Measuring the ROI of Social Media
Posted on 23. Jan, 2009 by Pete Hollier in Social Media
Social Networking is a great past time for online consumers, they meet new people, listen and voice different opinions and generally enjoy themselves or they would not be participating.
Well it is most certainly not the case for business. It is becoming increasingly important for businesses to interact with current and potential customers online, consumers are expecting your business to be online for them.
I may as well be blunt. Businesses operate for one reason and one reason only To Make A Profit.
So businesses are now faced with the necessity of participating in Social Networks with their consumers. If they don’t chances are the consumer will click on your competitors site who happens to participate the way they want them to.
But the bottom line here is, operating a Social Media Campaign is a business expense.
For many businesses this expense come mainly in the form of time, there is little need for additional software and many of the most popular Social Networks have no membership fees. The old business adage “Time is Money” most certainly is appropriate for Social Media.
To succeed in Social Media time and commitment is required, Social Media is not a part time marketing initiative.
Measuring The ROI
The Cost of Social Media Campaigns
To simplify the cost aspect of the ROI equation we will assume the only cost associated to your Social Media Campaign is the time of yourself or your employees. This is easy to determine. However, to ensure we are able to estimate the ROI it will be necessary to determine how much time will be spent on the Social Media Campaign and what the cost is for that time.
The ROI of Social Media Campaigns
The Metrics
The success of Social Media Campaigns comprise of both tangible and intangible measuring metrics. Now I am sure it can sound confusing but its not.
The Baseline
Regardless of the metrics used to analyze the productivity of the Social Media Campaign prior to initiation, it is important to determine the business’s current status of both tangible and intangible measuring metrics. If this is not completed it is not possible to provide accurate data on the performance of the Social Media Campaign.
Intangible Metrics
Much of the success of the campaign is based on customer experiences, such as:
- Customer satisfaction
- Improved communication
- Better service response
- Higher brand perception
It is not easy to really nail down these benefits to the business but it seems to me that common sense would suggest that improving these types of things benefit the profit margins of the business.
I am not going to dwell on these items at this time, but I have asked a Marketing and Market Research expert to Guest Blog on this topic next week,
Tangible Metrics
There are quite a few methods available to accurately measure effectiveness.
Leads and Sales
Well lets be honest here, this can’t be hard to work out providing we did our baseline work. Your company should know the value of a new lead from previous marketing campaigns and just plain old experience. The sales part should be pretty easy as well.
The Web Site
Ok, now I am back online and back into my comfort zone and there are some very identifiable items that can be measured accurately with your web logs and an Analytics Program such as Google Analytics. But again – Don’t forget the baseline.
Some of the more identifiable items to monitor to ascertain the effectiveness of your Social Media Campaign include increase in:
- New visitor numbers
- Returning visitors
- Newsletter subscribers
- Page Views
- Time on site
- Adsense ad revenue
So in a nutshell (If you know where that saying came from please let me know) Social Media is as measurable as any other form of promotion and in some ways even easier to determine. Social Media Companies are availble to work with you on your Social Media Campaign to ensure you get a measurable ROI..
Keep in mind our Guest Blogger next week who will fill us all in on measuring the intangibles of Social Media. However, consider this if the intangibles are measurable then they are no longer intangible.
Social Media \Campaigns can be measured for ROI
Written by: pete@seowizardry.ca a Social Media Consultant offering Social Media Optimization Services
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11 Responses to “Measuring the ROI of Social Media”
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The Sales part is by definition the MOST important part as it is directly responsible for contributing to that bottom line you start the article with.
Suggesting it is “easy”… perhaps, but it can be difficult to determine the indirect effect that social media marketing may have – and will depend on the measurement tools a company has at its disposal or baseline work as you put it. The other factor with sales is loyalty – and a big part of sales is keeping the customers you already have…
Hi Pete, Carson,
You are wise to look at both the issues of selling Social Media as a business application and the challenges and opportunities related.
I am an older guy so not at the age you would expect to lead this charge into new media but I do have an outstanding marketing, brand and innovation background so I guess that has always kept me hungry to be a year or two ahead.
Here’s my two cents or, if I am correct, two billion, opinion.
Social media is a culture that has to be respected. Just like email was great before spammers abused it.
It has the potential, properly applied, to add great value in how we learn, talk to customers, create trust, value, meaning and as a company, use that insight to fuel growth and renewal.
I have been partnering with a team that has now put out a near perfect consolidation of the best analysis methods, new technologies and a social media component that will blow the measures you have listed, and separated as tangible and intangible, into the ultimate delivery engine for a number of large initiatives underway today – including innovation management, sustainability, renewal, being market insightful and at a lesser level, the old standbys…customer satisfaction, technology migration. energy management, resource management.
We had our first three presentations last week and many Fortune 1000 and F100 companies were present. Yes, what we are doing is as deep as it is complex, but the value we deliver as a continuous core process gives companies their best shot at business renewal and resiliency. We are targeting companies over $100M as they get it so if you have clients that size and see a connection, as we do, feel free to contact us. We want 6 companies to engage with to illustrate the outstanding ROI we will deliver.
That said, you are asking the right questions and heading in the right direction.
Our new company will be Sixth Central. I am working on the new web site this month.
Bill Van Eron
Nice article. I think you have the basics down but for the companies I’m working with they’re more concerned with some of the downsides and unknowns of social media. I get questions about employees providing recommendations, potential leaks of company sensitive data, and disgruntled employees posting bad reviews referencing the company. Could you ask the expert to comment on these issues?
People have been talking for some time now about incorporating Social Media as an integral part of a companies’ marketing, PR and even sales efforts. It is nice to see a more substance in the discussion. I know that I was slow to adopt Social Media with my company (www.kineticast.com) because I needed to understand the ROI and not just hear the “You need to be doing this” argument.
In addition to needing to understand the ROI, like Denis Cooper’s comment brings up, I saw a lot of downside too. In addition to the issues Ms. Cooer brings up, I was and am concerned about uniformity and consistency in messaging. I would be interested in the expert commenting on this issue as well.
In regard to your asking about the origins of the phrase in a nutshell, if I were to speculate, I would guess that it attempts to illustrate the concept of taking a larger concept and summarizing it into something very small. This summary would be so small that, if it were to be thought of in physical terms, it could be held in a container as tiny as a nutshell. While I have not heard this explanation before, I think it makes sense… and now I get the last word to those that scoffed when I decided to get a degree in philosophy!
oh this poor poor topic
i’ve been saying all along the social media (and online media) is more measurable than traditional media. to every exec who wants to know how they can measure the social media ROI I say, “how do you measure the roi from the 2 million commercial or that giant billboard you purchased?”
great breakdown, i had something similar on a post i wrote a few months ago
The activities and #’s can be measured, but what about activities that are already a loss for companies? Tech Support or customer service. There is no monetary gain from these services, just possible retention and they are amazing areas for social media to flourish.
I feel like ROI is a terribly misused term for social media and is so narrowly focused that it misses a whole scope of how social media is effective.
If Sales Guy works the social media channels and makes one sale bringing in $35 in new sales that day. Then the ROI if that particular moment is able to be determined. But what about all the people that one customer tells both online and offline? Via email or word of mouth where your analytics can’t reach? How are you measuring the ripple effect of your actions and applying them to the ROI of past moments in time?
These very real and very common side effects of good customer communication are not as easily measurable but still stem from that one situation where the ROI was pitiful, but came back later to pay off in spades as the ripple got wider.
I think one of the things people forget when trying to calculate the ROI of social media that more than likely it’s going to be a loss at first, that it’s about building a community and planning for the long haul. ROI has long been associated with quick turn around and has that very real perception of “if i invest today what do I get tomorrow?”
“Social media consultant guy” did a great job of explaining how to measure social media efforts on his blog and I wrote an eBook about social media ROI (available on my blog under eBooks on the left). Without a DOUBT social media is more measurable than a traditional campaign. You can gather data and analytics from every single visitor, info from every friend, and disect every conversation because it’s on the screen, but you can’t always determine the long lasting, or continual effect of conversation.
Do you think Dell, Comcast, Zappos, etc started out with the idea of “Well if this doesn’t make x amount after x effort then this won’t be worth it”? No, they started their efforts to help their customers. To fix problems (which in a public forum gives them good press automatically via their actions). To help cement the “bond” between them and their customers.
I’ll get off of my soap box now, but when it comes to the “ROI” of social media the investment isn’t really about you or your business, and that’s one of the reasons so many businesses have a hard time with it. It’s about your customers and investing in them (just like tech & cus service is). The ones who realize this are the ones who have been the most successful.
It’s very important to get down to financial values – I’m convinced that this will be the number 1 criteria for upcoming projects in the next months (if not years…)