ROI has been one of the major focus points when organisations attempt to measure the success of their social media activity, but can traditional ROI measures offer reliable metrics in the social space?
For corporations, ROI remains a major component of business tracking and commercial assessment. If companies invest time or money into something, they want to get a return. But how do you measure the ROI of social media? Olivier Blanchard’s latest book, Social Media ROI: Managing and Measuring Social Media Efforts in Your Organization attempts to answer just this question.
Brian Solis, author of Engage: The Complete Guide for Brands and Businesses to Build, Cultivate and Measure Success in the New Web says in the foreword to Blanchard’s book: “While many companies are already investing in social media, the reality is that most are done without the ability demonstrate any return on investment.” Early in his book, Blanchard emphasises the need to tie your social media program to your business objectives. He says, “Your business doesn’t plug into social media. Social media plugs into your business.” Social media is a communications tool that should support your business goals.
During an interview I had with Blanchard, he made a sweeping statement that there is no ROI of social media. He says that ROI is not always relevant, that Return on Investment is simply an equation – the relationship between the investment and the return. Because of this, the formula has to be money for money – which is a weak and incomplete way to look at social media impact. One must create a separation between money and ‘Likes’.
Social media is activities-based and doesn’t fit into the typical ROI equation. Tweeting, posting to Facebook, and running your social media campaign are activities – and don’t neccessarily have a direct financial aspect. And before you jump in and suggest that this is a terrible weakness, you need to ask yourself “What’s the ROI of PR?” or “What’s the ROI of television ads?” [or you could just watch this video].
That being said, companies looking to start a social media presence should be investigating – and finding metrics to track – how social media engagement impacts on their company. Blanchard feels that the question of the ‘return’ on social media could be looked at two different ways.
- There is an increase in revenue – eventually: The justification of participating in social media. Companies ask why should I pay for this? Why should I take money away from other budgets to fund social media activities? Companies have to understand that there is an outcome, a return at the end that is financial. Anything that you do that can increase your chances of growing your market and selling more stuff has a financial impact.
- Social media can also save you significant amounts of money: Social media can affect not only revenue growth, but can also be a cost saving with areas of a business such as customer service. For instance, companies can now fund customer service activities through social media. Where in the past someone had to be on a one-to-one call with someone, that customer service person could now be tweeting with several people at once at a much lower cost. These activities can also create a more positive impression of the company.
According to Olivier you can directly measure this increased engagement through an increase in mentions and the positive sentiment around your brand. He says, “No matter what your budget, no matter what your capabilities, you can have all the data you want. You couldn’t do this 10 years ago.”
Sometimes corporations feel that they get intangible results from social media. But it’s not impossible to find statistics, spot trends and gain insight. You just need to track against different metrics to those you’re used to. The easiest way to measure the impact of social media is to sample your statistics once a week or once a month and measure the trends. In medical terms, he said to think of it as a biopsy rather than an EKG. Where an EKG is connected to your heart continuously and provides a lot of data, the biopsy is monitoring the situation at one point in time and comparing the data to the previous data set to monitor your progress.
Key Takeaway: Don’t drown yourself in data, instead put appropriate tracking in place.
Olivier gave an example of how one company measured the return in different channels of a campaign with discount codes. Each channel had a different discount code. They were then able to directly measure the sales and return from each channel: Facebook, e-mail, blog, print advertising, etc. The customer then had a clear view of who hadn’t been reached and what percentage of customers who did have a discount code came from each channel. They then continued to track the channels over time with different activities to maximize the effectiveness in each channel.
Talking briefly about tools, Oliver felt that right now Radian 6 has a good toolset because it integrates with CRM. Spiral 16 and Alterian are also good enterprise-class tools that you can use. One that he likes for a Facebook and mobile-specific toolkit is Webtrends.
But he also felt that many of the free, platform-based tools such as Facebook Insights are getting better. Even Klout with all the negative sentiment it has received over the past few months, has some good statistics to dive into. There are many free tools that measure very specific things that you can bring together to give you a good picture of your return.
Ultimately your success depends on your goals and how you act reach them.
Social media is just a channel.
For example, a TV campaign for Pepsi can give a different result than a TV campaign for Coke. The failure or success lies in the execution, not the medium. The return can vary from company to company because of the understanding of how to best use that channel to achieve the desired outcome.
In his book, Oliver outlines a step-by-step process for how ROI can be measured within the social space:
- Establish a baseline: Know what metrics to use, the sort of results your peers get against these benchmarks, and how your own results have been trending
- Create activity timelines: Track where your business is advertising in different channels, what the PR department is doing, and what social media activities are happening.
- Monitor the volume of mentions: Use monitoring tools to track mentions across the web and track the sentiment (positive and negative) of those mentions.
- Measure transactional precursors: This includes mentions, but also includes website traffic, blog comments, followers, fans.
- Look at transactional data.
- Overlay all your data into a single timeline.
- Look for patterns.
- Prove and disprove relationships.
In closing Oliver says: First, get very clear about your goals with your social media campaign. Second, put your measurement systems in place. Third, sample your statistics. And finally, evaluate your progress to your goals.