Marketers are smart, innovative people. They were early into digital technology and have used marketing automation solutions, CRM platforms and social media to deepen customer relationships and drive measurable business value. They also regularly defend planned budgets to the rest of the C-suite.
So what is behind the social media investment and performance disconnect we see in The CMO Survey?
On one hand, social media investment remains high. Although spending decreased incrementally from its all-time high of 13.8% of marketing budgets in August 2018 to 11.4% in the February 2019 survey, CMO commitment to the channel remains strong. Marketing leaders predict spending to increase 73% to reach 19.7% of their marketing budgets over the next five years, on average. (See chart below.)
On the other hand, social media is not delivering the goods. To date, CMOs acknowledge that social media’s contribution to enterprise performance has been relatively modest. They rate it at a steady 3.1 to 3.3 over the last seven surveys we have conducted since 2016, with 1 = not at all contributing and 7 = very highly contributing. Only large companies ($10B+ in revenues), B2C Product, and ecommerce firms that book more than 10% of sales over the internet have experienced higher returns.
Why Companies Are Doubling Down on Social Media Now?
Here are five reasons companies continue to invest so heavily in a channel that hasn’t yet delivered significant ROI.
#1 — Social media is a tool companies can control.
Most large companies pay to advertise on Google, Facebook, Amazon, and other platforms. However, they don’t want to be beholden to those behemoths who control the terms of engagement. Google and Facebook alone will capture 60% of all digital advertising dollars in 2019 ($76.57B of $129.34B). Amazon is coming on strong with $11.33B in projected sales.
Marketers’ goal is always to capture leads and connect directly with prospects. Social media is a platform that companies both own and control that’s relatively low-cost to operate. Companies can continually test campaigns on their platform, get immediate results, and scale successful outcomes.
#2 – In contrast, digital advertising is costly and not always effective.
Everyone knows that digital advertising is extremely costly. Yet the jury is out on how effective it is. Procter and Gamble cut $200M from its digital advertising budget after finding that prospects watched ads in mobile newsfeeds for just 1.7 seconds – which Chief Brand Officer Mark Pritchard called “little more than a glance.”
Because consumers are exposed to 4,000 to 10,000 ads a day, it is unlikely that any individual exposure will realize returns. In addition, watching ads is inherently a passive activity, which is less memorable than activities that promote engagement, such as social media. Social media can also be used to reinforce ads and boost their performance.
#3 – Social media is made for mobile.
The future of consumer engagement is mobile, which is one reason why $1 of every $5 advertising dollars now targets smartphones. Social media, with its visual content and short text updates, is ideally suited for mobile engagement.
Consumers engage with social media in bite-sized chunks throughout the day, making it more likely that companies can connect with them. As they like posts and interact with them, they help marketers build customer profiles, which is also true with digital advertising. However, consumers can amplify marketers’ reach by sharing, commenting on, and recommending social posts, which they are less likely to do with digital advertisements.
#4 — Social media is an extremely versatile business enabler.
CMOs view social media as more than a consumer engagement platform. They use the technology to research consumers by measuring online behavior, brand engagement, and social sentiment; connect with employees and improve workforce performance; and drive product and customer service improvements. As a two-way pipeline into consumers’ wants and needs, social media can provide powerful insights into what to change and when.
As the chart below indicates, CMOs view social media as a strategic tool and are increasing its usage across multiple dimensions.
Specific highlights include:
- 88.2% of companies use social media for brand awareness and brand building compared to 45.6% in 2018.
- 64.7% of companies use social media to introduce new product and services, up from 28.7% in 2018.
- 60.1% of companies use social media to acquire new customers, up from 32.6% in 2018.
- 55.5% of companies use social media to retain current customers, compared to 28.7% in 2018.
#5 — Companies know they haven’t solved the attribution problem.
Despite these benefits, the impact of social media on firm performance is difficult to measure. While likes and impressions provide initial metrics on the success of their social media efforts, it can be difficult to deduce how social media contributes to winning new customers and expanding existing relationships. CMOs say they are struggling with this issue. The August 2018 CMO Survey found that 39.3% of companies report they are unable to show the impact of social media on performance, 24.7% can prove the impact quantitatively, and another 36% have a good qualitative sense of the impact, but not a quantitative impact.
The CMO Challenge: Solve social media attribution and integrate the channel more fully into digital marketing
What’s ahead for CMOs and social media? Their path forward is two-fold.
First, they need to solve the attribution problem with the right strategy, technology, and data integrations. First-touch and last-touch models are easy to set up but provide a limited lens into customer behavior that may not be helpful—or accurate. Multi-touch models, which analyze customer behavior across their entire journey, are much more complex and provide a better lens into what is working – and what isn’t. In addition, social, customer and marketing automation data needs to be tightly integrated to create a holistic picture of how customers are interacting with brands and content on- and offline.
Secondly, CMOs need integrate the social channel more closely with their marketing strategies.
In the most recent CMO Survey, marketers gave themselves a 4.2 rating on a 7-point scale where 1=not at all effective and 7=very effective at linking social media to the firm’s marketing strategy, which has been remarkably consistent over the past eight years. Similarly, CMOs report an even lower score of 3.5 when asked how well their companies integrate customer information across purchasing, communication, and social media channels in the August 2018 CMO Survey.
As CMOs plan marketing growth and activities for 2019 and beyond, they may be wise to prioritize social media integration. Most CMOs are concerned about the prospect of an economic downturn this year or next and are refocusing efforts on growing share in domestic markets, which is a defensive strategy. If a downturn does hit, CMOs will need to account for every dollar of marketing spend, and the best way to do so is by demonstrating its ROI.
Want help? Here are 12 tips for integrating social media into your marketing strategy. Let’s add a 13th taken from our most recent survey. A large percentage of a company’s social media activities are performed by outside agencies—23% in our latest survey, the highest rating in five years. Thus, it’s key to align agency incentives around social media performance to ensure that they win financially by driving the right kind of consumer engagement and contributing to revenue wins – not just driving content volumes.
Get the latest CMO Survey.
The CMO Survey has been conducted biannually since August 2008, and is sponsored by the American Marketing Association, Deloitte and Duke University’s Fuqua School of Business. It is the longest-running survey dedicated to understanding the field of marketing. The latest edition, conducted from January 8-29, received responses from 323 top marketing executives.
Learn more about CMO expectations for 2019 and sign up to participate in the next survey.
*Torren McCarthy, MBA Student at the Fuqua School of Business, and Holly Larson, B2B and technology writer who occasionally does editor jobs, contributed to this post.