due to the longer time it takes to close the sale. They often stem from leads having known your business somehow, whether you’ve sold to them previously or they trust you to get the job done because you came through before. Also, remember 90% of sales are made between the 4th and 12th contact. These interactions benefit from social media because:
- Some platforms, i.e. LinkedIn, are places where you keep in contact with colleagues anyway
- Social media offers multiple touch points to help build and maintain relationships
- The ease with which someone can forward your information to another is unparalleled
- You increase the number of opportunities for engagement through ads, posts, replies, forwards, etc.
In Summary – How Social Media Improves Your Close Rate
As I’ve discussed, being able to move a prospect further along the customer journey improves confidence levels and increases your chances of a win. The more customers you can move along that journey, the more wins you’ll get. There are two things that social media marketing can really do to help improve your odds:
- It pulls more people into the funnel through its extensive reach as well as ability to organically expand
- It provides more opportunities for touchpoints, leading to continuous engagement
Social media is incredibly effective because it has the potential to reach tens of thousands of customers inexpensively and to uncover several hundred who might really be good potential leads that you might not even have thought of targeting. So, if you invest in one or two people to blog, post, and monitor interactions on Facebook, LinkedIn, YouTube and Twitter and those posts are viewed by people numbering in the thousands, you’ve just bumped up that 5:1 ratio by magnitudes. That’s a pretty good ROI.