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As the popularity of social networking explodes, companies are rushing to implement marketing and branding programs to take advantage of it. And as social media programs have transitioned from experiments to broader deployments, the need to show how they contribute to achieving desired business outcomes has increased.
Much of the early conversation about social media ROI has been confusing or misguided. To clear up the confusion, let me provide some guidelines to intelligently address the social media ROI question.
Social media ROI mythology
Here are three common myths about social media ROI, and some perspective on the underlying issues they represent.
Myth No. 1: You can’t measure the ROI of social media initiatives.
Many people argue that because social media ROI is largely intangible, it cannot be measured. What this argument really states, perhaps unintentionally, is that ROI is often difficult to determine and hard to understand. Communicators need a framework for capturing the impact of the social media effort—both intangible values like increasing awareness or purchase consideration, and any ROI caused by revenue generation, cost savings or cost avoidance. And as always in measurement, starting any program or initiative with measureable objectives is key to developing a structure for accountability.
Myth No. 2: Traditional ROI doesn’t apply to social networks.
This myth is primarily offered as a philosophical argument that social media is about improving relationships, creating engagement and building community—not about increasing revenue. However, it may be about both. Some companies are primarily trying to gather insights and ideas. Other companies are trying to increase brand exposure, or are making direct promotional offers to generate incremental sales. Not all aspects of a social media effort will be designed to generate revenue, save money or avoid costs. Even in these cases, the impact of your social media efforts should still be measured, as they are creating long-term value. The short-term objective may have a longer-term payoff.
Most of the attempts to reinvent or change the ROI acronym (Return on Influence/Engagement/Interest) are confusing “return” with impact or results. Social media efforts may result in financial return or ROI and/or have a non-financial impact. Engagement and influence are examples of a non-financial impact. Non-financial impacts like increased purchase consideration or enhanced engagement may eventually result in ROI at the point in the future when a financial transaction actually occurs. Any attempt to reinvent or circumvent ROI discussion in social media planning actually hurts credibility with the people writing the checks because they often expect a money in, money out discussion. Try to be explicit with them as to whether the program is designed to generate non-financial impact or true financial ROI, and make sure the people writing the checks understand the difference.
Myth No. 3: You can determine social media ROI with an online calculator.
The simple fact is that you cannot buy an off-the-shelf solution to calculate the ROI of any social media effort. All ROI studies are customized, due to the unique objectives each company may have for their social media efforts. Objectives are specific and contextual, and your ROI measurement efforts will need to be as well. Attempts to use ROI calculators by simply plugging in several numbers and hitting a button to calculate your ROI are “a one-size-fits-none” approach.
A framework for finding social media ROI
Here is a simple, five-step framework for developing a social media ROI program that works.
1. Set measureable objectives that are aligned with business outcomes.
Failure to begin with measureable objectives is probably the most common impediment to proper social media measurement. Your objectives should be aligned with one or more desired business outcomes. Think through all the ways in which the social business effort will contribute to driving the business forward. Make sure the alignment is obvious and understood by everyone involved in approving the program.
2. Link to and understand the business process you are addressing.
In order to demonstrate ROI in social media, you need to link the results seen in social media with the relevant business processes they are addressing. For example, in a B2B company, you might try to link social media efforts with the lead generation and closure process. For a program aimed at employee engagement, you might link social media efforts to the employee recruitment and retention process. For an e-commerce company, you might be able to directly link to the sales process through unique URLs or click-tracking technologies. Understanding which business processes are affected by online social networks, and how, is fundamental to understanding ROI.
3. Select the communication model, research the approach and key metrics.
The accepted outputs–outtakes–outcomes communication model is difficult and confusing for many to understand and apply. Here is an alternative communication model that is somewhat more intuitive and in tune with social media measurement.
- Exposure: To what degree has the campaign created exposure to your content and message?
- Engagement: Who is interacting or engaging with your content? How and where?
- Influence: To what extent have exposure and engagement influenced the attitudes of the target audience?
- Action: As a result of the social media effort, what actions—if any—has the target audience taken?
This communication model provides a framework for defining key metrics at each phase of social media measurement. The metrics listed are a starting point.
4. Gather and analyze data, and identify correlations.
When attempting to show statistical relationships, correlations become important. For instance, you could try to correlate social media brand engagement and audience influence with metrics, like the likelihood that a visitor either recommends a product to a friend, seriously considers the product, or purchases the product in the next x number of months. Select the metrics that are applicable to the business process you want to affect.
5. Calculate ROI and report results.
We started with measureable objectives, aligned them with the appropriate business processes, determined our research model and approach, and have gathered the data. Now we can calculate ROI and describe the value of the social media initiative. Results for key program metrics should be captured on a dashboard that can be shared with all program stakeholders on a regular basis.
Social media ROI approaches
While all ROI approaches should be customized to the specific program, there are a few emerging approaches that show promise for social media. Some of these include the following.
Direct linkage: This involves social media promotional efforts that use unique URLs tied to specific social networks, and that direct respondents to a company web site to redeem coupons or purchase a product. Dell’s well-publicized success in generating revenue through Twitter is an example of this approach.
Staff cost reduction: There is some early work that shows how social media programs may directly reduce the staff time needed for customer service and support. ROI determination involves demonstrating how social media programs have reduced staffing and call center investment requirements.
Correlation modeling and econometrics: The primary challenge with a correlation model is isolating the impact of social media from all the other ways—word-of-mouth, advertising, promotions—the change in the variable of interest may have occurred. The simplest approach is to collect data during times of little or no other communication activity. Much more complicated are econometric models that attempt to statistically isolate the impact of each communication variable.
Exposed/not exposed: This form of research attempts to identify those individuals within your target audience who were exposed to programs and content, and then compare their purchase intent or purchase history with a control group of audience members who were not exposed to the program and content. The “lift” created within the exposed group is used to calculate ROI.
Integrated, cross-platform research: It would be ideal to track the behavior of individuals across web sites and social networks. Early efforts have focused on using a combination of click-tracking, primary research, and sales scan data to track opinion, behavior, actions and transactions.
The need for accountability and ROI in social media is here to stay. As budgets and staff for social media efforts increase, the pressure to demonstrate impact and ROI will increase in tandem. Now is the time to develop models, frameworks and approaches that will yield the answers to the tough questions that are sure to come.
Don Bartholomew is principal of Acumentics Research, a social media and PR research and measurement consultancy. He blogs as MetricsMan and may be reached at +1 214.632.2721 or followed on twitter:@Donbart. |
