Social customers are worth 23% less than other channels

What’s the true return on investment from social media marketing?

By Rhian Harris

A new report from US-based customer acquisition and retention platform, Custora reveals that customers gained via social media are worth 23% less than other channels.

Custora conducted research of “utm_medium” tag data in Google Analytics spanning 72 million customers from 86 U.S. retailers across 14 industries.

Key findings of the research showed:

  • Customer acquisition via email has quadrupled over the last 4 years
  • The Lifetime Value of customers acquired through Twitter is 23% lower than average

Organic search still leads as the largest channel for online customer acquisition, but as more retailers move towards paid-for models and rely on third parties to help drive visitors to their sites, email and affiliate channel growth have exploded since 2009.

online channel growth 2009-2013

Source: http://goo.gl/ANjc2 – Online channel growth 2009-2013

Online marketers using quantifiable tracking and analysis will probably already know this finding is nothing new, but with the increasing investment into social, the interesting point is in defining the ROI driven through social media compared to other channels.

Overall, based on Customer Lifetime-Value (CLV) the most desirable consumers arrive through organic searches (54% higher than average). Surprisingly, customers acquired through Twitter tend to be worth about 23% less than average – thought to be attributed to the frequency of discounts offered within tweets.

lifetime value by online channel

Lifetime value by online channel

So what does this mean?

It is believed that 62% of companies will be spending more on social media marketing in 2013, and with historical difficulty in tracking genuine quantifiable ROI driven by social media, I am particularly interested in the results of this survey, albeit only US-based.

This study raises a few interesting points for me:

  1. Companies could be assuming greater value from these social customers because of the indirect, non-trackable benefit that is less easy to quantify e.g. offline word of mouth, brand awareness, positive PR etc. In which case, CLV could actually be much more than reported.
  2. A slightly lower ROI might be acceptable for less mature marketing techniques given their nature.
  3. Companies could simply be investing without much strategy or eye on tracking ROI, but rather feel they need to secure more budget because of competitor spending. Don’t we know that happens?!

Either way, with studies like this coming to the fore (and I am sure there will be plenty more as reporting insights and our understanding becomes more sophisticated), it’ll be interesting to watch whether the investment in SMM does continue, or whether brands begin to scale back.

What do you think?

 

Source: Custora – E-Commerce Customer Acquisition Snapshot

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