Redefining Social Media ROI– Apply Relevant Metrics to Justify, Manage… Business Cases: Measure Things That Really Matter…

Social media ROI– businesses don’t do social media to be social, they do social to grow sales, revenues… Yet, according to ‘Social Media Today’; 70% of online businesses that utilize social media don’t bother to measure ROI (return on investment)… According to Megan Marr; it’s very shocking to discover that the majority of online businesses are conducting social media completely in the dark with no clues as to how it contributes to success of their businesses…

To be fair, it’s not entirely their fault – social media ROI is a difficult beast to tame and some say that measuring the ROI of social media simply can’t be done– Like traditional billboard advertising, some businesses  put-up social media campaigns and hope for the best, trusting that something good will come of their efforts.

roi thM5FPJKTI

Part of the reason that measuring social media ROI is so difficult is that many businesses try to measure social media success through the social channel, examining metrics such as; ‘likes’, ‘tweets’… which are almost impossible to monetize… also, most businesses are more concerned with website analytics, such as; visits, subscribers, downloads… But, these don’t relate to the bottom line, which may confuse many business  executives who think in terms of traditional ROI… On the other hand, many experts think that measuring ROI in social media is just a waste of time…

According to John Heggestuen; many brands are moving away from metrics that purport to measure ROI on social media… They’ve realized that social media isn’t– a transactional engine or sales machine, so they’re dropping half-baked indicators that gauge secondary effects, such as financial return… Instead, new metrics evaluate social media strategies, such as; audience-building, brand awareness, customer relations… but again, these indicators are very difficult to monetize…

In a report by ‘BI Intelligence’ they indicate that social media strategies are evolving and rapidly changing, as follows:

  • Decline of ROI metrics: Between 2010 and 2013, the percentage of businesses using a revenue-per-customer metric on social media went from 17% to 9%, according to the February 2013 CMO survey. The percentage tracking conversion rates also dropped, from 25% to 21%.
  • Even as the vogue for ROI indicators fades, social media budgets are ballooning: On average, businesses expect to devote 9% of their budgets to social media in 2014, and 16% by 2018, according to the same survey.
  • Exceptions: Of course there are exceptions to the move away from ROI. Some social commerce applications and direct response campaigns will achieve measurable results on Facebook, or other social networks. And the end of the ROI-fever definitely doesn’t mean that all metrics can be thrown out the window…

In the article Social Media and ROI by Olivier Blanchard writes: If you are having trouble explaining or understanding social media ROI, then here are some pointers:

  • You are asking the wrong question: Do you want to know what one of the worst questions dealing with the digital world is right now? This: What is the ROI of Social Media? It isn’t that the idea behind the question is wrong. It comes from the right place. It aims to answer two basic business questions: Why should I invest in this, (or rather, why should I invest in this rather than the other thing?), and what kind of financial benefit can I expect from it? The problem is that the question can’t be answered as asked: Social media in and of itself has no cookie-cutter ROI. The social space is an amalgam of channels, platforms and activities that can produce a broad range of returns (and often none at all). When you ask; What is the social media or ROI? The question is too broad; too general. It is like asking what the ROI of email is. Or the ROI of digital marketing. What is the ROI of social media? I don’t know… what is the ROI of television? If you are still stuck on this, you have probably been asking the wrong question.
  • So what is the right question? The question is not; What is ROI of social media? but rather; What is ROI of [insert activity here] in social media? To ask the question properly, you have to also define the timeframe. Here’s an example: What was the ROI of [insert activity here] in social media for Q3 2013? That is a legitimate ROI question that relates to social media…
  • The unfortunate effect of asking the question incorrectly: What is ROI of social media? asks nothing, everything at once. It begs a response in interrogative: Just how do you mean? The vagueness of the question leads to many interpretations of the term ROI– from being a simple financial calculation of ‘investment vs. gain from investment’ to becoming any number of made-up equations mixing unrelated metrics into a mess of nonsense… They measure nothing…
  • Pay attention: Don’t think of ROI as being medium-specific; think of it as activity– specific. Are you using social media to increase sales of your latest product? Then measure the ROI of that. How much are you spending on that activity? It doesn’t really matter where you measure your cost to gain equation, e.g., email, TV, print, mobile, social… it’s all the same. ROI is media-agnostic. Once you realize that the measurement should focus on the relationship between the activity and the outcome(s), the medium becomes a detail: ROI is ROI, regardless of the channel or technology or platform… That’s the basic principle. To scale that model and determine the ROI of the sum of an organization’s social media activities, take your ROI calculations for each desired outcome, each campaign driving these outcomes, and each particular type of activity within their scope, then add them all up. Can measuring all of that be complex? You bet… Does it require a lot of work? Yes…
  • ROI isn’t an afterthought: Think about what you will want to measure ahead of time, what metrics you will be looking to influence. Think more along lines of business-relevant metrics than social media metrics, such as; ‘likes’, ‘follows’… which don’t really tell you a whole lot…
  • ROI doesn’t magically lose its relevance because social media is about ‘engagement’: If your business is for-profit and you are looking to use social media in any way, shape or form to help your business grow, then all questions regarding the ROI of investing in social media activity are relevant. Whereas, concepts, such as; Return on Engagement, Return on Influence, Return on Conversation… are all bullshit. Nice exercises in light semantic theory, but utterly devoid of substance, but they are not in any way substitutes for Return on Investment (ROI)…
  • ROI isn’t relevant to every type of activity: Not all social media activity needs to drive ROI. As important as it may be to understand how to calculate it and why, it is equally important to know when ROI isn’t really relevant to a particular activity or objective… Social media’s value to an organization, whether translated into financial terms (ROI) or not, is determined by its ability to influence specific outcomes. This could be anything from the acquisition of new transacting customers to an increase in positive recommendations… In other words, for an organization, the value of social media depends on two factors: (1.) The manner in which social media can be used to pursue a specific business objective… (2.) The degree to which specific social media activity helped drive that objective… In instances where financial investment and financial gain are relevant KPIs, this can turn into ROI. In instances where financial gain is not a relevant outcome, ROI might not matter one bit… Knowing when and how ROI matters (or not) will, (a.) help you avoid costly mistakes… (b.) hopefully help you make smart decisions when it comes to assigning precious resources and budgets to specific social media/business programs…

roi thYQTRN8OY

In the article ROI in Social Media –Where Does it Belong? by Steve Woodruff writes: It’s silly to ask; What’s the ROI of Social Media? Instead, we should ask; What’s the potential ROI of this or that specific social media tactic or campaign? Because you don’t measure the ROI of an assumed cost of doing business… You don’t ask for the ROI of a medium; you determine if that medium/channel/approach is going to be a viable and potentially profitable place to be.

Then you create a strategy… That’s why we should instantly dismiss the question; What’s the ROI of Social Media? It’s exactly the wrong question… However, once a specific strategy is defined and measurable tactics developed, then you move into ROI territory… But then again, as alternative, you can always take comfort in the ‘return on doing nothing’…

Social media’s value is not accountable as a ‘money-in-vs.-money-out’ model but rather as a ‘squishy metrics’ model, such as; user engagement, building trust, growing reach, gain insights around user behavior… Also, social media has other values that are not easy-to-quantify, and measuring results, such as; ‘growth’ year-over-year may be more important than measuring an activity, such as; ‘likes’…

According to Scott Allen; asking– What’s the ROI? It’s not a bad question. Surely, if you’re going to investment money on something in the business, it should generate some kind of return… or at least reduce some visible and measurable loss… However, the value of social media that’s immediately visible and measurable is just the tip of the iceberg… The bulk of the social media benefits-values are below the water line, and not represented in the major corporate social media initiatives, but in daily process of helping every employee do their job more efficiently, effectively… You must start looking at social media as a tool, and then you’ll begin to realize its real-full power… which is the 7/8 that’s below the water…

roi radian6-social-media-roi-300x282

According to Robert Mansson; the matter of measuring ROI within social media is still questioned by many people, but it’s an absolute  necessity to measure the effectiveness of an investments within a company… Although social media involves the use of business resources, it’s not easy to understand exactly how to measure its effectiveness… Some experts suggest– divide it into phases or, even better yet, into campaigns… But, what ever the approach there must be a ‘start time’ and ‘end time’…

According to Robert W. Joseyln; I’m a numbers guy and I would never make a financial investment without knowing what the ROI is, or likely to be at a later point in time, and then what it actually was– such that I can determine whether to stick with the investment, or not… Social media isn’t about directly selling something; it’s about– building, maintaining relationships…

When it comes to an ROI on social media, I am constantly told to just believe it, without proof… When I ask for proof, it’s as if I’m publicly committed some crime… But I’m still waiting for proven ROI results beyond a one-off anecdotal success… Then, only when I see a measurable ROI, will I be a true believer in social media for business– until then I have doubts on its real value in business…

As Winston Churchill once said; however beautiful your strategy is– you must, even occasionally, see tangible results…