“Social media provides 3:1 return on investment”. Or does it?

I was intrigued by this headline on the Marketing Magazine website, as I'm keen to get data on the ROI (return on investment) effect of social media. The article was based on a study done by the Internet Advertising Bureau (IAB) on three FMCG (fast moving consumer goods) brands. 

So, does the study really show that social media delivers £3 for every £1 invested?

Well, not really.

The IAB study

The research looked at the social media activity of Heinz, Kettle and Twinings over an eight-week period. It compared responses from consumers exposed to social media, and those that weren't. The key findings were as follows:

– Four out of five consumers would be more inclined to buy a brand more often in the future after being exposed to its social media presence

– 83% of consumers exposed to social media said they would trial a brand’s product

– there was a c. 20% uplift in "sentiment" when exposed to the brands’ social media presence

The IAB's Kristin Brewe commented, "Social media is the only channel where it’s possible for brands and consumers to have meaningful two-way conversations, making the strength of connections that much stronger."

So, let's have a look at these findings.

Cutting through the hype

Problem 1: No sales data

First, and most importantly, none of this data proves a 3:1 ROI, as far as I can see. This is a massive over-claim. The research looked what consumers claimed they would do. Whereas to prove ROI you would need to look at actual sales data. 

Problem 2: focus on frequency, not penetration

Even the question asked about purchase intention was flawed, as it asked about purchase frequency ("4 out of 5 would be more inclined to buy more often"). However, as covered before here, market share depends not on frequency, which is pretty similar across brands, but rather on penetration.

Furthermore, our brandgym research last year showed that 80%+ of people liking a brand on Facebook were already buying a brand before they liked it. So, social media is connecting mainly with people already buying the brand, not driving penetration of new users

Problem 3: limited reach

Let's assume for a second that some of the people exposed to social media would buy the brand more. However, this positive effect will likely have a limited impact owing to the very limited reach of social media for the brands in question. Looking at the Facebook likes of the three brands in the study shows they have between 130,000 (Twinings and Kettle) and 240,000 followers (Heinz Beanz). This means a reach of between 0.25% and 0.5% of the UK adult population. 

Problem 4: most of us don't want to talk to a tea bag

The quote from the IAB is another example of misunderstanding what most people want from social media, especially when it comes to everyday consumer goods brands. Ms. Brewe said social media helps create meaningful 2-way conversartions. However, our brandgym research showed that while 32% of marketing directors thought this is what people want from social media, only 5% of consumers agreed. 

And a look at the actual Facebook data for the brand studied shows that 95%+ of people don't, thank god, want to talk to tea bags, converse with crips, or blab to a baked bean. This is shown by the low levels of people actually interacting with the Facebook pages of the three brands, based on the numbers "talking about this":

In conclusion, the IAB study seems to be another example of social media hype and over-claim. Thumbs up for trying to get some data, and comparing users and non-users of social media, and for doing it on everday consumer goods brands. But thumbs down for making outrageous ROI claims based on purchase intention, not sales data, and for again over stating the interest in 2-way conversations with brands.