Challenges with and confusion about measuring the return on investment in marketing and keeping pace with the times are very old stories. Marketing leaders struggled in the past to demonstrate the ROI of billboards, television, public relations, digital, and Internet channels, to name just a few established tools without a direct connection to the revenue they drive.
Social media is just the new kid on the block, and we’re still in the process of developing industry-accepted proxies to measure value and impact.
Let’s take a look at the range of ROI measures you can use in social media today and seek to understand them specifically in the context of this specific media form. This list works loosely from least to most powerful in terms of meaningful business impact.
1. Social Media Statistics ROI: Social media comes with many stats options, from the social networks themselves and from all sorts of analytics packages. There will be no shortage of trackable data. The challenge is to make meaningful use of the metrics. For example, engagement, one of the most popular of these metrics, can be deceptive. You can get high numbers only to find that the engagement in question isn’t supportive of your business goals.
Consider a brand post that recently garnered 2,600 responses. The digital agency, used to thinking in terms of driving Web traffic, immediately said, “Great, let’s do more posts like this!” But when our team dove into the actual user conversation, we found that 1,600 of those comments were totally off topic. That’s not bad in itself, except that off-topic threads often develop into negative conversations. And indeed, 1,300 of those 1,600 comments were negative. So, contrary to the surface metrics view, this wasn’t a post that we’d want to repeat at all.
2. Marketing Statistics ROI: In much the same way major consumer brands like Nike or Coca-Cola use advertising to build brand awareness, often with little reference to a product and without any call to action, successful marketers can use social outlets to drive awareness. Companies that focus on brand awareness using reach as their most important social media objective tend to have an easier time with their KPIs than companies that focus on other goals, such as increasing Web traffic, sales revenue, or lead quality, according to a 2013 Ascend study.
Of course, there’s the danger that skeptics will question how valuable that additional reach is to your brand, so think about pairing this goal with a form of marketing that’s higher on the value chart, such as lead acquisition.
But how do you translate this information to an ROI for your marketing staff and for your CEO?
Marketing equivalency ROI neatly solves that problem. The marketing equivalency approach to ROI is nothing new. It’s how public relations agencies have long measured return on investment in media outreach efforts. Using marketing equivalency ROI should reveal how social media costs compare to those of other media, ideally demonstrating that social achieves its goals more efficiently than other spend. I have clients who really like using marketing equivalency because the marketing department has its arms around its own spend and so can arrive at ROI figures independently.
Determining marketing equivalency ROI is fairly straightforward. Measure your social reach, then ask what you would have to spend to get the same numbers in digital, print, television, and radio with standard CPMs.
3. Learning ROI: Social creates a giant 24/7 focus group by offering your marketing team (and anyone else you encourage to participate in the channel) real-time connection and conversation among and with customers.
What you’ll find is that what customers reveal when they talk to each other is even more authentic and useful than what they tell you directly. The real-time thoughts of people discussing your brand produce valuable quantitative and qualitative data—though exactly what that value is may be hard to quantify. The opinions they express there are apt to be more honest and less self-conscious than what they would have contributed in the structured, paid environment of traditional focus groups.
When it comes to quality insight ROI, automated sentiment analysis isn’t enough. It requires human eyes. The technology helps a lot, but generally it only can be configured to see what you already knew you wanted to look for. Human eyes are needed to discover what was previously unknown, if the language is nuanced or in an unusual usage pattern.
Searching for insight is much more complicated than measuring content volume. For example, sometimes you might see a trend that’s not particularly high volume but very passionate; you could be seeing the canary in the coal mine. The trend could show what might be coming, possibilities not even on your radar yet, and it’s important to listen.
4. Relationship-Building ROI: Here you’re getting into the deepest potential ROI: enhanced customer relationships, which ultimately become sustainable sales ROI. Relationship-building ROI stats include increased customer loyalty, brand advocacy, and intent to buy.
Loyalty and intent to buy can be measured by interviewing customers, with A/B control groups and before-and-after social media involvement. Brand advocacy can be measured by flagging (a.k.a. “tagging”) comments or content attributes and listening for customer reviews or mentions of the brand across the social Web.
One of the most recognized paths to both relationship-building ROI and associated financial impact is customer support delivered through social. Exceptional retail has always been about customers—listening to their needs and wants; really talking with them; and creating great, personalized experiences.
Customer service via social media is simply adapting these retail principles to new channels, often improving efficiency in the process. Cable provider Comcast was a pioneer in social media customer support, with director of digital care Frank Eliason leading the way with his @ComcastCares Twitter account. Before the end of 2008, he’d already handled 22,000 tweets with a simple philosophy: “Can I help?”
5. Sales ROI: There are two kinds of sales ROI from social media. There’s the direct revenue lift brands see when they push promotions through social. This is a hard ROI—but it’s limited compared to long-term sales ROI generated from relationship-building ROI when customers become active with the brand community, form a deeper relationship, and build a space for the brand and its products in their and their friends’ everyday lives. Here is where we see increased loyalty, increased lifetime customer value, and enhanced revenue growth that’s sustained over time.
Of course, the number most CEOs and managers have traditionally wanted to see is immediate sales directly generated by marketing activity. That’s a bit of a short-term mindset, pushing messaging at customers to make a quarterly buck, without care for the long-term relationship potential. In any case, for some companies, particularly those with the ability to follow a click from social media through to an e-commerce conversion, direct revenue ROI is an achievable goal.
Of course, short-term sales aren’t bad. They’re good—as long as the promotional push to make them happen doesn’t compromise building a social experience with committed, long-term customer relationships (and the revenue they create).
This is an adapted excerpt from "The CMO’s Social Media Handbook: A Step-by-Step Guide for Leading Marketing Teams in the Social Media World," by Peter Friedman.