Why Marketers that "Like" Results Must Spend With Care in Social Media

There is no denying that Facebook has changed the very nature of engagement on the web. So, it is no surprise brands are looking to Facebook as a new, potentially fruitful channel for reaching consumers- as they should. So why haven't marketers put more significant resources into Facebook advertising and fan pages? The answer is in the numbers.
Consider this: 1 million Facebook fans only generate 826 likes and 309 comments per post, according to data from social-media brand monitoring platform Simplify 360, which examined "50 Facebook fan pages with a random mix of brands from all over the world from consumer brands, to sports teams, to celebrities" (Starbucks, Lady Gaga, National Geographic, Red Bull, Mashable, etc.).

There's a big ugly spreadsheet-like chart in the post you might (or might not) want to glance at, but one blunt take on the data is that the average "response rate" to a Facebook post is .00085 and the best is .0035. To put that in perspective, the average direct mail (DM) response rate to prospects is just over .01.

As one commenter wrote,"OK. That is nice, but what about the number of 'likers' who actually buy something?"
Yeah, good point!

Consider a typical DM response of 1% that generates 10,000 orders at, say, $50 per order. If the cost of putting out 1 million direct mail pieces is $410,000 (to cite one recent real-world example I'm familiar with), that's an example of direct mail being profitable -- not by a huge margin, but definitely worth the effort. Also, these new customers have a much higher likelihood of rebuying, where the real value starts!

Which gets to why social-media marketing can seem so seductive: It's "free"! Well, not actually free from a human-resource management or planning or project-maintenance perspective, but a lot of marketers conveniently forget about all that stuff because, hey, if you're not spending money on printing and postage, that's great, right?

Sure, that's great. But back up: How many orders do Facebook posts or comments generate? Everybody keeps asking "What's the value of a Facebook fan?" and still nobody quite knows - but the Simplify360 data suggests: not much. That is, if you're willing to accept the (potentially dubious) notion that a Facebook "like" and/or a comment is a meaningful "response rate."

Even more to the point: In social media, what comes first, the chicken or the egg? By which I mean, do Facebook Fans like you because they are already spending on your brand, or because they desire to spend on your brand. If the former is true, then Facebook likes are simply representative of existing sales. This means that existing branding and marketing efforts need to be continually undertaken to drive revenue core to your survival.

And remember that businesses shed customers every day. In the real world, customers drift away, defect to competitors, etc. In the catalog business, for instance, the average re-buy rate of existing customers is about 50% -- so the pump constantly has to be reprimed just to stay even.

On Facebook, though, how many "fans" go through the trouble of un-fanning a brand they no longer care about? It might make for a nice PowerPoint slide or graphic for your annual report if you've got, say, 1 million Facebook fans for your brand -- but unless they all "fanned" you yesterday, chances are thousands of them (tens? even hundreds?) have moved on or are not truly engaged.

It's very tempting to drink the "free" social media Kool-Aid. But step away from the ledge. Sure, social media is and will continue to be a tremendous medium for brands to connect with their customers. But it takes very careful analysis before you shift spend from higher cost items that actually drive sales to wildly developing brand advocates in the hopes that they will light up their social graph on your behalf.

Michael Caccavale

Michael Caccavale

As the leader of Pluris, CEO Michael Caccavale is the innovator and forward-thinker behind the company’s marketing enablement, analytic and optimization solutions.

About this blog

At Pluris, we believe that we all can do a better, more efficient job at marketing to our most important customers. On this blog, we'll discuss how strategy, database management, offer optimization and analytics can help us all be better marketers. Sometimes, we may just talk about sports.

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