The topic of social media measurement is almost as hot as the topic of social media. With only a few years of consistent data, we still remain in the shadow of the econometric models of the olden days, built for measuring the outcomes of PR and branding efforts.
The novelty and uncertainty of the field certainly haven’t stopped the burgeoning cottage industry of self-inaugurated gurus. This combination of ambiguity and hucksterism might scare off the ROI-driven marketer.
Now I am certainly not a social media marketing nay-sayer. Like most marketers, my gut tells me that there’s great opportunity here. However, the scientist in me demands evidence. And in business, evidence is ultimately in the ROI.
Do ROI and Social Media go together?
I was quite perplexed by one author’s argument that while social media marketing creates value, it may not deliver an ROI. I will leave the debate about whether social media marketing should deliver an ROI in the first place to another time. Today, I wanted to turn to a small sliver of a large study that MarketingSherpa published earlier this year in its Social Media Benchmark Guide.
This chart (click on chart to enlarge) displays how frequently various metrics are utilized by marketers as they attempt to quantify the effect of their social media efforts. My immediate impression was that there were broadly two types of metrics listed here:
- the more traditional website analytics and bottom-line-related measurements and
- buzzword-laden, social media-specific measurements with intuitive, but likely only anecdotal, relationships with outcomes.
What this chart wasn’t telling me was whether marketers were likely to mix these approaches, or were loyal to either one or the other. I enlisted MarketingExperiments’ experienced research analyst and statistics guru, Arturo Silva, to help get a little deeper into the data.
What Marketers Tend to Do
Using principal component analysis, he was able to paint a different picture from the more flat utilization frequency account. Without getting into the technical details of the loading plot, what this diagram (click on diagram to enlarge) shows us is how likely each of the responses above are to be given in conjunction with one another. In other words, which activities these marketers are likely to measure together.
The vectors indeed bunched up quite nicely. Leads Generated, Search Engine Rankings, Visitors and Sources of Traffic, and Sales Conversions or Other ROI Metrics are grouped together toward the top (by the way, the exact direction of the vectors here is irrelevant—what’s important is their confluence).
Network Size, Competitive Share of Coverage, Engagement with Influentials, and Progress toward Social Media Objectives also were tightly grouped. This means that if a marketer was measuring network size, she was also likely measuring the other three items I just listed, and was less likely to measure the first four.
ROI vs. non-ROI Metrics
Altogether, even though the non-ROI metrics are not all plotted next to each other, they stand in stark contrast to the more traditional and ROI-based ones. That is, marketers are typically looking at either one set or the other.
I am sure that a big part of the reason for this separation has to do with the tools that marketers use. Traditional analytics packages have little or no support for social media measurement, and conversely the new crop of social media management tools lack web analytics components and don’t connect with transactional data. The converse may be true as well—marketers choose their tools based on their interest in either side of the story.
Measure what matters most
What concerned me was how poorly some of the metrics that I would consider critical for marketers, like Leads Generated (for B2B) and Sales Conversion (for everyone) compared with measurements like Network Size and Sentiment, which haven’t proven to be predictors of bottom-line outcomes.
Paris Hilton may be considered a highly trusted influencer according to some unscrupulous Twitter data-crunching tools, but aren’t her Twitter stats just a reflection of the pre-existing celebrity status? Twitter stats (and I am focusing on Twitter because its simplicity makes the new metrics easier to understand, not just because it’s an easy target for pundits) are a measurement of reach, but not of impact. Content analysis tools can measure sentiment of comments, but not their effect on the business.
Intuitively we know that more reach means more impact, and nicer comments mean more satisfied customers (who will influence others). However, measuring the impact of each would require either taking a deep dive into the psyches of a large number of social media participants, or (more realistically) looking at how all the metrics, all the way down to resulting changes in revenues and expenses, fluctuate in response to the changes in the social media end (or rather, top) of the funnel.
So how do you determine the ROI of social media?
In today’s live web clinic, MarketingSherpa’s Research Director, Sergio Balegno, will join me in discussing how the value of social media activities can be derived from bottom-line results, giving business-level meaning to intermediate metrics like Quality of Commentary.
I want your feedback as well. Leave a comment and let me know how you measure your social media efforts. Our favorite comment will win a free seat (a $499 value) at an upcoming stop of the 2010 Online Marketing ROI Tour.
UPDATE: Congratulations to Jon Rognerud, our favorite commenter and winner of the free seat at an upcoming stop of the Tour.
Measuring ROI is critical for executive buy-in, especially right now with social media still in its infancy. That said, it’s also critical to pay attention to non-ROI measures or you may miss out on a lot of the value being created (positive word of mouth is notoriously hard to measure, but extremely valuable).
Great presentation today. Thank you for sharing your insights.
Thanks for your presentation today Boris — it was very informative.
I work with ProcessMaker, an open source business process management software company. Since our target clients are already “hanging out” online and very technology-savvy, we use social media as an integral part of our marketing strategy to complement our SEO efforts, publicize our company and product blogs, and to build our open source developers and users community.
Open source software is unique because we want our visitors to participate actively in the open source community surrounding the product by developing, translating, and using the product, so its important for us to not only catch the eye of our users and developers but to also actively keep them engaged with ProcessMaker. We’re trying to use social media to accomplish just that.
Thanks again for the presentation today, and keep up the good work 🙂
Very helpful to be given a compass! Thank you for the valuable information.
good interaction on Twitter. loved your presentation about SOCIAL MEDIA. Do you also have this for B2B?
Great article. I think that the web clinic was a great followup to this post, as it outlined further how social media ROI can be determined by defining goals early in the strategy process. This definitely fits what I already know about measurement in other areas of my life. After all, if I don’t know what success looks like at the outset, how do I know how to direct my actions? Thought provoking article, thanks!
@robert brady yes, your ROI is critical for executive buy-in and critical to keep your organization in business. @ the end of the day if what you are doing on social platforms does not ultimately generate revenue or reduce a business-associated cost, either through streamlined customer service, augmented pr, word of mouth, twitter followers, facebook fans, more people giving you high fives @ social networking events – then your social media campaign is a social media hobby! you might as well put that time toward skydiving or punching keys on you cell phone to fit the next shape into a row on tetris.
Heya, Boris! Great blog post, get this question a lot. Measurement comes in different formats, as we’ve seen. All business owners want to know the “true” ROI (return on investment, effort & increase in sales, its impact on bottom and top line results) from social media marketing. Easy ways to check activity in the marketplace for example, is tracking via free tools like Google Alerts (your keywords, brand name(s), competitors, adjacent keywords), socialmention.com and Tweetbeep, for example. Monitoring the traffic and referrers (where links come from) in your Analytics package is a related, and ongoing effort. When you start to see traffic rising, you can create or optimize existing landing pages, and test pages against each other (A/B), and get more valuable data there. Listening first, and tracking activities & mentions is the first step and easy to do with the free tools, starting small. Cheers, Jon
Hi Boris, Today’s presentation was well-organized and higlighted the use of social media in building ROI through customer service and product and brand recognition… communicating and setting expectations using these channels is vital. The maturity model was particularly useful in gauging the ROADmap to success. I was glad to see the list of the various firms that provide free and paid analysis. Thanks for sharing these insights. Best to you and look forward to future information and webinars.
Valerie
Yet Another Great Presentation! Need to add 2 things:
The social media presentations are getting better– I suppose that’s a function
of platform maturity and more cases to draw from. In any case MEx stays on top of the game so this is definitely the place to be.
And then there’s this:
A business investment is supposed to produce ROI, and I can’t understand why it’s frustrating (or surprising) that projects can’t be sold in the C-suites with neither hard nor soft dollar value metrics to support them.
How much responsibility is the marketer willing to accept if the exec buys in (on faith) and is dissatisfied with his/her expected outcome down the line? We’d probably find it a much easier sale if we’d stake our jobs on it. But we won’t.
@jon. Your’re on the $$. Don’t know how I missed your comment before. Problem is (as has been well documented on MEx) getting buy-in on things like testing + serious tracking and analytics is a major challenge in and of itself. I guess those are OUR “micro-conversion” steps in the C-suite path to acceptance.
Twitter delivers value. It enables people and business entities meet thereby increasing awareness whether it be personal or business information. It is really an effective marketing and networking tool.
Wow! Cool beans! Thanks for the selection! Cheers, Jon
@Robert Brady
I agree that there is value in other than the easier-to-measure transactional activities, but I suggest it would be a giant leap from saying that word of mouth IS important to saying that a particular effort (e.g., increasing the number of Facebook fans) HAS, in fact, effected it.
@Brenda Sleeper, @Kate Millea
Thank you Brenda and Kate, hope the discussion was useful!
@Amy Wyron
Thank you, Amy! Your example would probably make an excellent case study. Not every company, especially B2B, may be ready to achieve a positive ROI using social media. However, you described a highly engaged target market, one that’s prime for effective social media marketing–I would be very curious to learn more about your results. Please let me know if you are interested in sharing your story!
@Cristina Andriescu
Cristina, thank you for your participation on #webclinic! My take on social media for B2B vs. B2C is that the principles are really unchanged. As I mentioned in a previous reply, B2B might be tougher because, aside from Linkedin, not all target audiences view the online social networking tools as part of their “business” life. Some may not be engaged at all. This is why understanding objectives and building out metrics is critical before jumping into the hype… I would be curious to learn about your company’s particular challenges with using social media!
@Nate Kartchner
Thanks, Nate! Simply deciding at the outset how success would be measured fits both with scientific method and business planning, doesn’t it?
@neal rodriguez
Speaking about high fives at social networking events–see you here in New York on the 15th!
@jon rognerud
Great points Jon–it really doesn’t have to be complicated or intimidating to get started in social media. I was at one of our events in Jacksonville, FL, and myself had to be reminded of all the free tools available.
@Valerie Watson
Thank you Valerie, glad you found the web clinic helpful!
@Kamau
Thank you for introducing the idea of “soft dollar value” measurement. It’s much different to assign a meaningful dollar value to an activity or an occurrence than to throw one’s hand up in the air and give up on measurement altogether, isn’t it? Measuring some forms of marketing effectiveness can be difficult, but shouldn’t be automatically ruled out as impossible. Great points, and thank you for the kind words.
An excellent article, thanks! I retired from a corporate environment, so I had a natural inclination to using ROI measurements when I got involved with Social Media. However, I also agree that measurement can be divided into two categories:
1) Soft Key Performance Indicators (KPIs) that I consider trend indicators. As an example, we established a Twitter account with a goal of getting 500 specific type of followers by a date certain. No hard ROI, but attaining that goal is a trend indicator in our plan.
2) Hard Key Performance Indicators. Here something concrete that we can associate a real value with must occur. We started off we a goal of attracting travel writers and travel bloggers to get exposure in the print and online media for our destination. Media exposure is worth something, so it is a hard KPI. After that, we measured special promotions and the actual business resulting from the promotion — that is the best type of hard KPIs.
@Jack Wilson
Great example! I am curious how you distinguished business that resulted directly from the promotion and business that was generated otherwise. Tracking social media efforts with hard data–using promo codes, special URLs, etc., may not always be amenable to the efforts employed, and even then doesn’t capture the PR/branding aspect of the effort (which may be far greater than direct response). On the other hand, trend measurement (as simple as Google Insights for Search) may be too generalized and require at least a year’s worth of historical data to possess at least some validity.
Great stuff, Boris. I blogged about your post at my AllBusiness.com blog (owned by Dun & Bradstreet). I created a list of the many, many social media ROI tools (195+ tools for measurement and monitoring).
Great Article! Sad I missed the presentation… five months back, but still! It is very difficult to put a price on the effects of social media and sometimes that’s all clients want to hear. “How much money will I make?”
ROI measurement can be notoriously difficult for Social Media Marketing. Numbers are easy (visitors, re-tweets, fans, etc, etc) but correlating this to other KPIs that sit easily in the Managament Information numbers can often be a challenge.
In a survey of 219 respondents, when asked to indicate the three most valued business objectives, more than two-thirds of company respondents (69%) said their organizations value increased sales, and 65% cite increased profitability. Echoing Matt Chandler’s comment, measuring direct ROI from the use of social media platforms is a tricky business, Softer brand objectives are not as high on the list of priorities, but 53% of respondents cite improved customer satisfaction and just under half include more brand recognition (49%) and better brand reputation (48%) in their three most important business objectives.
As such, the ROI of social media encompasses much more than simply direct increases in sales or revenue and perhaps one of the most important factors is simply increasing traffic from relevant and interested potential clients as if a company can increase the volume (and quality) of people visiting their sites they are more likely to be able to convert these visitors into customers.
For a full report on the value of social media (including a dedicated section on ROI, from where I obtained my figures) check out this link: http://ecly.co/9XJLkk