There is little doubt now that social media is a necessary piece of any corporate marketing mix. The bigger question these days seems to be “how do we monetize social media?” Real examples of a financial Return on Investment (ROI) from social media marketing programs are rare. Unfortunately for most e-commerce teams, having a huge flock of followers often doesn’t translate into revenue.
For C-Level management to take your social media efforts seriously, you need to validate a direct tangible impact that either reduces costs (e.g. reduced customer service calls) or increases sales. At the moment, most social media initiatives are doing neither.
Both Dell and Sony have both stated that they have generated real sales from social media program, but these are definitely exceptions. What’s interesting is that most organizations don’t even measure social media engagement at a basic level let alone try and attribute sales to their efforts. It’s not that there aren’t any tools to do so, it’s just that unless you’re running a direct marketing campaign links to actual sales from social media programs are often tenuous. And where you have tenuous links, then ROI becomes very subjective and only as good as the assumptions that go into the formula. In my experience, the C-suite doesn’t like subjective!
There are a number of sophisticated thinkers and writers on the ROI of social media and Olivier Blanchard is one. He says “You have to understand that the value of a pair of eyeballs, of an impression, is subjective until that pair of eyeballs actually does something. Then the body attached to that pair of eyeballs becomes one of three things: A browser, an influencer or a transacting customer. The first two don’t actualize a financial impact (yet). The third does. That’s where we want to focus when dealing with ROI.”
An industry wide problem is at hand, social media ROI means so many different things to different people. In economic terms, ROI is simply defined as “the monetary rate of profit or return relative to the money invested.” Therefore it goes that ROI in social media should simply be defined as the monetary profit or return relative to the money invested.
ROI is not synonymous with results, KPIs or value. ROI is not the only or perhaps even the most relevant way to define success in the social media business. ROI is a financial metric. ROI can only be measured in terms of revenue generated, cost savings or costs avoided. It is transactional in nature. There is ample evidence on twitter, blog posts and in industry articles that many people say ROI when they really mean results or value.
Don’t get me wrong, impressions, click through rates, conversations, and influential advocates are all important. These performance metrics are at the heart of social media engagement but until you are able to tie the “Return” to the “Investment” those measurements are a vague representation of your success (or failure).
Your C-Level management wants to know how your allocation of time and money has either saved the company money $$$ OR generated an increase in revenue $$$. Phrases like Return on Engagement sounds like soft and squishy marketing speak because engagement is a means to an end, not an end in itself.
What does all of this mean? Organizations must determine a measurement strategy for their social marketing activity that aligns with internal goals, objectives and cultural capabilities. This requires knowing where you want to go with your social programs and how you intend to get there.
I’m a practical guy. I know it may be impossible at this point in time to determine the specific ROI of your efforts. But there is no excuse for not tracking key non-financial measures that contribute to your company’s goals.
Are you looking to shift sentiment? Are you hoping to generate leads? Are you striving to increase the share of voice? Are you hoping to reduce the number of inbound service requests? Increase the number of influential advocates? Do you have these metrics defined and implemented in a way that is measurable?
The world would be so much easier if we didn’t have to be accountable for results. But that’s not the way business works. A company exists to create shareholder value, so that’s what we should do — and be PROUD of it!