The CEO at Abraham Harrison, Mark Harrison, brought this post to my attention over the weekend over at Irfan Kamal’s blog, Digital & Social Media Strategy. This post speaks to the ongoing and continuous debate on issues around Returns on Investment (ROI) for conversational marketing. The problem is we all know it works it is just how do you prove it to the bean counters.
Two firms that do a lot of work in this arena, BzzzAgent and ChatThreads are quoted by Irfan in his blog. The research that these two organizations have performed shows that the cost of a converted sale driven by a conversational marketing campaign costs around$2 to $3 per sale. Depending on the product this is not a huge amount of money. I do not know off the top of my head how that looks in relation to other forms of marketing.
What this shows is that conversational marketing is a very viable alternative to search engine advertising – and Irfan points this out and I have to agree. However the two elements that he points out that could change this equation are issues of audience targeting and costs of scaling up a campaign.
Like any online campaign the audience you target is critical and where and how you find that audience is one of the harder elements – in addition the need to create conversations with many different audiences require knowledge and time. This is where the scaling up issue comes into play – scaling up means more conversations, a larger audience and more time. If one can keep labor costs down and if the conversations are managed efficiently and are long lasting then the ROI grows.
I believe that ultimately we are all going to get a little weary of regular in your face advertising and that the future will be grounded in social networks of information and recommendations. The value of the conversation will grow and grow in importance. We value our peers and their opinions and as we get bombarded with more and more information and advertising the need to turn to the conversation for value and information will grow.
{ 3 comments… read them below or add one }
Customer acquisition costs (i.e. cost of a converted sale) vary tremendously by industry, product and product category, so it’s tough to compare the WOM $2-3 current estimated cost.
However, it’s likely that this is very favorable: consider, e.g. , a not-unreasonable $1 CPC Adwords campaign with a pretty good 10% conversion rate once the user is on the site; that’s a $10 cost per conversion.
So, on balance, assuming you can get around the scalability, interest level & relevance issues (which are potentially big assumptions), WOM delivers sales very efficiently.
Ifran – first thanks for stopping by. Second – I agree with the three “potentially big assumptions” and I think that this is where the WOM marketing will have to grow and refine their approach. You after all don’t wanna start conversations with everyone – it takes time and energy to sustain a conversation.
But, I think that the web and blogosphere specifically gives you insights into issues of interest and relevance unlike any other medium. The issue of scalability is where it becomes really interesting and looking at different ways of operating and structuring campaigns will be where you recognize the ability to scale up and out.
Excellent post Saul.
I believe the traditional “in your face” advertising will stay strong for products and services that have broad appeal. But in today’s world of fragmented media and diverse populations and interests, the in your face won’t work for most clients.
Or at least, it won’t be worth the cost.
The greatest resistance is with the many marketing agencies and marketing decision makers within client companies that continue to view the traditional marketing methods as gospel. Send out a press release, advertise on prime time, Control the message. Give no means for recipients to expand the message.
Those days aren’t over, but those that stick to it as the major thrust of their operations will find themselves marginalized.