8. Marketing Investments on the Rise for Social Business Initiatives
Many times social media teams are forced to roam the halls of corporate America with a tin cup asking for a budget to support social media programs. Either the money has dried up to fund existing programs, a company needs to invest internally in social technologies, or a company needs to hire an agency or community manager to build an external presence in social media.
This scenario usually arises because an organization has not fully evolved into a collaborative social business. A company that has truly embraced social media will do more than just say it does. It will not only transform the culture, break down silos, and build collaborative teams, but it will also add social media programs and funding as a line item to existing marketing budgets.
The good news is that this shift is beginning to happen.
In the last months of 2010, research firms began polling executives and industry leaders to find out what their real plans are for social media programs—they asked about how they’ll spend their marketing dollars. The research suggests that the majority of companies are embracing social media, based on their upcoming marketing budgets.
A 2010 report produced by Econsultancy and global digital marketing provider ExactTarget looked in detail at how organizations are allocating their offline and online marketing budgets. Data for the “Marketing Budgets 2010: Effectiveness, Measurement and Allocation Report” was gathered from 1,000 companies in the United States and the United Kingdom between December 2009 and January 2010. The findings show the following:
• 46 percent of companies plan to increase their overall marketing budget for 2010.
• 70 percent of companies plan to increase their budgets for off-site social media programs within networks such as Facebook and Twitter.
Meltwater Group also found that companies are trending toward funding social media efforts. The group’s annual report, “2010 Future of Content,” focused on research and online monitoring and was conducted in October 2010 through telephone interviews with 450 organizations around the world. Consider Meltwater’s findings:
• 40 percent of respondents expect their marketing budgets to go up in 2011, with an average increase of 1.4% forecast.
• In the last 12 months, marketing budgets are most likely to have increased for social media (by 35%), email marketing (by 34%), and online advertising (by 34%).
Additional data from email marketing firm StongMail and Zoomerang reveals an optimistic outlook for marketing investment in social media. They published a report titled “2011 Marketing Trends Survey” that examined the trends and attitudes of 925 business leaders regarding their planned marketing budgets, priorities, and challenges for 2011. Half of the organizations plan to increase marketing budgets, and another 43 percent plan to continue funding at the same level. Additionally, email and social media marketing remain the top targets for increased spend. The survey found the following:
• 93 percent of respondents plan to increase or maintain their marketing spending in 2011.
• 57 percent of businesses plan to increase their marketing budgets for social media in 2011.
Alterian, a social media monitoring and analysis firm, also recently found that companies intend to allocate more of their marketing budgets to social media programs. In late 2010, Alterian conducted its Eighth Annual Survey, “How Engaged Is Your Brand? 2011,” of nearly 1,500 marketers, agencies, marketing services providers (MSPs), and systems integrators (SIs). The survey found these results:
• 57 percent of respondents anticipate an increase in overall marketing spending.
• 75 percent of companies expect that the largest increase in marketing funds will be for social and digital channels.
Social media is top of mind when it comes to not only usage, but also spending, according to research firm eMarketer. A worldwide survey of marketers found that social media ranked third (at 38 percent) among areas marketers planned to target with their online marketing budget in 2011, with search marketing (at 51 percent) and web site optimization (at 47 percent) coming in first and second, respectively.
Finally, the human factor will account for nearly 60 percent of budgets for social media marketing initiatives in 2011, as the MarketingSherpa’s “2010 Social Media Marketing Benchmark Report” found. This includes staff salaries for strategy and blogging, content development, and social media monitoring. Another 20 percent of that budget will go outside the organization to hire agencies, consultants, and external social technology vendors.
This multitude of data clearly indicates that marketing investments in social media are becoming top of mind for marketers and business leaders across the United States and abroad in 2011 and moving into 2012. However, companies are still struggling to determine budget needs for social media initiatives. This is mainly because company leadership doesn’t understand the value of what social media can do for their organizations. If leaders do understand the value, they’re not communicating this throughout the organization through budget planning and forecasting.
While many companies are still trying to figure out social media, some are requiring their marketing and communication teams to demonstrate the business value of using social media before making any financial commitments to support ongoing program and initiatives.
Demonstrating the Business Value of Social Media to Acquire Budget
Business value can mean just about anything. Its meaning depends on the culture of an organization, the industry or vertical, and company leadership. When marketing teams can demonstrate some level of business value from social media, budget increases will surely follow. Along with this rise in budgets, however, will come a rise in expectations from company leadership to produce measurable results.
In fact, almost three out of four CMOs expect to attach revenue assumptions to social media in 2011, even if they hadn’t in previous years, according to a 2010 report from Bazaarvoice and the CMO Club. In “CMOs Want Measurable Results from Social Media,” 64 percent of CMOs also said they plan to invest more in social media in the next year. This will surely add more pressure to marketing managers to create social media programs that demonstrate a calculated Return on Investment (ROI).
Despite these expectations, business value doesn’t always have to translate into revenue and it shouldn’t have to. For many business-to-business (B2B) companies, this is nearly impossible.
Social media results can demonstrate value to the business in a variety of ways; and it’s not always measured in terms of dollars earned. Positive publicity and sentiment, collaboration with customers and partners, and increased reach with potential new customers can also demonstrate value to the business.
For example, enterprise application software vendor SAP has embraced and promoted the value of social media and community building for its business. Through the entire business life cycle, from building collaborative software to selling services and solutions to supporting its customers after sales, SAP recognizes a range of results from its social media efforts.
SAP’s online community, the SAP Community Network (SCN; see www.sdn.sap.com/irj/scn/index) fulfills many key objectives that ultimately drive business value for SAP. A close examination of the community reveals that it represents a variety of job functions and roles, including developers, engineers, IT and data center professionals, analysts, financial consultants, purchase decision makers, and even end users of SAP products. SAP experts, partners, industry opinion leaders, employees, and customers are collaborating within the community to increase the return on customers’ SAP investments.
Mark Yolton, Senior Vice President of the SAP Community Network, wrote in a blog post that “well over 2 million members—with 1.5 million visiting monthly and 100,000 contributing thoughtful solutions and insights—are connecting, collaborating, and sharing for mutual benefit.” The SAP Community Network launched more than eight years ago and delivers a wide range of benefits. The community is built on four pillars of business value:
• Social innovation
• Social intelligence
• Social commerce
• Social insight
As Yolton explains in his blog, the SCN is where SAP product managers, engineers, and business leaders can collaborate with customers. They are crowdsourcing new, innovative ideas from the insights of the community. One example is the SAP Idea Place. Similar to Dell’s IdeaStorm, the Idea Place helps users to innovate, using a crowdsourcing tool hosted by SAP that enables customers and partners give input on SAP products at all phases of development, from design to testing to updates. SAP product managers get direct, real-time, customer-driven feedback on specific projects; input on requested features and functionality in current products; and, in some cases, ideas for entirely new products.
Business intelligence in general is key to making data-driven decisions. Intelligence acquired from the community will not only drive decision making, but also shape future products offerings. IT and research and development (R&D) organizations are using this actionable intelligence to equip their teams to develop precise business cases for technology solutions, provide the best approaches to solve technical challenges, and create best practices in business operations.
This is true of the SAP community. Today the SCN has 6,000 active bloggers, most of which are not even SAP employees, but customers and partners. These bloggers are sharing their concerns, best practices, technology challenges, and implementation ideas with the broader community. This real-time intelligence is valuable for SAP in innovating and improving its product offerings which demonstrates serious business value for EMC executives.
Time is money. In today’s real-time business environment, organizations need to evaluate technology solutions and make timely decisions. Community members who participate in the SCN are learning about each other’s implementations of SAP technologies and partner products. The time needed to evaluate technology solutions then dramatically decreases. As with most professional communities, a high degree of trust exists between its members. When sourcing for a technology solution provider, customers have a reliable source—other SAP customers—to help them assess their technology challenges and even make purchase decisions. This level of trust is imperative when sourcing technology solutions. The SAP EcoHub provides SAP customers with this option.
Within the EcoHub, customers can discover new technology solutions, get real-time feedback from their peers within the community, access online demos and customer reviews, and even initiate the purchase of SAP solutions directly within that area of the community.
Intelligence becomes insight when used to evolve business operations and change behavior. Within the SCN, SAP is actively observing and engaging with community members. The company is listening to community discussions and feedback and extracting intelligence from these discussions. By using this intelligence, SAP can better change a product or service, as well as equip sales teams with actionable information that can help them best meet the needs of customers and even markets. Additionally, the right quantitative and qualitative analysis offers deep insight into customer pain points, technology challenges, and new opportunities that equip engineers with information on which features and functionality customers will demand and buy in the future. This analysis also turns up customer support issues that evolve from community discussions.
Evidence that the SAP Community Network demonstrates business value becomes visible when customers are vocal about their personal experiences. Phillip Parkinson, integration developer at Standard Bank, says this about SCN:
[W]ith the SAP Community Network, we’re able to capitalize on the content and lessons learned to significantly shorten our learning curve and development life cycles.
This SAP example can be used as a guide for companies that are trying to determine the business value that social media can bring to their organizations. With minimal investment, enterprise companies can create external communities for customers and partners to engage and share key learning and technology challenges with each other.
For the community to successfully show business value, however, company leaders must be committed to empowering their employees to engage in community discussions. More importantly, companies need to be committed to apply the collective intelligence gathered from these discussions to their products offerings and business operations.
SAP is doing just that. Its community engagement efforts are helping drive innovation, intelligence gathering, sales leads, and insights into business operations and sales development life cycles. It’s safe to assume that, over the last eight years, budget investments have increased and are now part of ongoing financial discussions internally.
Given recent research and SAP’s experience with the SCN, it comes as no surprise that marketing budgets are beginning to increase for social media investments. However, it’s important to understand how businesses are prioritizing their budgets and exactly which job functions these investments are being allocated to.
How Organizations Are Prioritizing Social Media Budgets
After budgets are acquired for social media, many companies and business leaders aren’t quite sure where to make the investment. Some are focusing on investments in internal technologies—for example, community applications and CRM. Others are using those dollars to hire agencies and putting more focus on external engagement efforts.
In 2010, Jeremiah Owyang and Charlene Li, partners at Altimeter Group, released a report titled “How Corporations Should Prioritize Social Business Budgets.” The data was gathered from more than 140 global social media marketers in September and October 2010. One of the key findings was that corporate spending on social media initiatives averaged $833,000 in 2010. A closer examination of the data reveals the following:
• Companies with revenue earnings less than $250 million spent $229,000 on social media.
• Companies with revenue earnings between $250 million and $1 billion spent $408,000 on social media.
• Companies with revenue earnings between $1 billion and $10 billion spent $568,000 on social media.
• Companies with revenue earnings of more than $10 billion spent about $2 million on social media.
It may seem natural to assume that the more an organization earns in revenue, the more it would naturally spend on marketing-related activities. This is not the case, though. Social media investments specifically correlate to program maturity levels, according to Altimeter.
In the survey, social strategists were asked to classify their social media programs by maturity level: novice, intermediate, and advanced. The data found that 52 percent were classified as intermediate, 23 percent were advanced, and 25 percent were novice.
One of the key findings in the report is that overall social media budgets increase as the organization matures and evolves into a social business. This makes perfect sense when examining this insight holistically. To be effective, the social business evolution has to become an integral part of an organization’s DNA—its culture. This means that employees at every level must incorporate social behaviors into how they work every day, regardless of their job function. The end result is technology investments in internal communities and collaboration platforms, as well as investment in staff hired to deploy the applications, community managers and strategists, and staff that externally engages with the social customer.
Altimeter’s data also revealed that adoption of social media initiatives, coupled with spending, will certainly increase in the coming years. Much of the investment falls into three categories: internal soft costs, customer-facing initiatives, and technology investments.
Internal soft costs include hiring community managers, strategists, analysts, and managers who will mainly be responsible for deploying and overseeing social media initiatives. This also includes costs related to training, organizational development, and research and development. Customer-facing initiatives include marketing dollars allocated to paid media programs within social media channels, investments in influencer programs, and contracts with external digital or PR agencies. Technology investments include both internal and external applications used to deploy and manage social media programs. (Chapter 2, “Surveying the Technology Supermarket,” discusses several of these technology vendors and categorizes them by internal communities/collaboration, social CRM, social listening, and social relationship management applications.)
Altimeter concludes the report with seven social business adoption initiatives that companies should consider when making financial investments:
• Organizations will ramp up hiring efforts to manage social media initiatives, but investment in training and organizational development will be low.
• Marketing teams will invest heavily in paid media within social media networks.
• Companies that fall into the advanced category will spend more on hiring agencies to help with strategy, deployment, and execution of social media programs.
• Most organizations will make technology investments in social listening software.
• Companies will continue to invest in community platforms and leverage the networks for customer support and marketing efforts.
• Companies that fall into the advanced category will integrate social media platforms into the corporate website.
• To scale, mature programs will invest in social media relationship-management systems and social CRM applications.
The key takeaways from this study by Altimeter are that every company is different and manages its budgets differently, depending on the size of the organization, its culture, its maturity level, and its company leadership. However, the trends listed previously are good indicators that companies are slowly moving through the social business adoption life-cycle and will naturally invest more dollars into social business initiatives.
What’s important to remember is that change needs to start internally to have the most impact externally. This means that organizations that are in the novice or advanced stages in the social business adoption life cycle should focus their investments on getting their internal houses in order first. This means that budget focus should be not only on hiring people to manage social media, but also on training existing employees in how to engage with the social customers, ways to use collaboration and communications applications, social etiquette, and so on. Internal community deployment should also be a key focus when it comes time for budget planning. This certainly doesn’t imply that companies should abandon all external social media programs—just that the focus should be on the foundation of a social business, the organization.
How to Determine Budgets for Social Media
Organizations allocate budgets based on their maturity level and size. What’s not explained in the Altimeter study is why companies are not maturing in the social business adoption life cycle. Much of the “why” relates to a lack of confidence and experience; a company might not be ready for change and might not be willing to make significant investments into social business initiatives. The companies that are spending millions of dollars in paid media advertising are allocating very small percentages to social media and even smaller budgets to change management, which is a key pillar to social business transformation.
In many organizations, social media budgets are being formed out of funds already allocated to the overall marketing budget, which includes paid media, web site development, public relations, and so on. Social media marketers often have to fight tooth and nail to justify budget increases every quarter. In other cases, a bucket of money somewhere in the accounting books might be set aside for social media pilot programs. Both of these scenarios are ineffective and will not scale as a company matures.
This is why marketers and business leaders must think about the long-term opportunities social media can bring to the organization, as well as the opportunity costs of ignoring it. When faced with budget decisions, marketers must consider several questions:
• What are the company’s business and marketing goals? Will social media programs (internal and external) contribute to the goals? If not, maybe social media engagement is not the right channel.
• Will a budget be set aside for research? Without data or some level of insight, companies are taking a shot in the dark.
• What are the organization’s internal strengths and weaknesses? Are employees, customer support teams, or community managers ready and able to engage? If not, will some of the budget be set aside for hiring and training?
• What resources are available to support social media initiatives? Who will write content and moderate comments? What is the editorial plan for Facebook and Twitter? Are technical applications available to support it?
• Is there a need to hire an agency? Better yet, does the existing agency have the skill set and thought leadership to support social media initiatives? These are considerations that are important when thinking about budgets.
After answering these questions, marketers and business leaders will be better equipped to make budget decisions for social media and help determine where the funds will actually come from. In many cases, the social media budgets could be taken out of an organization other than marketing.
For example, funds might come from an IT budget to deploy a social media application with a tool such as Jive. This makes sense because a team of IT engineers and developers will likely be responsible for the deployment, management, and ongoing maintenance of the community application. The budget allocated to this may certainly be a shared expense with other organizations, depending on the company.
Externally, customer support organizations might have the budget responsibility of external support communities, community engagement, investments in social listening software, and reporting. This naturally makes sense because much of the customer support organization would be using these communities and tools to address and engage with the social customer.
In many organizations, community managers and the budgets associated with their job responsibilities will come from a product organization. It’s a best practice for community managers to have extensive knowledge about the company’s products and services. Many community managers today also were previously product managers. Not only does this product knowledge help them engage more effectively with the community and share content, but it also gives them knowledge for answering technical support questions.
In a perfect world, companies will think about budgets that can help them socialize their business operations first. But the reality is that most companies are working backward. That is, they already have budgets they are using to engage in Facebook and Twitter. They already have corporate blogs and community managers, and many of them are using paid media to drive traffic and engagement to their branded communities. These companies are displaying characteristics of a social brand. The issue today is that these same companies are realizing the internal challenges of collaboration, culture change, employee communications, executive support, and so on. They are tasked with determining budgets to address this and help them evolve to a social business.
Taking the Next Steps
As companies’ use of social media continues to explode around the world, the social media landscape will continue to see massive change. Companies are determining their strategic initiatives, which include budget investments.
Business leaders, marketers, and other decision makers need to recognize this shift early and begin planning for budget allocations in social media spending. Understanding the trends is just as important. An eMarketer study in 2010 revealed the industries that forecast the biggest budget increases in the United States. Almost 80 percent of retail and e-commerce firms will increase their social media budgets. In addition, 69 percent of publishing/media companies, 55 percent of technology hardware and software vendors, 54 percent of business and consumer services providers, 54 percent of manufacturing and packaged goods companies, 52 percent of travel companies, and 43 percent of education and healthcare organizations also expect to increase their budgets for social media. Knowledge and understanding of these trends is key to staying ahead of the competition. More important, though, is for companies to take action—and this means spending budget dollars wisely and making a commitment to adding social business initiatives to ongoing marketing budgets.
Additionally, organizations need to allocate much of their budget dollars internally to operationalize different areas of business, such as hiring, social technology investments, and customer support. A 2010 eMarketer report stated that 60 percent of social media marketing dollars next year will go toward staff salaries for activities such as blogging, developing content, and monitoring social channels. Another two-fifths will be spent on outside help from agencies, consultancies, and service providers. This area of investment is critical to the success of a social business.
When thinking about budgets, think Facebook. According to MarketingSherpa’s “2010 Social Media Marketing Benchmark Report,” social media budgets will be spent with the social network of choice: Facebook. The report examines other social networks, such as MySpace, which received $490 million in advertising spending but is predicted to decrease by 21 percent over the next year. Facebook, on the other hand, will increase by 39 percent and is being forced to expand its service offerings to give companies new opportunities to engage fans and build community. In December 2010, Mark Zuckerberg, founder of Facebook, told the world on 60 Minutes that anything a person can do online, he can do on Facebook: shopping, searching, poking, stalking, chatting, blogging, emailing, collaborating, and more. Marketers need to keep this in mind when planning for long-term social media initiatives. They should focus on Facebook as a marketing channel.
As marketers begin to think about allocating budgets, Facebook should certainly be a consideration. It’s no surprise that Facebook’s revenue for advertising added up to an astonishing $1.86 billion for 2010. In fact, in an interview with AdAge, eMarketer analyst Debra Williamson said that around 60 percent of Facebook’s 2010 ad revenue came from small to medium-size business (SMBs). In addition, $740 million of Facebook’s revenue in 2010 came from major brands, such as Procter & Gamble and Coca-Cola. Williamson also said that Facebook alone accounted for 5 percent of all online advertising spending in 2010, and she predicted that this number will rise to 8 percent in 2011.
Finally, as social media budgets increase, so will the expectations from senior management to provide some level of business value or measurable return on investment (ROI). Chapter 6, “Establishing a Measurement Philosophy,” gives insight into how organizations can calculate financial impact metrics such as ways to measure paid, earned, and owned media values; strict ROI metrics; and even cost savings in using social media for customer support.
Additionally, other ways to think about demonstrating business value can include positive publicity and sentiment, collaboration with customers and partners, innovation of business processes, products and service offerings based on community feedback, and increased reach with potential new customers.