Measurement has become a topic that has transfixed our industry, particularly in the realm of social media marketing and ROI. Everyone is asking what’s the ROI of social media marketing. Answers range from “engaging with your consumers” to “gaining business intelligence” and even “building customer loyalty.” Those are not ROI.
ROI is a financial term to determine how much income was earned from marketing efforts. The only real answer to “what is the ROI of X” should be a number.
(Income Earned from Tactic – Tactic Expenses) / Tactic Expenses = ROI
ROI is only one measure of success for a business, however. Social media can help a business in a variety of areas outside of ROI, which is where some of those other definitions, such as “build customer loyalty” come from. Depending on where your business is going it might be more effective to focus on building awareness, improving your brand’s reputation, increasing referrals or something else. Only you and your business can determine what you’re trying to accomplish, but the only way you’ll know if you accomplished anything is through the right approach to measurement.
Start from the Top
The measurement conversation should start from the top. What are we trying to accomplish as a business? That question determines everything moving forward. Marketers can use the answer to that question to determine how to drive toward a business goal with specific tactics and measurement against those tactics.
It’s worth nothing that no large business objective can be accomplished with just one tactic. For example, social media cannot be solely responsible for increasing sales. Social media can be one component of a larger initiative that includes traditional media, digital advertising, etc.
Once you have your larger business objectives in mind, you can apply specific objectives to tactics.
Your business objective may be to increase sales by X% within X days. One of the strategies to accomplish this goal may be to mobilize existing brand advocates to make a purchase and encourage non-customers to try our product. The tactic could then be to launch an exclusive discount for Facebook fans that becomes a better discount when they share it with a friend. This type of effort will have a tangible ROI.
Then again, a business might see that it has a massive online reputation problem, so the objective becomes shift online brand mentions from 60% negative to 60% positive. One tactic could be to identify and build relationships with bloggers and give them the reasons and the means to talk about your brand and increase positive mentions. This type of effort won’t have a tangible ROI, but it clearly has value for the business.
The point is marketers must start from the top when they ask what social media or any marketing initiative is going to accomplish for them. Then determine the tactics and metrics that tie back to accomplishing that goal. The question isn’t “What is the ROI?” The question is “Did we meet our objective (ROI or something else)?”
Measurement is a Commitment
One of the most common complaints about social media measurement is that an ROI doesn’t exist or it’s not possible to measure. This couldn’t be further from the truth. Social media measurement for your business that goes beyond vanity metrics (e.g., # of likes, # of retweets, etc.) to something far more valuable is a commitment.
Marketers have the tools to measure the effectiveness of their social media marketing efforts. One of those is market mix modeling, which helps marketers determine the effect of various marketing tactics on sales to inform success and forecast a tactic’s future effect on sales. The question is: How badly do you want this information? This kind of analysis can be time and data intensive, but it does provide answers that many marketers are asking for.
Measurement is an Investment
Social media measurement is not a dark art that’s impossible to unravel. We have the answers. Marketers need to first determine what they want to accomplish and then commit to measuring against that objective.
It can be difficult to move forward with more advanced levels of measurement, but it can be a big step in moving a business forward. Measurement should not be viewed as a line item but as an investment to improve marketing decisions moving forward, alter a course of action for improvement and prove the value of the marketing department.
We can throw vanity metrics at social media all day, but board members and CEOs don’t care about the number of followers a Twitter profile has. They care about what various efforts, including social media, are doing for the business. This question can be answered if we want to approach marketing efforts with business objectives in mind and then measure ourselves against how we deliver on those objectives.