In a recent post on “shocking facts”, a prominent blog declared that email marketing has a ROI of 4,300% while social media marketing has barely any. I was shocked indeed to find such a limited view of these statistics.

For any marketer, even slightly knowledgeable about the so-called sales funnel, this is of course nonsense.

I’m an optimizer but I know that social media is early in the sales funnel while email is at the end.

Email marketing ROI put in perspective

First off, let’s take a look at the numbers in context. 4,300% sounds incredible, doesn’t it? That’s four thousand three hundred percent or in other words 43$ for every Dollar spent.

Do we have to drop all other marketing techniques and just do mail from now on? No.

I haven’t found a public source with the most recent numbers but I’ve located those from 2011 which are quite similar. Email marketing ROI has been 4,056% in 2011, that’s down from 5,223% five years earlier (2006).

Search Engine Marketing came second with roughly half the ROI of “only” 2,224% in 2011. Social networking followed with 1,271% ROI and slowly growing year over year. So while Email Marketing ROI is indeed fantastic despite declining steadily for a few years, social media ROI is not catastrophic by any standards.

That’s, of course, not the whole story. It’s also about comparing apples and oranges or even bananas.

Acquisition channels vs awareness channels

Saying that email converts better than social media is like saying that a cash register converts better than the shop window. Also try to imagine it in real life human relations. What makes you succeed when it comes to dating, flirting or calling someone up? Do you see the problem here?

You can’t call someone up without getting the phone number first.

Flirting is a must-have initial step of your “dating funnel”. Using the phone requires prior steps to get the number as you can’t call up strangers or when you do as in cold calling you are very likely to get rebuffed.

sales-funnel

Sales funnel visualization courtesy of ReTargeter.

It’s very similar on the Web when it comes to sales. You do the flirting on social media to get noticed by potential customers, then you ask them for the mail address and after receiving a few messages you can finally hook up and close the sale.

Social media or networking sites are foremost so-called awareness channels

where people may find out about you or at least notice your brand and products or services. Then they trust you enough to give away their contact data so that you can stay connected. These can be both email or social media connections. Email can be used far better for acquisition because you already know the people who subscribe are interested in your offerings.

Hard selling to your social media followers can be ostracizing in contrast. It can work but many people on social media are rather keen on socializing first. That why it’s not called sales media. View social media as the party you meet someone you want to date. It’s not the date itself yet though.

Conversion attribution and the last click fallacy

We are still at the beginning when it comes to measuring user interactions with a product or brand. In most cases, websites measure the so-called last click as the actual conversion or sale. That’s when someone clicks a call-to-action in your email newsletter.

You are only able to track that last click and consider your newsletter as being the source of the sale. It’s not how it works actually. The person who has clicked your email link was at the end of a long process or in other words the sales funnel by now.

Buyers had most likely seen you on social media first

then they searched for your product, they visited your site, and they came back. After the third visit, they subscribed and after reading your newsletter for probably half a year they finally decided to click that button and to buy something from you.

You may think I exaggerate but I actually have outlined a very concise sales funnel. Usually it may take even longer and contain several more steps like

  • TV ads
  • word of mouth
  • real life store encounters
  • print reviews
  • retargeting
  • customer support conversation
  • white paper downloads

etc. in no particular order. Yes, it’s complicated. What’s simple though is that you can’t tell people that email has a better ROI than social networking even if the “big data” numbers says so. I haven’t even mentioned another significant reason why social media ROI is lower than that of mail now.

Email-Marketing has been around for 20+ years while social media for business is way younger.

That’s why you have to invest more in it now and your Return on Investment is lower in this initial phase. Once your social media infrastructure is built up and working, you will have to invest in maintenance only and the returns will be higher too.

(CC BY-SA 2.0) Creative Commons image by Benson Kua

Sales funnel visualization courtesy of ReTargeter