ROI for Social Media Marketing: It's Complicated
At a recent Social Media Breakfast in Boston, Harvard Business School associate professor Andy McAfee had this to say about the age-old Return On Investment (ROI) question:
“There is not enough ROI for figuring out ROI. It is an intellectually bankrupt exercise.”
Got that? McAfee is not saying that measurement is not important, he suggests instead that it is simply not worth the trouble!
To be clear, when McAfee talks about the challenges in determining ROI, he is referring to Info Tech spending, as laid out in two posts published. According to McAfee, the sum of his argument was succinctly laid out in his Harvard colleague Bob Kaplan’s seminal “Strategy Maps” tome. I am going to excerpt and bastardize Kaplan’s text, for my fellow marketers:
"No marketing program has value that can be measured separately or independently. The value of marketing derives from its ability to help the organization implement its strategy … Marketing programs seldom have a direct impact on financial outcomes such as increased revenues, lowered costs, and higher profits. (Rather,) Marketing affects financial outcomes through chains of cause-and-effect relationships."
This is even more true in the Social Media era. Jason Falls wrote a rock-solid – and highly popular – post about Social Media ROI last month, containing this gem:
“The problem with trying to determine ROI for social media is you are trying to put numeric quantities around human interactions and conversations, which are not quantifiable.”
Or as David Meerman Scott is fond of saying, “What is the ROI of putting on your pants?”
At this point you’re thinking that I am anti-measurement. I’m not. I believe in measurement-by-objective: once you know which needle you want to move, decide how to make it move and how to keep track of progress.
The brilliant Peter Kim, a former Forrester analyst, outlined a framework for measuring Social Media in a September post:
- Attention. The amount of traffic to your content for a given period of time. Similar to the standard web metrics of site visits and page/video views.
- Participation. The extent to which users engage with your content in a channel. Think blog comments, Facebook wall posts, YouTube ratings, or widget interactions.
- Authority. A la Technorati, the inbound links to your content - like trackbacks and inbound links to a blog post or sites linking to a YouTube video.
- Influence. The size of the user base subscribed to your content. For blogs, feed or email subscribers; followers on Twitter or Friendfeed; or fans of your Facebook page.
There's an "x-factor" that comes into play well: Sentiment. The spirit driving user participation matters. The net result of these adds up to a score for social media engagement.
So what's the monetary value of a visit, comment, link, or friend? Well, the only honest answer is "it depends." Only you know how much these interactions matter to your brand, regardless of industry, channel, or competitive results.
The just-as-brilliant current Forrester analyst, Jeremiah Owyang, also offers a whole series of posts related to the measurement issue – but my favorite of the group notes the fundamental difficulty:
(Until) we can measure the impact of a conversation between an employee and a prospect at a coffee shop, it (will be) difficult to measure social media…
What are you trying to accomplish? … (The) trick is to figure out what your goal is first – is it to spread a message among a community? Is it to reduce support costs? Is it to learn from your community? In each of these cases you’ll have to then assign the right attributes to measure against.
So, yea, basically it’s tough to measure ROI for Social Media. This doesn’t mean it is not worth doing! It just means that the justifications that professional marketers will make to qualify for budget are as likely to be anecdotal as analytical/quanitifiable.
What is the dollar value of responding humanely to an angry customer blogger in their public forum, or, say, on Amazon.com? Have you made that customer happier? Maybe. Have you made other visitors feel good about your publicly-displayed good intentions and responsiveness? No doubt.
But did the effort motivate more sales? How could you tell? There is no “I am buying this product because ____” form in the Amazon Checkout Cart.
How much money do you save by having the PR agency monitor Amazon.com, or the blogosphere, so that your customer support reps can instead be on-the-phone with live end-users? There could be a formula for that, but I’m no math whiz.
How much value can you place on the fact that the professional communicators at a PR firm trained the Customer Support reps on tone, responsiveness, etc., before letting them loose to represent the brand in the blogosphere? You can’t measure the value of something that didn’t happen (i.e., a blow-up in the blogs based on a poorly-trained public spokesperson).
Doth I protest too much?
Ironically, for all the hemming and hawing, it is sometimes easier to show “needle movement” via traditional PR. For one start-up client, “new users” was the metric we were asked to improve. They came to us with a base of 5,000 alpha users, and our outreach to traditional and social media outlets led to an additional 200,000 users in just two weeks! How’s that for ROI?
Lessons?
Know your objectives in advance. Start small, when possible: think “proof of concept.” Track the metrics obsessively. Make sure that your interactive marketing efforts are tied to the sales funnel (e.g., your vp of sales ought to be able to determine where most leads are coming from online). Report frequently.
Lather, rinse, repeat.
Continue reading here: Real-world Ethical Dilemmas In Social Media: Upcoming Series
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