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Oct 19, 2008

Lead Generation, Direct Mail, eMail, Word-of-Mouth, Buzz Marketing, Social Media Compared

Much has been written about social media, conversational marketing, buzz marketing, and shared networks. Let's compare social media to direct mail, email marketing, word-of-mouth, referral marketing, lead generation, coupons, and other traditional marketing.

Let's simplify.

What is Social Media?

Wikipedia defines social media as:
Social media are primarily Internet-based tools for sharing and discussing information among human beings. The term most often refers to activities that integrate technology, social interaction, and the construction of words, pictures, videos and audio. This interaction, and the manner in which information is presented, depends on the varied perspectives and "building" of shared meaning among communities, as people share their stories and experiences.
Huh!

Let's try English.

Social media websites enable sharing - Youtube for video; FlickR for photos; Blogger for blogs; Facebook, LinkedIn, and MySpace for friends; Digg, Stumbleupon for recommendations; Yelp for reviews; ... the list goes on with hundreds of sites.

Many support fan-bases, friend circles, or other viral marketing tools that become distribution channels for your marketing messages.

Over one billion people access the Internet daily. More time is spent on social media websites than email, search, and other Internet uses combined.

It's hot!

What Businesses Want

What's the relevancy of social media? How do we integrate social media with business?

Any business wants reach, brand recognition, and mindshare that generates more orders. If you can reach 100,000 customers, and have a recognized product or service - then, each time you reach the customer with a message, they are more likely to respond. These orders can be online or offline through retail.

Reach, recognition, and mindshare lead to results. It's simple.

Traditional Marketing

Traditionally, businesses gather addresses or email addresses and send ; or pay for flyers, coupons, or ads through publishers who have the mailing addresses. These have been high cost, high friction activities.
  • A stamp costs $0.39 and is rising. Total mailing budgets cost $2.00 plus and rising.
  • Effectiveness of direct mail is declining. Few open unsolicited mail.
eMail collection and management is high friction, high decay, and dropping in effectiveness.
  • Users are reluctant to register and give you an email address. Registration is high friction.
  • eMail addresses decay 20% per year. An unmanaged list decays to uselessness in two years.
  • Spam blockers prevent bulk mailings - most bulk email don't arrive.
  • eMail formatting is limited and complex. No flash, video, or interactive component.
  • Few people read the email - deleting without reading.
Not surprisingly, return on investment (ROI) on a direct mail campaign has dropped to insignificance.

Social Media - the Low Friction Approach

Effective use of social media replaces the list building, message sending, and mindshare maintenance functions. A blog is your media archive - with multi-media postings and an RSS subscription mechanism. Your presence at social networks like Youtube, Facebook, or LinkedIn are like magazine racks at popular cafes to reach fans, friends, and interested parties.
  • Readers discover you or your products by friending or subscribing. Compared to registration or supplying an email address - these actions reduce the friction to join to clicks - no typing, easy decisions, less commitment.
  • Lists are decentralized. Each member maintains their own current address. The connections - whether a friend or a subscription - are maintained automatically. The list stays fresh.
  • The lists scale - to millions. With addresses, the cost to mail a million is prohibitive - not scalable. With emails, blocking of bulk mail stops scalability. (ed: Obama leveraged his ad budget with social media to impact 4 million voters per month.)
Like traditional media, the likelihood that a member would see/read a social message is low. However, social media compensates with:
  • Scale. Your lists sum to millions of connections.
  • Frequency. You can publish 1, 2, ... 10 messages a day - thus increasing the chance that a fan would see your message.
  • Format. The message can be video, interactive, musical, or otherwise capture the attention of a fan.
Social Media's Impact on the ROI

The bottomline measures results relative to costs.

Although the creative costs can be the same as traditional marketing, the distribution costs is zero dollars. This means you can send more messages, test messages, and actively manage the message flow with very small investments.

Returns are measurable at each step in the sales funnel.
  • Cost per action advertising, such as Google CPC or tEarn CPV, reduces the cost to bring a suspect to your website or blog.
  • Low friction capture of prospects increase the likelihood for first stage engagement.
  • Frequency of contact builds recognition and mindshare.
  • Social referrals from existing customers among your social networks accelerate decisions by prospects to buy.
  • Online convenience leads to quicker purchases.
With lower investment and higher returns, social media improves ROI. Most importantly, the solution scales from a few customers to millions.

Conclusion

What is social media? It's an efficient replacement for direct mail marketing.

Every business needs to learn. What do you need?

22 comments:

  1. I am not in your "top 20" but probably one of the top 50 social media consultants.

    I thought I would share anonymously some details of what I make. I am based out of San Francisco/Bay Area and have 6 years+ top tier industry experience.

    For long term engagements (eg one current client likes me to work 3 to 4 days a week) I charge $250hr + expenses. I perform a social media function within a specialist niche and this client is a top tier brand/company that everyone will have heard of.

    Additionally, I work with several startups, where I charge $800 a day plus a minimum of 0.5% of the company.

    I have helped companies and I guess you might call "significant individuals"/celebrities with blog strategy but I do not write blog posts specifically (unless it's to help a client launch their blog) - mainly because the money is in strategy and exec-level consulting, not blog writing.

    I posted revenues above $400k last year, although after tax and expenses (conference trips are the biggest spend) I probably pocketed $200k. That sounds like a lot, and compared to the national wage average it is, but here in the Bay Area that doesn't go as far as other parts of America.

    It's also worth remembering that unlike an employee I have to cover my full medical insurance and deal with the uncertainty of being out of work if there is no work around. I have definitely seen a sudden drop off of interest in my services in the past few months as consulting is the first budget to go at big companies. I've actually got not new leads currently and so if my current engagements dry up then I am without income.

    My advice to anyone thinking of getting into this industry is a) be really sure you have the biz dev leads, esp in this current climate, and b) try to get up the food chain as quickly as possible as writing blog posts for $25 a pop is a hard way to make BIG money.

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  2. Consulting - The Big Money
    Social media consultants, expert practitioners with multiple years of success in the kinds of positions discussed above and in some cases in traditional marketing jobs, are the ones making the most money.

    No one we surveyed named an hourly consulting rate below $150 per hour. $300 per hour was the most common rate named. Some listed monthly rates of $2k to $4k per engagement, which we assume probably means 20 to 40 hours per month.

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  3. Any consultant who charges by the hour is an amateur in my book. By doing so the consultant is doing himself and his client a disservice.

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  4. A very informative article ...thank you

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  5. In my humble opinion social media is the new PR, not a replacement for direct marketing.

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  6. So how would you reccomend a newbie get started? My market is college students, college seniors, and recent grads

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  7. Hi Dash,

    Social media marketing is a great way to build a brand as most, if not all brands in today's digitally connected world are built not on campaigns alone, but through the interaction of the online communities in these social networking sites.

    That said, it's still not possible for anyone to define a metric that links social networking to brand equity. While your article have listed areas that could lead to ROI, the direct association to incremental brand equity is not obvious enough to convince marketeers that it's a viable medium.
    By Darren Yan Metrics Driven Digital Marketing Professional - Focusing on Mobile and Web 2.0 services in media and advertising.
    posted 7 days ago

    Thanks for the article.
    By Shannon Young Golladay Director of Public Relations at Paragon Wealth Management
    posted 3 days ago

    I have found that there are seven fundamental direct marketing concepts that go into execution excellence.

    1, Promote a compelling offer.
    2. Target your message accurately.
    3. Create relevant and arresting creative concepts.
    4. Write movitating messages.
    5. Control production costs.
    6. Test and measure your results.
    7. Analyze your results for future improvement.
    By Anne Purvis Marketing, IT, Project Management, Business Development
    posted 23 hours ago

    Thanks for the thousands who have viewed this article and left feedback.
    By Dash Chang Founder, tEarn Exitmercial Network

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  8. Wow, quite a lot of varied opinions here. As someone involved in marketing systems over the years, I've found that there is never a "Replacement" of any type of marketing technology by any other but an evolution based on specific value. Social Media is a new approach to augment other forms of marketing either as a communications vehicle or success monitoring solution (or both). But most certainly not a replacement! Marketing is a mix of activity blended by need and audience.

    In my mind, social media (or online media) has added a new dimension that increases the value of marketing concepts and traction in general.

    I would love to discuss this in more detail at anytime with anyone interested.

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  9. Agree with you Steve Dodd. Well said... The "marketing mix" continues to evolve.

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  10. Matthew KernodleNovember 11, 2008

    Dear friends and marketers...I guess I would be classified as a direct marketer - to me, nothing replaces the telephone as the most effective (and expensive) tool in the tool bag. I can access attitude, calls or contacts made or received by the audience (meaning "you're my fifth caller today" or "no one calls me and asks me questions") building a strong CRM system through specific knowledge.

    Althoughin fact all tools are great for the marketer, I cannot imagine replacing the telephone and face-to-face meeting in generating long term business relations.

    Great post!

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  11. When leaving your URL, remember that the URL includes the http:// part like http://tearn.com/

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  12. In my business, direct mail and email marketing are not on the decline. To do it right, you have to understand that the creative, the list, timing, message and offer all play an equal role. Those that are failing are doing so only because they are not managing all aspects. We've added social media into our marketing mix and continue to leverage that technology. Too early to forecast results, but I'm confident it will prove to be worth the time and effort.

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  13. Great post! The only thing I would disagree with from my personal perspective is that while it's true that traditional direct mail's ROI is insignificant, for the last seven years we have consistently become more and more effective with physical direct mail. We are spending more money per piece than we used to, no doubt. But in a B2B campaign we will typically see a 15% plus response rate. In a B2C campaign, we're seeing 3-5% response rates (depending on what we're pitching). It's expensive to do it right, so the up-front cash is always the issue. But assuming you already spend some money on direct mail, we are consistently more effective with that money than 100% of our clients were before we came along.

    This comment is certainly self-serving in one way - shamelessly so. But I hope that it offers a different perspective that direct mail doesn't have to be dead when done right. Social networking is here to stay in one form or another, but I think it's part of the mix which should also include effective direct mail.

    My two cents, from my experience.

    Kevin Lofgren
    Founder and CEO
    Farstar Inc.
    http://www.wedontplayfair.com

    ReplyDelete
  14. Four Business Opportunities for the Evolved PR Agency

    from Web Strategy by Jeremiah by jeremiah_owyang
    This post is a response to last night’s event at the Horn Group called Is Social Media Killing PR? Sam Whitmore moderated Kara Swisher (media), and Susan Etlinger (PR) and me (analyst) for a lively debate, which resulted in the crowd chiming into the issues. I don’t think the conversation evolved as far enough as I wanted to see it go, so here’s what I wanted to share.

    For years the Public Relations industry has ironically one of the worst reputations –esp since they are hired to look after the reputations of their own clients. Things only got worse as some brands got punk’d; the introduction of self-publishing tools that allowed anyone to connect to each other using social technologies, causing a shift in power. We’ve already talked to death about the risks and the changes that are happening to this industry, yet I’m hoping to elevate the viewpoint out of the gutter and focus on the larger opportunities –and risks at the industry level.

    Four Business Opportunities for the Evolved PR Agency:
    1) Enhance Existing Functions
    First of all, some things that are already in place need more focus, for example, it was discussed last night that now that influencers (press, media, bloggers, analysts, customers) can directly be reached by clients –PR professionals can be bypassed. In fact, when you look closely, everyone’s doing press, analysis and media.

    A) Be a filter for clients: There’s a tremendous amount of noise now being created, creating an opportunity for PR folks to filter, sort, and prioritize what matters. You’ll need both access and understanding of brand monitoring tools as well as the ability to see patterns in the noise.
    B) Council rather than conduit: Although strategic council has been happening for many years, now that clients and influencers can connect directly, this could result in a business shift resulting in more focus on coaching, less on pitching. Mary Trigiani suggests the same.
    C) Extend Social Strategy: Most firms don’t have a strategic response to social media across the whole firm. While the young digital natives may use these pervasive tools, they lack strategic insight, yet the immigrant executives don’t fully understand how these tools change the communication lines.

    2) Differentiate
    Two potential customers were at the event, and both lamented that they can’t tell the difference between one firm to another –they all offer similar promises and relationships. The opportunity for PR firms to be more vocal in the areas of expertise they provide are at hand. PR firms should become part of the community they serve –regardless of the client they have on the accounts receivable. Instead, be known as the expert firm in your industry, not just pitching, but also serving and helping beyond your clients needs. There’s a business opportunity here for some smart entrepreneur to create a VRM system that allows clients to recommend PR firms to other brands.

    3) Extend to the Entire Customer Lifecycle
    I alluded to this yesterday in the panel, but this is perhaps the single largest opportunity for the evolved PR firm. As we know “Public” relations involves prospects and customers, social technologies mush up the lines between when this starts and stops. As a result, PR firms how learn how to offer value to other areas of the organization beyond corporate communications can find new revenue buckets in product marketing, product management, product support, and beyond.

    4) Fix Your Own Damn Reputation
    I’ll hit this again: it’s very ironic that an industry so focused on keeping the image of their clients reputation pristine is unable to shine their own shingle. Use these social tools to tell your story –and to get your clients to tell your story –on your behalf. Although the HORN group was the only firm to take this challenge head on, the industry as a whole needs to fix this, but it can’t be insular within the PR community, but looking outside the circle of pros.

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  15. The information here made me wake up to two things.

    1st is the realization that what I offer my clients is worth more to me than it is to them.

    2nd A market for direct mail marketing is still available. The trends may continue to change, but there is still a population of U.S. citizens who DO NOT use a computer. (28%)

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  16. I guess I work in a different reality because direct marketing techniques such as direct mail work. (Read this article for 3rd party validation: http://knowledge.wharton.upenn.edu/article.cfm?articleid=1919)

    Before chasing more shiny objects such as social media, I prefer focusing on the strategic plan as well as the wants, needs, expectations, perceptions of the target audience(s).

    Then I select the appropriate mode of engaging them in a dialogue that provides both parties with value...sometimes that's sharing information and other times it's selling a product/service.

    Simple approach...that keeps working. I recommend it...as do my clients and employer.

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  17. Great article and great feedback, folks. I'm a technical writer and with a marketing bent. I've gone freelance instead of working contracts for large companies. I am rather bored with writing proceess documentation and last minute privation.
    Someone said: "Climb the ladder to the top tier as fast as possible". I agree. I'm motivated.
    Can any of you offer suggestions or advice? How about mentoring?
    I'm finishing a class on Copy Writing. I agree with learning the foundations. I want more. I work in technology. I am enhancing and extending my services to reach a broader audience.
    What I read here is fascinating. Please ... more threads like this at a minimum, but if someone wants share more on how to get into the market and build a business, send me a note or post on here?
    Many thanks.
    Nancy

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  18. After 20 years in business & the Co founder of Intecom eMarketing, I believe people respond best to genuine relationships, & most of all, winning a customer is really a matter of timing. Peoples circumstances are changing continually & by regular correspondence in one form or another you may strike it lucky at the moment of change with your offer. Also birds of a feather flock together chances are what motivates or ignites action in one will possibly register the same result from their spheres of influence. Our eMarketing application encompasses many of the points noted, email, lead generation, coupons, promotes digital mouth of mouth & can be coupled with other digital mediums - So really Im alittle bias www.intecom.co.nz
    By Barry Mckean Co Founder: InteSuite Corporation Ltd
    posted 15 hours ago

    Thought you might enjoy reading this article: http://knowledge.wharton.upenn.edu/article.cfm?articleid=1919

    The rumors of direct mails death are false.

    As Mark Wiener states "...Direct mail (email marketing included) can be very successful but if you have a poorly targeted list, poorly managed list, or a poorly designed message "nada".

    I think the greater problem is that too many "marketers" are chasing 'shiny objects' such as the latest web toys/technology rather than focusing on a strategic vision of consistently delivering unique value to the target audience(s).
    By Pat McGraw Experienced Global Marketing Executive
    posted 7 hours ago

    I read your article and I completely disagree with you. Social Media which is the "it" thing to do right now does not and cannot replace direct mail. It is a good addition to your marketing arsenal but should not replace direct mail. If anything, direct mail can help get the word out about the social media site.

    Most business owners fail at direct mail because they want to make a sale on the direct mail piece instead of using it as way help educate their prospects about them. Just because you implement social media does not mean sales.
    By Jonathan Olaso Owner, J. Marcus Ltd.
    posted 7 hours ago

    Interesting that no one has pointed out yet that the target market would play a significant role in choosing which avenues you'd take to promote your product/business as well.

    Want to tell gamers about a new video game? Hit the MUDS and gaming blogs up for advertising opportunities, make a YouTube video of a great action clip.

    Want to reach teenagers/college kids with new bling for their phone or the next super-duper texting plan? Try Facebook and Twitter to get a buzz going.

    Announcing a new wine? Hit your in-house winery mailing list with an email newsletter, do some signage at distribution points, and post to your winery blog.

    Want to push your new supplemental prescription insurance card? You're probably going to want to go with postcards and print ads, cable t.v. ads, and maybe banners on medical sites.
    By Jen Visser Reseller Marketing Manager
    posted 4 hours ago

    @Jen Visser: I agree that target marketing is important, but wanted to point out that Facebook and Twitter, for example, are not just for teens and college kids anymore. Facebook has a much larger demographic these days. And did you see the #votereport tweets on election day? They represented a diverse cross-section of the country.

    One has to be ready to adapt to a fluid market.
    By Valerie Butler Communications specialist
    posted 3 hours ago

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  19. Direct mail response declining? Worthless? Expensive? What planet are you from? A compelling offer and enough profit margin still gives far better results than, say, buying leads from online scum lead vendors... Far better than email, without the risks of SPAM charges and DNC violations. Social media? Maybe as good as the white pages, except a little younger crowd...in my opinion anyway. I would love to hear a social media mktg plan that could generate 1000 targeted leads in a week rather than a century or two. Got one?

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  20. Use a pink envelope, address it to the man of the house, initials for your return address, use a real stamp and a blue felt tip pen, then spray perfume on the envelope, any man of the house will certainly open it and you can be sure his wife will! Be different!

    Dan Auito
    www.citruscountyclassifieds.com

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  21. In the past two weeks, I have learned more information about the world and technology through social media outlets, portals, links, than I've learned in a whole year through our local newspaper. I applaud the innovative ideas of our future. - Sheryl Krieger

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  22. No, Social Media is not an efficient replacement for direct mail marketing.It has its own importance where as direct mail marketing has its own.

    Direct mail marketing has been a traditional form of marketing since the advent of post offices. It is a crucial communication by promoters or producers. Direct mail marketing is posted to prospective customers on the latest mailing list. The marketing message may be mailed through letters, circulars, folders or leaflets.

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