How B2B Uses Social Media: Which Sites Are Most Effective, and for What?

We asked B2B firms what social media sites were most effective, and what they used them for. The results could be helpful as a guide for similar companies as they develop their social media programs.

LinkedIn, Facebook, Twitter, blogs and YouTube were, as you might expect, rated highest. However, the degree to which each was rated as effective, and how it is being used, varied significantly with company size and across the industry groups surveyed. Concerning other sites, Wikipedia showed some value as a brand and awareness tool, but Reddit, Digg, Foursquare, StumbleUpon, and others seem to be having little impact in B2B.

Overall, B2B companies have broadened their use of social media when compared to results from our survey last spring. Their #1 use for social media continues to be for brand and awareness, i.e., one-way, outward communication. But B2B firms are finding social media to be increasingly effective for listening/gaining insight, generating leads, creating preference, and building customer satisfaction and loyalty.

The survey showed social site use patterns to vary with company size. As a group, firms less than $100M in annual revenue rated LinkedIn to be the most effective social site, especially as a tool for listening/insight and as a lead generator. Blogs were rated next most effective by this group and rated highest in effectiveness for customer satisfaction and loyalty. Twitter and Facebook follow closely. YouTube was rated to be effective, especially for awareness building, but scored significantly lower than the others.

Large firms exhibited a very different profile. Twitter received the highest scores and was rated as most effective for brand awareness, listening to customers and the market, and customer satisfaction/loyalty. Facebook, LinkedIn, and YouTube formed a second tier. YouTube was rated much higher in effectiveness by large firms than by small firms.

The responses were also analyzed by industry and business type, including computer H/W, S/W, biotech, telecom, other manufacturing, services, agency, consultants, and other. While much of the variance in scores correlated with company size, there were some patterns of difference in the use and effectiveness ratings across these groups.

For example, agencies and consultants rated LinkedIn as the most effective site by a wide margin, followed by blogs, with Twitter and Facebook significantly lower.

For corporate or client side respondents, small firms tended to rank Facebook higher and LinkedIn and Twitter lower. As firm size increased, ratings for LinkedIn and blogs dropped, and scores for Twitter and Facebook increased. Firms with more than $1B in sales rated Twitter and Facebook about the same, and much higher than other sites.

Implication: Your social media strategy should be developed based upon the specific needs of your company and market. However, the basic patterns found in this study, even simply using company size, offer a guide for where and how to expend your social media efforts for the highest effectiveness. If you have questions or for more detail, please feel free to comment. And check in every 3-6 months, as social media is changing faster than the annual planning cycle typical of B2B companies.

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How do you justify your social media programs (less than 10% point to leads or sales)?

Are you under pressure to justify your social media programs? Not yet? Then you are most likely at a small company, where management accepts the need for social media programs (for now). But this freedom is only felt at 16% of large firms (greater than $100M in sales), where these programs are under increasing scrutiny.

The chart shows results from a recent survey of 140 B2B companies on how they justify their social media programs. The largest group seems to be given free rein. But for the rest, most seem to use social media for branding and awareness.

An interesting justification is the alternative cost method, used by nearly a quarter of respondents. Cisco, for example, has used social media for major product launches, comparing the cost to that of traditional product launches (see September 19, 2010 entry in this blog). Other typical comparisons include the alternative cost of public relations or advertising for similar measures of exposure or awareness.

Only about 7% use lead generation as a way to justify their programs. Fewer, about 5%, track leads and use an attribution method such as a percent of sales resulting from these leads. And only 2% track sales related to contacts and leads and calculate a return on investment from social media programs.

Interestingly, smaller firms are more likely to track leads and sales when compared to large firms, and respondents from large firms are more likely to report that they are under increasing pressure to justify their programs. Ultimately, the strongest support for your social media programs will result from being able to show, as directly as possible, that these programs have a positive impact on sales.

84% of B2B firms say impact of social media programs is minimal; small firms more successful than large ones

Results from a B2B survey* this past Fall show that most social media programs are having minimal business impact. 82% of respondents rated social media impact as small or minimal. Interestingly, smaller firms seem to be having more success than larger firms, and software firms seem to be having more success than other market segments. Why?

The data seem to point to one factor: the degree to which the programs are effective at generating leads. Larger firms are using social media to get the news out, build awareness and develop their brands. Smaller firms, and software firms, seem more focused on generating leads. And it appears to be working for them.

66% of firms who indicated that their social media programs were having a ”significant” or “major” impact reported annual sales of less than $50M. And the one area where they showed the most significant advantage, compared to larger firms, was in generating leads.

The survey also shows that the social media programs at the larger firms are under increasing pressure to justify resources in order to expand. This was an issue for 27% of firms larger than $1B, but only 8% of firms less than $100M. For software firms and firms of less than $50M, only about 5% were getting greater scrutiny. Their focus on generating leads is producing a tangible impact, and resulting in an overall positive perception that social media programs are important to the business and should be expanded.

*140 companies responded to a survey sent to the Northern California Business Marketing Association email list which was completed in October 2010. 85% of responding firms have an active social media program.

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Is B2B serious about social media when 68% of firms have only one full time person?

The social media space seems to change monthly, but B2B staffing commitments remain minimal. Last Spring, in a survey of mostly high-tech, Silicon Valley companies, we found that 70% of respondents were staffing their social media programs with one or less than one full-time equivalent person. Now, in a survey of 140 B2B firms completed in October in conjunction with the Northern California Business Marketing Association, we find that that there has not yet been a significant change: 68% have one or less than one FTE dedicated to social media.

OK, so the economy has been fairly flat, but social media is reported to be growing 50% or more in 2010. Social media is people-intensive. It can’t be automated, you need humans to blog, tweet, interact and respond to others online. So where is the hiring?

Here is a great list of social media stats. These stats show social media in hyper-growth. They tell a compelling story about social media for business. But they also show B2B lagging in adoption. The blog explains that B2B executives do not buy in to social media as much as do B2C executives. Nearly half of B2B companies see social media as irrelevant to their businesses.

Yet the respondents to this survey include computer hardware and software, networking, telecommunications, manufacturing,and services, among others. Social media would seem very relevant to these firms and in fact 83% have active programs. So where is the hiring? Here are some possible explanations:

Hiring may simply lag behind social media growth and/or may not growth as quickly (i.e., there may not be a 1:1 relationship between social media use and hiring).

There is 2% change since the spring survey. This would indicate a 4% growth on an annual rate, if the surveys were accurate to this level of detail (which they are not)

Perhaps hiring is taking place at the companies that already have larger teams, and so is not showing up this statistic.

Or, perhaps bottom line results have not been identified adequately for the 68% who have not expanded their staffing beyond one person for social media. The business case will communicate to B2B decision makers. And we’ll know it is compelling when these companies start committing additional staff for their programs.

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A Strategic Model to Align Social Media Programs With Business Objectives

In order for your social media programs to grow and have greater impact in B2B, you will have to compete for attention and resources (http://bit.ly/d2tlJ9). But how do you build a strong case that executives will find compelling? This article provides a model to do just that by offering strategies to align social media programs with business objectives and in terms that are relevant to decision-makers.

The model is a simple, situational construct based upon company revenue growth and profitability relative to the industry average. The four quadrants of the model relate to the following company situations: Market Leader, Low Growth, Low Profit, and Crisis. We will discuss how basic company objectives are affected in each quadrant and the associated opportunity for social media programs.

Of course, companies can benefit from both higher growth and higher profitability. But depending upon their situation, a company may be focused more on one or the other, which leads to a different set of strategies and objectives.

When a company is focused on revenue, it usually tries to grow faster than the industry average, thereby increasing its market share. Companies in the right half of the model are growing faster than the market and are increasing share.

Profitability is the amount of profit per dollar of revenue expressed as a percentage. Companies trying to increase profitability tend to focus on reducing costs, increasing efficiency and return on investment (ROI). Companies in the top half of the model are more profitable than average.

A MARKET LEADER

A company with high revenue growth and high profitability is in an enviable position. It is likely a market leader, gaining market share and earning more on each dollar invested than competitors. It is able to invest in its business and if it is a public company, its stock probably trades at a premium. Suggested strategies for presenting social media programs include:


Vision and leadership. A market leader is at the front of the pack, an innovator in at least some areas of the business. It has funds to invest, is forward-looking and wants to retain leadership. Show how social media offers an opportunity to redefine the business, separate the company from competitors and place it in the vanguard of an industry-changing trend.

Vital infrastructure for the future. Now is the time to invest in systems to integrate social media programs with your company’s standard business processes. This could include integration with marketing and sales force automation, CRM, order entry, and other systems. Begin coordinated cross-functional planning for social media applications across the enterprise, including internal collaboration, R&D, customer service, and executive communications.

Risk avoidance, crisis management. When things are going well, executives want to protect a good thing. Brand value can be destroyed–consider Toyota or Tiger Woods–or potential disaster avoided–as with Comcast or Dominos–in a few hours. In case of emergency due to natural or man-made disaster, social media communications can offer speed and reach when other systems fail. Explore value through scenario planning or case studies like those mentioned here .

A company that is a market leader is in the best position to consider investing in the tools, training, staff, and outside support needed to be tuned in real time to its market, develop processes, and build cross-functional response teams.

LOW PROFIT

This situation is characterized by higher growth but lower profitability, relative to the industry. This company has been focused on revenue growth and has, in effect, been buying market share at the expense of profitability. However, attention will eventually turn to the bottom line, and when it does, social media programs will be attractive if they decrease costs or increase efficiency. Here are strategies to employ:


Marketing cost per dollar of revenue. Collaboration is important when a company is trying to become more efficient. Unfortunately, when budgets are under pressure the internal environment can become competitive. The good news is that by adjusting the marketing mix with lower cost online and social media programs, the overall sales and marketing expense is reduced. The lower cost per lead and per dollar of sales makes the company financially stronger.

Compare the cost of social media with traditional methods. For example, consider the cost per exposure of social media with traditional advertising, the cost of finding and communicating and monitoring influencers with traditional public relations, virtual interactive events with in-person events. It is important to note that social media does not replace these other valuable marketing programs, but adjusting the marketing mix to include more social media can increase effectiveness and decrease overall cost. Your company may not have a system to attribute revenue to a specific social media program, but total marketing costs are tracked and the goal is to reduce this relative to total revenue.

Project ROI. If you cannot determine ROI for your social media programs in general, you may be able to develop ROI for a specific project or proposal. For example, Cisco found that a major project launch relying heavily on social media had 90x the reach at 1/6 the cost when compared to a traditional launch. An ROI can be derived through comparative cost analysis–the savings in traditional methods over the proposed investment in social media for example–to show how the program will help toward the goal of greater profitability.

Decreased sales cycle, increased turns. This approach should appeal to both the head of Sales and the CFO. Social media offers another opportunity to engage in a highly credible venue at a very low cost (usually no impact to the Sales budget). Valuable information available from the customer can help Sales be more informed about the customer’s situation and needs, resulting in a more efficient and effective customer interaction. Propose pilot programs and evaluate the impact on the sales cycle.

LOW GROWTH

Companies in this portion of the model are profitable but growing slower than the market. They may be in a niche with limited market potential. Or they may have leading but mature offerings that are no longer keeping up with market growth rates. A company in this situation is likely to be interested in revenue growth.

Increase sales in existing markets: Adding social media programs offers another avenue to generate demand and engage customers leading to sales. Social media can result in greater reach, and can be quicker to deploy, than other forms of communication. Increased leads, customer touches and interaction help generate additional sales.

Enter new market segments. Social media may be able to reach new areas of the market more quickly and affordably than other sales and marketing methods.

Early in the market planning process, social media is a valuable supplement to other market research and planning activities. Learn about trends, identify and follow influencers, and help to understand customer concerns. Asking questions via social media and being involved in conversations provides ongoing market connection and intelligence, and will help executive decision-making. Consider the impact of taking a question from the board room to social sites and returning in just a few days with input from influencers, customers and members of the general market.

Brand building can begin immediately. With an approved plan and resources, you can begin to engage customers, drive web traffic, support other programs, generate leads.

Invest in social marketing to increase market share. Some companies with high profitability may temporarily increase marketing and selling costs per dollar of revenue in order to increase market share. This is easier to justify if their marketing and selling costs as a percent of revenue are lower than industry average. Starting a social media program is low cost, and can begin to reach audiences more quickly than traditional methods. Since incremental costs are low, a marketing mix that includes social media will provide additional efficiencies and result in an overall cost per lead that is lower.

CRISIS

A company in this quadrant of the model, characterized by low revenue growth and low profitability, is in a difficult position which is not sustainable for long. It is likely under pressure to take severe action, such as restructuring, change in management, strategic refocus of its products or markets, mergers or acquisition. Social media can be an extremely valuable part of a plan to achieve success in any of these directions. During significant changes in company direction, understanding sentiment of key constituencies and responsive communicating are critical and social media should be considered with public relations, customer service, and investor relations as partners.

HOW TO USE THIS MODEL

The purpose of this model is to provide a tool to help shift the discussion about social media program success from tweets, posts, sentiment and influence ranking to revenue, costs, risk and competitive advantage—terms that are relevant to executives making investment decisions. Identify your company’s location in the model compared to the industry and key competitors. Then consider the strategies provided as a starting point and use the model as a platform for discussion and to develop alternatives.

The model applies in general and over the long term. However, there are nuances within each quadrant, and there can be exceptions to the model when considering the short term and due to unique circumstances that may face a specific company. Therefore, it is crucial to understand your company’s objectives and the perspectives of your manager, CFO or CEO.

I hope the ideas presented here help you to develop your social media program plans, stimulate a new approach or spark new thinking about how social media can benefit your organization. Please do not hesitate to provide feedback or to contact me relative to your company situation, this model, or other comments you may have.

GLGottheil Sept 10, 2010

ROI Calculations Not Possible for Social Media? Phooey.

Lately, I am seeing too many articles from social media gurus about how really difficult it is to measure ROI for social media. The implication is that these programs are building awareness and customer relationships, which, as in the MasterCard commercial, are priceless. Success measures are tautologically developed specifically for social media (number of retweets, for example) as though this will somehow excuse these programs from financial return provings. Phooey.

CFOs are not going to buy it. Over the long term, social media programs will fall under the same financial decision-making that govern essentially all other aspects of business (exceptions include actions based upon law or regulation). Let’s face it; social media is getting a bye in the ROI discussion thus far because the real, measureable impact on cost or revenue in B2B for most companies is hardly a blip.

A recent survey of about 40 high tech companies showed that 70% of them spend less than 1% of their marketing budget on social media (source). From an investment point of view, when considered in a company ROI calculation, this is less than the round-off error. The impact on the revenue is also difficult to determine, as less than 10% reported that they are even tracking social media through to sales (source).

Of course it is important to set objectives for social media programs and measure progress. Some measurements such as increased share of voice do not easily translate to financial impact. But others, such as cost per lead, do. Have a look at the Brasstackthinking blog for discussion and examples of objectives that demonstrate value or impact of social media programs and those that are useful in the ROI discussion.

What to do?

Understand your company’s financial priorities. While companies are always trying to increase revenue and decrease costs, their emphasis and specific objectives vary considerably depending on company strategy and current market conditions. Your first step is to understand your company’s current top financial objectives. Have a conversation with your manager. Test your understanding with your CMO or CFO. If your company is public, listen to the latest quarterly earnings conference call which can typically be found in the investor section of your website. Your CFO will respond better if you can translate social media metrics jargon into the terms of your company’s current financial objectives.

Align your metrics and justification to the top financial objectives. For example, let us assume that your company is focused on increasing top line revenue by increasing sales. In this case, relevant metrics could include increased qualified leads, leads from new market segments, or sales resulting from marketing leads. Also, consider time comparisons as suggested by Olivier Blanchard in Basics of Social Media ROI, showing sales before and after social marketing programs. This could be compelling with even a small segment of your customer base. Perhaps a new market segment being addressed through social media. Or customers of a certain product that benefited from social media promotion compared to the average. Perhaps customers segmented by behavior, such as satisfaction rating, or frequency visiting your website. These examples emphasize increased or new business as a result of the social media programs, and we will discuss other examples in more detail later.

On the other hand, let us assume that your company is more interested in profitability, and is taking steps to either cut costs or increase efficiency. In this case, you could show how social media programs help achieve marketing objectives for less. For example, presentations from LaSandra Brill and Petra Neiger of Cisco show how using social media for the ASR1000 router series launch achieved 90x the reach at 1/6 the cost when compared to traditional launches. This highlights the cost-effectiveness of social media. I will elaborate on opportunities to use comparative cost savings and discuss collaboration (versus competition) within Marketing in a later post.

I hope these two brief but contrasting illustrations help show how financial objectives can differ, and how the specifics of your ROI discussion will need to fit your company situation. There are many possible scenarios. But, armed with an understanding of your company’s financial priorities, you can tailor the design of your metrics and align your program justifications and language accordingly.

Next steps. In order to continue growing, social media programs will ultimately need to demonstrate value in financial terms. Next, we will discuss strategies for financial justification of social media, review specific examples, and consider the perspectives of CFO, CMO, and Sales executives. Meanwhile, here is a classic post on Mashable: How to Measure Social Media ROI

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