frankly speaking
Acquiring New Customers from Facebook
Five years ago Facebook started out as a place where college students could anonymously scope out fellow students in their classes at college. Today it has developed into one of the top 10 most trafficked site on the web.
Recently, the company announced that it had over 500 million registered users. The interesting thing is this is more than just 18 year old college kids planning their next party or trying to figure out who’s going to be in their next Economics class. Everybody’s on Facebook . Walk down the street and I’d be willing to bet 7 out of 10 people you walk by have a Facebook account.
Facebook is more than just a place for people to hang out online, it’s a place to share ideas, empower likeminded people and ultimately, if your advertiser, sell products. From the very start Facebook knew that if it wanted to compete with the big boys of the internet it had to figure out a way monetize the massive amount of traffic it had on its site (it is after all a business) and it has since developed one of the premier display ad serving platforms on the web.
So if you’re an advertiser, how do you utilize Facebook to enter the conversation, gain awareness and ultimately boost sales for your product? Fortunately, Facebook has built a relatively simple self-service platform that helps even the most uninformed advertiser set up an ad on Facebook. I would even go as far to say that Facebook’s ad platform is much simpler than Google’s AdWords platform.
So why isn’t everybody jumping on the Facebook Advertising bandwagon? A couple reasons come to mind. The first problem with advertising on Facebook is the click through rate is extremely low. I’ve experienced click-through rates of close to .01%. If you’re a direct response advertiser, this is not great news. Lower click through rates mean high acquisition costs. The second problem with Facebook Advertising is trust. Because the barriers to advertise on Facebook are low, everybody who is anybody has a product they want to promote. The problem is for premium advertiser’s is to stand-out from the mud.
How do we resolve these two issues? Low click through rates is a common problem throughout online advertising. In order to overcome this, some advertisers have tried taking short cuts and frequently use images of cleavage, attractive women and the like under the guise of “chicks get clicks” in order to get people to click on their ad. While this does increase the click through rate, it frequently has zero effect on the ultimate conversion of that new customer (i.e., a person may easily click on that cleavage photo, but that doesn’t mean they will convert when they see that the advertiser is selling books).
The best way to solve the click through rate problem is the same way you would resolve it with any other form of online advertising – test, test and test some more. Change the copy of your ad frequently, change the photo of your ad, change the landing page of your ad. Use images of attractive women, but make sure it relates to your product in some way. What’s more, test whom your ad is targeted to. Facebook advertising makes targeting a group of people very simple. Want to target Females age 35-50 who are college educated, live in New York City and are in a relationship? Facebook advertising makes it easy to do this – make sure the ad you show them resonates with this targeting.
The second problem, how do advertisers gain the trust of Facebook users is a little more difficult to solve. When I’m on Facebook, I hardly ever click on an ad. Why? Because I know those advertisers are probably trying to sell me something I don’t want and I don’t need. So how to turn a Facebook user into a customer? Go for the soft sell.
Instead of driving the user to a landing page on your website, make it simple and just have them become a fan of your brand or product’s page on Facebook. Most people are more likely to buy from advertisers they’re already fans of on Facebook. By getting them to become your fan, you build their trust. When people trust you, they will buy from you.
How do you know how much to invest in Facebook advertising? To me, it’s pretty simple. Do a quick analysis of how much your Facebook fans typically spend on your brand or product. For simplicity, let’s say that the average Facebook fan spends $100 on your product or brand. This means (depending on your return on ad spend requirements) you can spend up to $100 to acquire a new fan on Facebook.
Proper Revenue Attribution in Online Marketing
Part of he problem with today’s social media ROI model is it doesn’t properly take into account how to properly attribute incremental traffic, conversion and sales. This is a microcosm of the online marketing landscape at large – many companies do not properly attribute each respective marketing channel with their due credit for driving traffic and ultimately revenue.
Why don’t companies do this? When you ask advertisers they come up with a variety of excuses ranging from simply not having enough time to do the proper analytics to limited internal resources. Commonly, most companies use what is generally referred to as the ‘last-click method’ of value attribution, that is which ever channel was the last channel that drove the customer to convert is the one that is credited for the sale? Unfortunately, this doesn’t provide the entire truth as to the true effectiveness of an advertisers online marketing efforts.
How should companies properly attribute revenue to the marketing channels? Opinions on this are a dime a dozen. I find the most effective way model of revenue attribution to be as follows:
- The last channel that touches the customer should get the most credit for the conversion. Usually, a customer is touched by 3 to 4 marketing channels before they make a purchase.
- After crediting the channel that drove the channel with the conversion with a majority of the credit, the rest of the credit should be evenly distributed across the rest of the channels that touched the customer.
Let’s walk through an example. Let’s say customer x comes through paid search and makes a purchase of $100 on your website. Further, let’s say that customer X saw a retargeting display ad, an email, and an affiliate ad before eventually converting after coming through on the paid search ad. How should this be broken out? I would suggest that $50 of the revenue be attributed to paid search, and the rest of the $50 should be divided up and evenly distributed among the email, affiliate and display channels.
Proper channel attribution is important in any online marketing campaign and will enhance the effective ROI of your overall marketing efforts.
via digital-diva
This is a good deck on assessing the ROI of social media. The thing that I think is missing is on slide 26 as it implies that in order for one to get a full understanding of ROI on a company’s social media activities, you need to take into account interaction and influence. I couldn’t disagree more.
While interaction and influence are important at the end of the day, they probably did not close the sale (though, you can rightfully argue that they helped lead to the sale, which leads to the age old problem of value attribution in the digital space).
Return on Investment for any channel in the digital space is easily measured by knowing the dollar value of sales generated for every dollar invested in advertising. It’s that simple. While I think social media is valuable and at some point in the future may be even more valuable than search (in terms of ROI/ROAS), right now it’s still under-performing for a lot for a lot of companies in terms of driving actual sales.
Out With The Old, In With The New
The other day I received the following email from Delta Airlines promoting their recent fare specials:
One thing you (and Delta) should know about me, I live in the Bay Area. The email above, is promoting flights from SFO to OAK and OAK to SFO!
Seriously, Delta, this why you suck. Find an airline who gets it by clicking here.
About
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Welcome to my blog. My name is Ben Wilkinson. I work in online marketing and advertising. I'm also a rabid Red Sox fan. This blog is dedicated to everything from sports and politics to business and pop-culture. Sit back, relax and enjoy!
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