I’ve been following the Social Media ROI discussion for a while and it is great that many are working to make social media a “profession” by encouraging discussions that may eventually affect the creation of standards by which “professionals” are ethically bound. Social media is in its infancy and the process of making it a profession is really just beginning.
It seems that the question of how to measure Social Media efforts is elusive and a critical component that needs to be addressed as Social Media evolves into a profession. Social Media is a disruptive technology that affects numerous industries. Modern companies have evolved to measure the efforts they put forth and investments made in terms of how much profit or loss those same efforts have generate (ROI). Since Social media disrupts industries and business practices, it is often hard to grasp exactly how social media initiatives perform in respect to ROI. Additionally, new metrics such as, mentions, blog posts, comments, engagement, etc. have arisen as a way to quantify the effectiveness of social media initiatives in terms of reaching strategic objectives.
This begs a couple questions:
1) how much emphasis should be placed on traditional ROI as opposed to other metrics?
2) How do these metrics give an indication of how social media efforts affect “brand” and how this may in turn affect sales over time?
Olivier Blanchard is probably the most outspoken advocate of measuring ROI for Social Media efforts. His fervor is largely created by the ease at which anyone can raise a shingle and call themselves a Social media expert and the lack of standardized methods and history to measure expertise against. Olivier seems to believe that in order to engage a company as a Social Media Professional that one should be able to address the question of ROI for social media efforts; ROI in the standard business sense of how much profit or cost savings accrued from a given effort.
Others including Greg Satell find the quest for Social Media ROI to be largely unattainable. I find both these stances to be a little extreme and the answer for most companies to be somewhere in the middle.
It appears that many businesses are analyzing their social media efforts but are measuring them against desired outcomes rather than in true ROI. Is this a bad thing? Is it less valuable than measuring ROI? For some maybe, but perhaps not for those that have a deep understanding of their businesses, who understand how customer interactions at every touchpoint determine the brand, and how changes in brand sentiment affect frequency, reach, and yield. Perhaps it is because the Social Media component of the overall marketing spend is too small to justify calculating ROI. Perhaps this is because they don’t yet know exactly how to measure ROI from their initiatives and they feel the urgency to be part of the disruption before it disrupts them. Maybe they intend to learn along the way. At some point the CFO, will scrutinize the efforts and want to maximize financial return and will need to look at ROI to do so. They have a choice at this point to roll Social media initiatives into larger buckets or break them out and calculate ROI individually for each.
Don’t get me wrong, I firmly believe in measuring the as much of the financial impact of your social media efforts as possible and it is definitely possible to measure some of the impact of social media efforts in terms of true ROI. The problem is that is very hard, if not impossible, to measure the long term effect that social media efforts can have on your brand sentiment positive or negative and how this translates to an increase or decrease of sales over time. For instance if you succeed in creating a truly charismatic brand that evokes customer loyalty and diehard evangelists, you will be able to sell more product at higher prices. How would you divide the return among the many activities and facets of your company that worked in concert to achieve this feat? This does not mean that a company should disregard measuring as much of the ROI for social media initiatives as they can, but does mean that the actual ROI, if positive, would likely be greater than what you can measure.
As I said earlier, Social Media is a disruptive technology and behavior that spans numerous corporate silos including, marketing, pr, customer service, HR, R&D, communications and more that will change your corporate culture. Honestly, even though I believe that true ROI is measurable for well defined social media initiatives and direct marketing initiatives through social media channels, I am skeptical when anyone tells me they can accurately measure the ROI of a broad social media effort that spans numerous corporate silos, and it is exactly these companies, that are fast to move with a well conceived strategy on broad social media efforts, that will be positioned to benefit the most.
I am in complete agreement that “for social media and social technology to really work businesses need to measure its impact, positive and negative”, and this needs to be done with both hard (financial) and soft (trending) measurements. The results need to be compared to benchmarks, and predetermined desired outcomes; from here the strategies, tactics, methods, can be tweaked to achieve better results.
So how should a company begin?
Understand that the effective use of social media should and will change your company culture and is a long term commitment to providing value to customers, vendors, employees, and/or partners
Define Strategic Objectives
Identify the Social Media Platforms are best suited to achieve these objectives
Define tactics to be employed to achieve objectives
Determine what metrics and actions indicate success in regard to objectives (including but not limited to ROI)
Select tools needed to deploy tactics and measure effectiveness
Dedicate resources to launching and maintaining initiatives
Plot all marketing efforts and results on timelines including social media activities and anything of significance in the competitive landscape.
Look for correlations between actions and progress toward strategic objectives
Evaluate progress, calculate ROI as best you can, and adjust strategy, tactics, methods as necessary
Of course, if you feel you need help with any of this it would be wise to engage a Social Media Professional who can guide you through the process. I would highly recommend that when you select such a Social Media Professional that you make sure they can demonstrate knowledge of Social Media and how businesses use it, but that they fully comprehend your buisness, what your immediate and longterm challenges are, and if Social Media is the best way to achieve your goals.