Social Media

The Social Media Conversion Funnel and ROI

The naysayers are everywhere proclaiming “There is no ROI in social media.” There are others proclaiming how successful and profitable social media is. So, which one is it?

The answer lies in the social media conversion funnel. When it comes to creating a funnel analysis (made popular in Web Analytics) for social marketing, there are at least two very different funnels available.

The best way to examine the two different funnels is to think of in-person social interactions. I prefer to use a dating analogy.

The first funnel is the “Instant Gratification” or “The One-Night Stand”

In this funnel, organizations expect that a tweet, a blog post, or a Facebook status update with a link in it will drive their fans and followers to click on the link and covert. They can measure click-through rates, conversation rates, and calculated URL much in the same way agency have been doing for years with direct mail/email marketing.

Unfortunately, just like going to a bar to meet people, few will get instantly lucky, and for those who do, rarely is there more engagement than a one night stand with limited lifelong customer value.

The second funnel is “The Long-term Relationship”

This funnel has a minimum of four stages all revolving around relationship building. The goals of organizations who implement this strategy are commitment relationships and being there for the long haul with their customers.

Step 1: The Cocktail Party

Just as in the physical world, this is where you meet people and establish weak connections. Perhaps you met someone at an actual party, a conference, a networking event, or online at during a TwitterChat, or followed them from a link in an article you read and so on.

You have limited reasons to trust this person with anything more than a business card and your contact points. You then take this information and add them to you contacts on LinkedIn, follow them on Twitter, friend them on Facebook, add them to a G+ circle, etc. If neither of you actively takes the relationship to next level, nothing more will happen in the conversion funnel.

Step 2: Building Trust

By adding them to your on-line social network (step 1), you can now move the relationship to the next level: building trust. This is established with communication. Each of you can see and monitor the behavior and knowledge of the other. Is he or she the person you thought they were when you first met them? Do you start trusting that person as a subject matter expert? When you do, you’re ready to take the relationship to the next step in the funnel.

Step 3: Dating

Do all first dates go well? Of course not! This is the point in the relation where you feel each other. Is there a mutual attraction or does it appear that they want a one-sided relationship? Are they going for the hard sell? When talking to them do you pay more attention to your smartphone or look up and count the holes in the ceiling tiles in your office? Typical signs of a social media first date would include a product demo or a phone conversation about service or a product offered.

If you had a successful first date, perhaps you’ll have a few more and even kick it up a notch. At this point, you’re prepared to take the relationship to a whole new level. In the business world, perhaps you’ll sign up for a free trial of their product or let them provide you with a quote on a project. If anything goes wrong, there is always an easy exit from the relationship.

Step 4: Marriage (The Long-term Relationship)

You take the plunge, you buy the product, or they become your customer. In essence, you’re both in it for the long haul (life-time customer value). And you both can ride off into the ROI calculation sunset, or can you?

Yes, you can calculate ROI, but only if you’ve captured all related costs to the four steps of this relationship. Not an easy task if it took six months, perhaps a year, perhaps two years or more before you reached step 4. It’s for this reason that many who think you can go from step 1 to 4 in a heartbeat find no ROI in social marketing.

Real Life Case Study

It was 2008 at an Internet conference that I attended a networking cocktail party. In this picture from the event ironically are three people who I met at the event and a fourth who all contributed to a positive social media ROI. Each has their own story, but here they are in a nutshell:pubcon cocktails The Social Media Conversion Funnel and ROI

Joe Morin – I met him in a conference the previous year, and he insisted that I contact PubCon and get on their speakers lists. I did, and with Joe’s help I have spoken at that event ever since the 2007 show and where I met the next three people in 2008.

Aaron Kronis – when I met Aaron, he was just an attendee. We exchanged contact details and communicated regularly via Twitter and Facebook. He’d frequently ask me about speaking and how I got started.

Eventually with the knowledge he gleaned from me (and from others), he became a conference speaker (his positive social media ROI). I received my ROI when I was programming an event and needed a speaker with his credentials. Aaron was happy to help out and spoke at the event.

Michael Martin – in 2008, Michael and I were on the same site review panel. Once again, we used social media to keep up with one another. Michael is one of the leading authorities on Android phones. By reading his blog and tweets, I learned to trust his opinion.

So, when it came time to get my new phone, I contacted Michael for his recommendation on which phone in Canada I should get. He told me to wait two months and get a specific phone that was coming to that market. I did as he suggested and have no regrets. His advice saved me lots of research, time, frustration, and possibly a wrong choice. What’s the ROI on this? I can’t put a dollar figure on it, but it’s positive.

Rob Snell – Rob and I really didn’t keep in touch much after this initial meeting beyond adding each other as friends on Facebook and chatting at other subsequent conferences we both attended, but trust was gained.

While writing my book, I was stuck for a final chapter and was wracking my brains for a solution. Right when I was about to give up, I attended an address Rob was giving (after all Rob is a nice guy and I trust the information he gives). Half way through his address, I saw the writing on the wall, his story was the final chapter.

After his presentation, I asked him if I could use his content in my book. Because he trusted me (our social connection), he took it under advisement and shortly thereafter agreed. We both obtained positive ROI from our social connection as I had my final chapter of the book (and could start selling it) and Rob received additional notoriety by being featured in a book.

So what was my ROI from speaking/attending PubCon 2008?

I didn’t’ get paid to speak nor had any expenses covered. It cost me perhaps $1,500 plus my time. Did any direct business come from it? Not really. Did I obtain knowledge while attending? Yes. Did I make connections and add them to my online social network (social media)? 100% yes. Did some of these connections eventually emerge from the social media funnel with a positive value? Yes, but the dollar value is nearly impossible to fully calculate.

There you have it, a two-step funnel and a four-step funnel. The first has an easy way to calculate ROI, and the other comes with a nearly impossible way to calculate true ROI. Before you discount social media because of ROI, make sure which funnel fits with your business strategy and don’t use the calculations for a two-step funnel with a four-step funnel because the results will be disastrous.

 The Social Media Conversion Funnel and ROI
Alan is public speaker, corporate trainer (SEO, social media marketing & digital analytics), award winning author, and an online instructor for the University of San Francisco's on-line Internet marketing and analytics programs and the head of their Advanced Analytics course. He also co-hosts of the weekly Twitter Chat #SocialChatBe sure to follow him on Twitter: @aknecht
 The Social Media Conversion Funnel and ROI
 The Social Media Conversion Funnel and ROI

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8 thoughts on “The Social Media Conversion Funnel and ROI

  1. Great analogy Allan! It’s true that many clients want to “jump into bed” on the first date; a trait that is not desired in either the business world or the dating. It’s in creating true value and building trust over time that a prospect turns into a long-term customer (or “Relationship” as you describe in this article).

  2. In Social Media… direct selling or promotion is a total NO.. Take your brand to promising heights,by rapport building and engaging people by trust building… your audience should find your updates and discussions authentic and credible….. only the can you maximize conversions & ROI via social media… value of which is more than MONEY because it only and only means success in business.

  3. Yet another article using that term naysayer as if it was some sort of affliction or disorder. For every article, written by knowledgeable, experienced people and certainly not ‘naysayers’, there is another diametric opposite article. Who is right is not cut and dried, but perhaps you should read this – http://marketingland.com/why-social-media-roi-cant-be-measured-and-why-thats-ok-25279 – if more social media evangelists presented their cases like this, then SM especially in hotels and travel would be more widely ‘acceptable’ I’d say. likewise Max Starkov, makes the excellent point that as social media in travel is not a distribution channel but an engagement/reputation management channel, it should me measured using metrics that are relevant to engagement/reputation &c, not distribution, where of course ROI is the prevalent metric.

    1. Yes perhaps the word “naysayer” might be a bit strong, but it does make a point. Too many people are quick to discount social marketing because they don’t see an immediate positive impact on ROI and in many cases just a huge cost.

      When organizations understand the concept of developing a relationship as part of the ROI equation, then they can make the educated decision if Social Marketing is right for them or not.

      1. And many hotels (‘m in travel), especially independent, are being hounded by bank managers and financiers for immediate ROI, and social media doesn’t cut it, you’re right. Also many hotels I represent (223 in all), via our full service consultancy, have tried all sorts of SM initiatives and used agencies and consultants, and are still trying to understand where/whether there’s any real value – these hotels are certainly not ‘naysayers’

  4. Thanks for sharing this Alan!!

    Yes, I always wonder how to explain the RoI of Social Media. Most of the times, the clients just talk about the likes & subscriber, etc and get annoyed when I tell them to engage with the community.

    Your insights should help!!

  5. Alan,

    Thank you for the great info. This is something I felt like i knew but needed it to be put into a structure to help me understand it better. I will definitely use this for my approach when doing my social media marketing.

    See you in class!

  6. Presented in a way that is really easy to understand. Thank you for the great post. Actually the whole point of social media marketing is interaction through a medium that people are familiar with and building long-term relationship through trust. It is also be a better form of marketing as the message is spread through word of the mouth from a trusted source. In any case, ROI is not the end of everything as we all know that ROI also does not always give the true insight.