[MUSIC] Performance funnels play a significant role in developing your justification to senior management. While we will discuss this in more detail in a video on justification metrics, what senior management and CMOs want to know are two things. What is the potential of the program to grow our revenue? And what is the risk we are taking? This video, We'll focus on establishing the potential for your social marketing program. To accomplish this, we return to the performance funnel. The performance funnel is designed to track the consumer journey from total market to product purchase. We create it by documenting the major steps a prospect needs to become a customer. While your performance funnel might be different, the ways you develop are the same. Examining this funnel, you see we start with the total size of the market, and the percentage we are likely to impact on social. We then move from the total social market into the consumer journey. For this Social IMC example, the consumer journey starts when they come to the landing page and begin the information exchange. Some time during the year, a few will inquire about our product and some will then purchase it. Quantifying and valuing the first two steps is relatively easy. To size a total market, we could use secondary research from research firms like Gardner or Forester, or national databases like InfoUSA.com, to get the size of our high valued market. With a little research, we could identify a market nationally, regionally, locally, or even hyper locally. The social market number is a little tricky. It is the size of the market you can reach using social. Generally, it is between 90 and 95% of the total market. But some markets might be lower, like marketing to farmers in rural Africa. To establish the value of these two steps in the performance funnel, take the total market size and multiply it by the revenue from a product sale. Why do this? We want senior management to understand the potential of a market before we give them the cost of the marketing program. A $100,000 marketing program makes more sense, if they realize the potential value is $45 million. It gives your presentation scope. Getting secondary research is great to establish the first two numbers, but then we have a challenge. To go beyond it, we need numbers we don't have. We need to complete the funnel. To do that, we are going to develop three what if scenarios. We ask the question, what if the performance is average for our marketing program. What if it is slightly above average? What if it is slightly below average? These become our average optimistic and pessimistic projections. From this graphic, notice that all three scenarios start with the same numbers at the first two levels, why? Because there's nothing we have asked the prospects to do. There is no required behavior to be in the first two groups, so the numbers for all three scenarios are the same. Notice this graphic also calculates the potential value of these first two steps in the funnel. Senior management will notice the total market is 567,000 prospects, with a market potential of $425 million. It is a valuable market, if your marketing program can crack into it. Notice the social market is 90% of the total. For this client, we knew most would be on the social sites we were targeting, but we wanted to be conservative. Now we begin the what if portion of the analysis. We start by examining our marketing program, and asking the question, what is the likely aggregate response rate for the program. To get this number you could talk to other companies with your digital agencies, with your influencers, or examine other marketing programs to learn the best percentage. Remember, the prospects don't know about your social IMC offering, so it is often low. For consumer markets, your aggregate response rate will likely range from 2 to 5%. For business to business programs, it will likely be higher, often 10 to 30%. Why the difference? Because business relationships are less personal and passionate. Business target markets will likely join just to see what it's all about. The mix of marketing channels, and the size of the market, will determine the most likely response rate. In this case it's 2%. This became the number used in the average performance calculation. This means that 2% of your market will visit your landing page during the first year of the program. For the optimistic version, the team determined the response rate would be 2.5%. If their marketing communications were great and really hit the target, they might produce an additional one half of 1%. For the pessimistic version, the team forecast 1.5% of the social market would come to the landing page. From there, we forecast that 50 to 60% would successfully complete the registration process. They then forecasted number two, evaluate the product and the percentage to first purchase. The scenario build ends with the calculation of the number who will make their first purchase and the total revenue it will generate. This type of scenario forecast really shows senior management the likely results of the campaign. They will make a $250,000 investment into a potential market worth $425 million. It will return at least $573,000 from the most pessimistic evaluation and $1.7 million in the most optimistic. So this is a good investment for senior management to consider. From a revenue and profit perspective senior management will likely green light this social marketing program. This final graphic is interesting because it combines several metrics of interest to senior management. It shows the efficiency KPI's in the blue levels of the funnel, .and the effectiveness KPI's in red. Senior managers and CMOs really like this type of performance funnel, because it gives them the KPIs they will track to ensure their investment will be a success. Check your toolkits for more examples of performance funnels and scenarios from my Northwestern class. Look at different ones, to find the examples which best fit your needs. Performance funnels are critical to establishing your marketing and senior management expectations, and for you to manage your social marketing programs. They show the customer journey and the critical KPIs, you're likely to receive as you execute your social marketing program. They transform the unknown into important metrics you can use to guide your social marketing programs towards success. [MUSIC]
