Week 10 has arrived and my last blog post on my journey of “Discovering
Enterprise 2.0” will finally focus on the bottom line outcome of investing in
social technology – the Return on investment (ROI). The ROI can be specified as: (Net profit/invested capital) *100
and in general the examples of how ROI can be increased using social technology are
numerous. In my final blog post I have chosen to take a
look at Cisco, one of the world’s leading manufacturers of networking supplies, and how the company managed to decrease the investments of a productlaunch with more than $100.000 ultimately increasing the ROI.
Product launch at Cisco
Usually when Cisco launched a new product the process turned into a costly activity. The cost more precisely was applied to:
- Flying in more than 100 executives and press members from more than 100 countries to the HQ in California.
- Time taken from the CEO and other executives to prepare and present the launch.
- Designing well-crafted and statistical press releases.
- Distributing press releases.
- E-mailing customers.
- Running print ads in major business newspapers and magazines.
In 2008 Cisco therefore decided to launch their product campaign, for
their newest ASR 1000 series router, entirely through social media using
videos, images and product specifications. The changes in the product launch
strategy more specifically lead to:
- Saving 42.000 gallons of gas for travel.
- Top executives not spending more than one hour recording the video presentations.
- Expensive printed ads replaced with social media exposure.
Reflections of the change
in ROI at Cisco
I
really think Cisco did a good job in including both tangible and intangible
costs in their analysis, having the specific calculations available would,
however, increase the validity of the study. As the source of this case study
unfortunately do not provide either the net profit, the contribution margin or
profit ratio of the product it can be hard to say how crucial the change in the
marketing grant is compared to the overall ROI.
When
viewing the product launch in a bigger perspective, all things being equal, I
would actually be bold to claim that the most beneficial part of the new
product launch strategy, in terms of the ROI, was not the money saved but the
money earned; from the following facts:
- 9,000 people attended the social media product launch event – 90 times more attendees than in the past.
- Three times as many press articles were published.
- Over 1,000 blog posts and 40 million online impressions were recorded.
In
other news
Finally
in the clip below you can see how other major and minor companies have also
increased their ROI using social media:
Before signing off I just like to give a huge thanks to the people providing
valuable inputs to my blog helping me “Discovering Enterprise 2.0”. I had a
good time, learnt a lot and hopefully you did too :-)
Rererences
It seems much easier to estimate the amount of money saved, than how much more the company will eventually earn, although, as you said, the earnings might well be the larger part. Many aspects like increased reputation and media coverage cannot be predicted easily, but are a huge benefit.
ReplyDeleteHi schiya thanks for stopping by, yes it is surely not easy quantifying the net profit return directly linked to the use of social media. I also think you have a good point specifically in terms of “improved reputation” which will also be were hard to quantify in dollars on the bottom-line.
DeleteHi Lise,
ReplyDeleteThanks for sharing this post, and congrats on finishing this final post.
the example of Cisco shown me how investment can be applied not to increase revenue, but on cost reduction. Cisco saved a lot of money by using social media as a marketing tool
thanks
Mohammed
Hi Mohammed
DeleteThanks for stopping by :-) Yes I definitely think that the cost savings is an important part of improving the ROI. Just sorry that I couldn’t provide more “numbers” in my case, but I guess that is always the tricky part in measuring the real value potential in using social media :-)
Hi Lise,
DeleteApart from the Cisco's cost savings (e.g. time, human resources), I think that the organisation also get its chance to explore the new marketing strategy along with expanding its customers' network and gaining insights through the customers' feedback. By basing on the ROI's reflection in your post, I agree with that the organisation really manage the use of social technologies throughout its campaign very well. This also reminds me to link back to our discussion on how each organisation defines the term 'success' (e.g. gaining more earnings and savings, getting extensive connections) (http://bit.ly/GA638C). Is there any tradeoff in adopting the social technologies from the following Cisco's case study?
Interesting ROI's analysis post, Lise :)
Note: As a blogger, I am glad that I get a chance to know you and learn from your posts.
Hi Sarun
DeleteThanks for stopping by one last time. Hmm you final question really had me thinking. The first issue I can think of is actually related to the difficulties in measuring the exact value of using social media technology like we discussed this week. Maybe we can get some more answers to some of the cons of social media technology through the google hangout that one of the groups presented :-)
Hi Lise! :D
ReplyDeleteI agree with you that Cisco has made a success by launching new router and they use social media to broadcast it. I must say that social media is a pretty important tool to announce every activities you do.
Correct me if I'm wrong, but based on your post, I think Cisco has more intangible gain on this. Customers are becoming more attracted to Cisco, more reviews, articles, and assessment about Cisco. So, the intangible gain comes first, then the tangible gain is affected to it.
http://delleee1902.blogspot.com.au/
Hi Della
DeleteI must say that I agree with you that the initial gains are definitely more intangible but I also believe that these gains are, over time, turned into more tangible gains – in terms of Dollars like you also indicate :-)
Hi :)
ReplyDeleteCisco did some good work by doing this, by making the costs 1/6 of what they would have been otherwise, there would definitely be a favourable ROI. What's equally as impressive is that the turn out for the announcement was even greater than their traditional method, truly the power of social media.
Do you think they could be doing more?
sammacgregor.wordpress.com
Hi Sam
DeleteThanks for the feedback. Yes, I am personally convinced that Cisco could do more and increase the benefits by engaging and exploiting the value levers of social media i.e. through customer feedback which I am personally a huge fan of. Anyway thanks for stopping by this last time :-)
Another great post from you, but sadly the last one in this semester. :) I liked the way how you presented not only the money saved by Cisco, but also the money earned by utilising social media effectively. I agree that most companies are wasting tremendous amounts of money on printed advertising, whereas online marketing campaigns could be much more effective and involving way to convey the same information to a potentially much larger audience. Executives traveling to different countries seems also a waste of money in the time of high speed internet and readily available cheap video conferencing facilities. Thanks for the informative article again :)
ReplyDeleteHi Digitalrainforest
DeleteThanks for stopping by one last time as always your feedback is highly appreciated :-) Yes, It seems like the traditional advertising is “dead” and the future of advertising has moved to social media platforms – which I also think is a win-win situation for both customers and company!
Great post Lisa! Its very interesting to see how CISCO saved money increasing its ROI. I agree with comments before about the intangible benefits that CISCO gained in this campaing. It seem like the company use effectively its Social media networks. Thank you for all the inforation provided, I have learnt lots! :)
ReplyDelete