Social Media ROI – Don’t Be So Short Sighted – Think Longer Term

Hey … it was another exciting week … for me, one of those weeks where lingering concepts and thoughts jelled. As many of you know, I been sharing social media via this blog and SocialSteve at Twitter for better than 3 years now and I am persistently trying to convey the real value of social media (no snake oil play) and best practices. And if you are going to take a stance like that, you’re going to have to talk about ROI. Yes, I’ve covered this topic numerous times and put my recommendations on the table in a number of articles, but today, I have something a little different …

Time to think about social media in another way. Maybe we are just too short sighted about the whole thing. Social media is a channel to build strong brands. Strong brands are not built overnight. So if social media is about building brands and building brands takes some time, why shouldn’t we think about social media ROI over a longer period? Social media should not simply be a campaign or a promotion … it is a part of business for the long haul.

So this week, a few things happened that punctuated this view.

Piece 1 – No Quick Hit Lottery Wins

First, I met with someone that runs a boutique PR agency. We were talking about successful marketing and building solid relationships. She said to me in a very puzzled look, “Everyone wants something quick. They think you can just waive a magic wand and all of a sudden get tons of fans or followers.” I couldn’t agree more with questioning this convoluted perception. Furthermore, the most important parameter is the number of fans or followers that engage with your brand, not just the raw number of followers.

Piece 2 – Initiatives to Build Brand Growth

A bit later in the week, I saw a great Charlie Rose interview (is there ever a bad Charlie Rose interview :)) with TED Conference Curator, Chris Anderson. I suggest listening to the entire 18-minute interview, but one part of the conversation was specifically applicable to and supports the notion of social media ROI being looked at over a longer period.

Chris was asked what he has learned about the online space and answered …“When you give something away sometimes, it is the very smartest thing you can do. People pay $6,000 to come to TED, and when we first started to think about giving the talks away for free on the web, a few people thought we were crazy. That we were giving away the crown jewels. But as the world interconnects, those rules about giving away are kind of changing. It turns out that there is huge power to give something away because in an interconnected world it can then spread like wild fire across the web. And so far from killing the demand for the conference, it actually increased the demand for people to come and attend. And more to the point, instead of the conference being 800 people once a year, it’s moved to being about 750,000 people everyday now watch a TED talk.”

He went on to explain that TED (Technology, Entertainment, Design) has taken a life of its own. It has spawned to TEDx events that allow people to organize their own TED events and more than 1000 are held. Going forward, 4 or 5 are being held ever day throughout the world. That’s viral when you consider 1000 events with numerous participants. The TEDx events have turned into a content sourcing pipeline for the TED. Thus TED is “aided now by thousands of people around the world doing this – all of their own back.”

So when the initial discussion of making the presentations available for free when people paid $6000 to hear it live at the conference was made, the vision was long term brand power. I am sure there was an ROI objective there, but it was not a short term sales figure. It was about building audience that had affinity for the brand, became audience and advocates. Not only does this support the long term sales objective, but also supports sales growth. Profitable, sustainable growth – not short term sales objectives.

Piece 3 – Appropriate Social Media Metric Parameters

Then I read another piece that helped solidify this ROI mentality in my mind. Nick Elliot, a Forrester analyst, wrote an excellent article titled “Which Social Media Marketing Metrics Really Matter? (And To Whom?)”. The post highlighted a new report Nick authored called, “Social Media Marketing Metrics That Matter.” Elliot’s social media metric guidance is based on a model that breaks down by constituent:

I like this overall approach, but want to emphasize that while the monitoring frequency maybe (and should be) short term, the objectives should be long-term based looking for a continuous incremental growth. Short term fluctuations are not nearly as important and relevant as a long-term normalized positive growth slope.

Piece 4 – Influence and Enhanced Lifetime Value

Social media is about engagement – engagement with your customers and target market. Successful engagement builds brands. So what does it mean to have successful engagement? I really like the perspective laid out in the new released report “Liminal – Customer Engagement in Transition” was produced by Razorfish. In it, they state that engagement is “about more than just driving revenue – we believe it’s to drive LTV (lifetime value). But, not just that, either. At a time when some newer channels – such as social media platforms – make brand engagements public, it’s to build enhanced LTV – or what we call eLTV. eLTV is built not just on the strict monetary value of one customer to brand, but also on each customer’s unique power to influence others to be interested in it. All men and women might be created equal, but all customers are not. The trick is to identify those customers who can deliver eLTV – lifetime value that takes into account each customer’s ability to influence.”

Putting the All the Pieces Together

Social media ROI should not be looked at short term. You don’t just do something and expect quick hit measureable results. It is about building relationships that help build your brand and in the longer term producing measureable results. If we can all agree that social media is about building relationships, I’ll ask this – What strong relationships have you ever had that were built immediately?

Second, understand the power of sharing. I can personally vouch for the positive return on investment I have gotten producing my articles, insights and experiences for free on the web. I have been afforded great residual value in simply sharing – much like Chris Anderson described.

Third – understand that there are different appropriate metrics for different audiences and even though you may collect and deliver reports on them in short time periods, the true measure of your success must be looked at in a longer time period.

And fourth (but certainly not last), look to develop lifetime value customers and relationships. And when you develop these relationships, know how to distinguish those that are influencers – give them more – treat them extra special.

Now, are you ready to discuss social media ROI in your organization?

Make It Happen,
Social Steve

23 Comments

Filed under brands, measuring social media, social media, social media ROI, Social Steve, socialmedia, SocialSteve

23 responses to “Social Media ROI – Don’t Be So Short Sighted – Think Longer Term

  1. Excellent read. Now you have me thinking about what as I can give away.

    • Thanks – I suggested first thinking about who your target audience is, then determining what type of continuous content you can deliver to them that is of value to them. It has to be about giving something of value that makes them want to be part of your audience.

      Best,
      Social Steve

  2. My normal response to anyone asking for a social media ROI is that you wouldn’t have asked for a public relations ROI, last century pre-social networks. What we focus on at Flip.to ( http://flip.to ) is ROE or return on engagement. However, with that said, when we establish more than one touch-point with travelers, and convert customers into engaged brand advocates when they book a room (for example), you can follow them through every step of their journey and offer them discounts and promotions at pre-departure (airports) and during their travels – establishing an ROI tracking for airlines, airports and destination marketing venues.

  3. Social Media ROI, from my experience is the most asked question I have experienced, even more so of late with large and small companies. Because social media embraces a variety of marketing (hate to say this) intricacies from branding to PR to promotions etc, as a result each has its own ROI KPI’s. Social Media is not a one trick pony marketing tool.

    Thanks Steve for your thought engaging work.

    Michael Newhouse
    WCN Group

    • Thanks Michael – you are right that social media covers a re number of areas in marketing and thus it is hard to get to the ROI. But maybe some of these areas should be measured with appropriate KPIs and not ROI explicitly.

      Best,
      Steve

  4. As more and more people are clambering on board something they think will give a quick hit once they slow down and consider how to maintain sustainable growth, they will then start developing a more effective mindset. That understand the audience not imposes something on them whilst focusing on the rtelationship as you describe so well here Steve.

    Short term financial gain is still been searched by some especially those trying to convince others they have or will have the next big thing. The big thing is engagement and building relevant long term relationships, you knew that though.

  5. Sure short term ROI is important for a business as it is the long term branding effect.
    It is easy to show short term ROI on social media activities!
    With inbound marketing which also includes social media, businesses are able to execute a holistic marketing strategy and measure their results the smart way.

  6. Hi Steve,
    You can do a documentation on daily social media activities and the invested time and include this in an excel sheet.
    You could do a documentation of your month to month results (friends and followers growth) and then divide these numbers through your invested hours, your hourly working rate.
    Than you can get a good picture of how much it cost be active and to get followers and friends in each network. You can calculate down to the price per friend and follower if you like as well.
    To get a clearer picture about the profits made through social media activities you could setup different landing pages which for example lead friends from facebook to a FB related landing – lead capture page and followers from Twitter to a TW landing page – lead capture page.
    In the following lead nurturing process you can track each channel separately and calculate your previous efforts invested (hours/ time = dollars) to your sales results from the said channels.
    Additional idea: To get a better inside scoop about the value of the generated traffic which hits your landing pages, you could research the Google AdWords Keywords pricing.
    You will discover that your social media landing page traffic, made through PPC, would cost you a ton of cash.
    With social media it is free!
    This an additional ROI factor to be taken into account which also lowers the cost per lead through social media activities.

  7. Compared with PPC, it’s very close to free😉

  8. Emanuela

    Steve,
    thank you for the article, some of the best insights on the use of Social Media I have read so far.
    As a small business owner using Social Media as main marketing tool for a new online retail venture, I can attest to the fact that one of the great myths of Social is that it is free or close to it. You still have to invest resources in finding where your customers actually are, very much like for traditional media, otherwise you are literally trying to shout in a crowd and hope someone will listen. Not very efficient. Secondly you constantly have to create new, original, engaging content to keep the conversation and the interest alive, and this requires a substantial amount of resources as well. I could not agree more that this is an investment for the long term benefit and strategic building of a brand. TED is the perfect example.

  9. Great to see the LTV in there. Other things we could be considering is Brand Equity, company valuation, as well as the value brought in at the various parts of the customer funnel.

  10. What an ridiculous assortment of effectively executed articles, it looks like now-a-days everyone is just copy/pasting and stealing content all the time, however I assume there’s nonetheless hope in trustworthy blogging.

  11. This is an excellent post. I think that you’re spot on with the long-term approach to social media ROI. In fact, I would argue that ROI on all types of initiatives need to be looked at long-term, not just social media initiatives. The example you provide in Piece 1 speaks volumes: everyone wants a 6 month (or 6 week) payback if they are going to execute a project. This is not a practical approach and often, short-term gains lead to long-term problems. There are always those “low hanging fruit” type of projects out there, but big initiatives take time to provide the returns. With that said, those who do make the investment in long-term initiatives often see returns that exceed their expectations. I think this is especially true with social media.

    Great post! Thanks for sharing!

  12. Hey man, I really like those metrics and your stance on social media. Great to have another person spreading the good message. This rocks!

    P.S. – But, I didn’t come here because you sent me and Anthony the link. I came here because Anthony tweeted it. But awesome post.

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