Phone: 331.223.5742

download a resume

follow me on Twitter @bjoosse

Measurement and ROI of Social Media

Inching Closer to the Bottom Line

“Marketers appear to be inching closer to answering the question of social media ROI—or at least making a serious effort—as the stakes get higher.”

--eMarketer, “Dramatic Difference in Approach to Social Media Metrics”

“The future of social media is about math, metrics and monetization.” –Jamie Turner, Chief Content Officer, 60-second Marketer

Social media is approaching the point in its development where most channels and implementations are no longer the shiniest new toys. The buzz isn’t quite as exuberant and the wow factor isn’t quite as transporting. Those us of old enough to remember the heady days of the internet bubble probably remember  the mania over “eyeballs” and “mindshare” and how the dot bomb explosion prompted a more prosaic approach to web-based business models; in other words, they had to show a road to profitability or they were left on the table.

Social media may be entering a similar phase in its evolution. Like earlier in this millennium , we are experiencing a financial upheaval which has changed much that was previously the status quo. For social media, breathy excitement over fandom and engagement in the early days is starting to be tempered by a practical desire to demonstrate the worth of budget investment.

This eMarketer report [,Rpp:25,Ro:-1]

 includes data from a study by BazaarVoice and the CMO Club in which they compare results between 2009 and 2010 from a survey of marketers about their social media measurement practices and the metrics they find most valuable. In particular, Conversions (i.e. online actions that achieve a specific objective) and Revenue have greatly increased in importance. Calculating the latter in social media remains particularly tricky, since attribution is complex to identify, but the survey results seem to indicate that social marketers are now considering it much more closely and valuing it much more highly than in last year’s survey.

This changing mindset indicates that those of us who advise and assist our clients with social media need to keep several things in mind as we move deeper into 2011.

Marketers will want justification for their spend.

While the technical costs of entry are very low in social media, i.e. zero to set up a Facebook page or Twitter handle, marketers now realize that an effective program requires significant investment in talent, time, and partnership. As social channels monetize, the hard costs involved in effective community interaction have increased as well as the person-power investment  to staff a quality team or find effective partners.

Mapping social activity to business objectives is a key part of demonstrating effectiveness. While these objectives can be financial, they don’t have to be. For example, applying customer service metrics to Twitter or Facebook interaction can show a clear cost reduction value, while also bringing benefit to less-specific objectives such as issue management and corporate reputation enhancement.

We need to be able to explain the value of a social media investment to our clients in more precise terms than we have to date.

There is a difference between a value calculation and a return on investment.

ROI is a financial calculation. Discussion of ROI must be tied to revenue increase or cost reduction, something that is not easy with social media in the same way that it might be for Search Engine or Direct Marketing. (See my colleague Don Bartholomew’s blog post about this topic for a thorough and nuanced discussion.)

However, the “squishiness” of financial benefit attribution to social media should not obviate the value discussion. The point is that there can be a demonstrable and measurable value achieved through effective social channels, though it may not be specifically financial. Traditional PR has grappled with this kind of measurement for years, but still it serves as a model for identifying value calculations. To continue paraphrasing Don Bartholomew, measurable results  in social media will typically fall into four categories of increasing value: Exposure, Engagement, Influence, or Action. Only the latter can some times be tied to a financial impact, and not always. Still, value to the brand is arguably brought by any of these positive results.

Value in social media may come from multiple disciplines. 

Social media for a given brand often begins via the Public Relations team, conducting influencer marketing and online editorial outreach, or sometimes via the corporate group dedicated to Marketing. In both cases, the value of social media is demonstrated through exposure and engagement metrics (i.e. impressions, replies, retweets) that might lead to influence (positive tweets) and occasionally measurable actions (e-commerce or online registration).

However, for many brands, value can be derived from impact on other business operations. As suggested earlier, a Customer Service function is frequently fulfilled via social media, and value calculation can shade into ROI through traditional CRM metrics like shortened CSR time, improved problem resolution, and reduced call center usage.

In the case of B2B companies, social media channels can often directly support the Sales operation, and lead generation/nurturing activity can positively impact Cost Per Customer Acquisition, Cost Per Lead, and other sales metrics.

Finally, all R&D activity across the globe benefits from the collaborative nature of social media channels such as technical community forums, SME blogs, and educational videos on YouTube.

One cannot necessarily ascribe a specific dollar impact in each of these instances, but it is an easy step to tie them to metrics that obviously provide value and can impact the financial factors that determine ultimate success in business. Our client partners are going to demand this more and more; even though the economy seems to be rebounding, there remains considerable focus on smart spending and we need to be able to show the specific value we can bring to their brands with social media.