Return on investment (ROI) is a method of calculation to determine the amount of profit returns for a particular investment. A higher percentage result from the calculation means a higher return in profit. Cisco as most people would know is a large multi-national corporation responsible for the creation of networking equipment. Ranging from servers, router, phones and much more. Since the interaction of Cisco in social media including Facebook, Twitter and YouTube, the company knew these technologies were aiding their sales, but could not provide proof. That is until Cisco decided their new ASR router product launch would only be presented on social media rather than conventional methods. This decision produced amazing effects by both outlining the popularity of their social media presence as well as shaving an astounding $100K off their product launch. Cisco’s entire ASR launch campaign cost a staggering six times less than the conventional launch.
How does this product launch tie into ROI’s you might ask? Well…Cisco would have used ROI’s or similar estimation calculations to determine the amount of profit return on the product long before the campaign even began. Read below to have a look how.
(click to enlarge, Cisco ASR 1001 router)
While Cisco has not released any information regarding their ROI calculation, some assumptions can be set, and a suitable ROI can be formulated. Some initial facts regarding the success of the advertising campaign will also aid in the processes of setting assumptions.
Cisco Social Media facts
- Blogging: 22 external blogs with 470,000 views/quarter
- Twitter: 108 feeds with 2 million followers
- Facebook: 79 groups with 100,000 fans
- Youtube 300+ channels, 2000+ videos, 4 million views
- Flickr: 300+ Photos, 400,000 views
- 3D online game, attracted 20,000+ network engineers
- 9,000 consumers reached
|Cisco ROI assumptions (derived from social media facts)|
|Timeframe||Marketing period for the ASR = 2 months|
|Cost||Posting and monitoring of social media: 10 employees = $120,000|
|Cost||3D interactive game and prizes = $1,100,000|
|Revenue||approx 200 units sold (during the timeframe) x $18,000 /per unit = $3,600,000|
|Revenue||social media advertising also earnt Cisco sales in other areas = $50,000|
ROI is calculated on a very simple formula that produces a percentage rate of return. The formula is as follows.
By using the previously stated assumptions regarding revenue, we can easily substitute the figures into the equation to achieve the ROI result. The calculation is as follows.
ROI = ((3,650,000 – 1,220,000) / 1,220,000) x 100 = 199%
199%! That is an amazing revenue return and was said to be one of the most successful company launches to date. Of course this percentage result is only a very rough estimate as Cisco and many other corporations are unlikely to reveal the rate of success regarding product lauches. However it is known that this product launch was defiantly a large success, and ROI figures similar to this are not unrealistic.
For a more realistic and accurate approach to a ROI for Cisco’s ASR launch would require much more in-depth thinking regarding possible cost and revenue avenues. Judging by many product promotions form other corporations, it would be expected that there would be hundreds of cost and revenue factors involved.
Cisco has had tremendous success with many of their product launches but this one surely proves the usefulness of social media alone. As mentioned before, while Cisco has not release any figures stating the use of ROI for the ASR launch, it is almost certain that Cisco would have used the calculation (or some formula similar) to gauge the possibly of return. However in saying this, even their calculations may have been inaccurate due to the unpredictability of social media and viral advertising. In summary its great to see the potential that social media adverting can offer, and how ROI’s can really outline the potential for great return.
Until next time readers. Peace
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