[MUSIC] Now comes the second key performance metric. From our budget, we are going to spend $150,000 for this social IMC program. From our pricing analysis, our treasurer informs us that the $225 product contributes $150. As a CMO, you want the break even as low as possible. In this calculation, we want to determine what would happen, if we invested the entire contribution into our marketing program. This means, we won't be profitable at this level. Nor will we contribute to the fixed cost of the company. Break even is the absolute lowest number the company can tolerate. It recovers marketing costs, and then we will kill the program because it isn't making money. From this scenario, we divide the entire marketing budget of $150,000 by the $150 contribution. This yields a break even of 1,000 people. This means, at the absolute minimum, we need to sell 1,000 people from the 200,000 people we attract to the social site. Dividing these two numbers, we will need to sell only one-half of 1% of all the people on the community site to break even. Remember, lower is better for break even. From these two programmed calculations, the project looks like a go, but what happens if the break even is really high? Occasionally this happens. What you need to do is revisit your calculations and make some adjustments. Like every one of the steps in this process, each one yields new insights and measures. If they don't work, adjust the plan. For example, if your total registered size is 200,000 and you need to see 150,000 in a year to hit break even, there's no way you will do that. So what do you do? First, attempt to lower cost. The lower the budget, the lower the break even. This is why CMOs are often tough negotiators with their agencies and vendors. The lower the cost, the safer their marketing programs become. We can also look to raise prices or increase our contribution, because price changes affects everything in the organization. That is a solution of last resort. So now that we've done the program metrics, let's move on to the business metrics. From our three scenarios, we can calculate the marketing return on investment for our program. We call it MROI. This is a number senior management wants to see. If the MROI is over 100%, it means a program will return dollars to the cash flow of the organization. For a justification, we want to break even as low as possible and the MROI as high as possible. What about ROI? We can make this as refined as we want by simply subtracting product costs, fixed costs, and other cost categories from the sales price. I generally use MROI, because it is easier to calculate. I want the MROI for each scenario to be 150% or more. The numbers on this graph are an extension of the one developed to show the program metric. The budget of $150,000 remains the same as we used in the program metrics calculation. We will show the same number for the registrants and customers. From the average scenario, we will grow 1,200 customers for a conversion rate of 0.62%. This means only 0.6 of 1% of our registrants must become customers within the year. A very low conversion rate. To calculate MROI, take the total revenue from the average scenario, divide it by the total budget. For this company, the average scenario will return an MROI of 180%, and it will produce $210,000 in revenue. This means that marketing will be contributing $120,000 to the firm to cover other expenses and to generate profits. Putting these two types of calculations together, senior management will see this is a low cost program. With a good chance of being profitable. For actual programs, I like the MROI to be 200% or more. The higher the better. I also must have positive MROI for the worst scenario. If it isn't, I revise my assumptions, and my budget numbers. To further assist you, there are a number of different calculations in your toolkit. They will show you the performance from a number of different types of social marketing programs. The key is senior management is always considering the risk reward tradeoff. Build your social marketing programs to show them the benefits with extremely low risk, and you'll likely receive a green light for your marketing program. [MUSIC]