As the year closes out, everyone (including me) will be looking back on the year and looking ahead to 2012 and stating their trends and predictions of social media. There is absolutely no doubt that the most common topic will be social media ROI.
So let’s get the reality on the table. Social media does provide a great value to organizations that take a well thought strategic approach and integrate it with other business and marketing programs. Measuring social media return on investment is very difficult to perform because of the inability to hardcode or hardwire social activities to a purchase. But there is no doubt socialization of a brand leads to increased sales. You want some data to back this up?
Bain and Company declared that “Customers who engage with companies over social media are more loyal and they spend up to 40 percent more with those companies than other customers” in their study “Putting Social Media to Work.” Just yesterday I listened to an interview with Wendy Clark, senior vice president of integrated marketing communications and capabilities at Coca-Cola Inc. where she stated that an independent group verified that Coca-Cola fans on Facebook (36 million +) were twice as likely to consume coke and 10 times more likely to purchase. Are these not results you want to see for your company?
When used correctly, social media is powerful because it sparks earned media and/or user movements. The earned media and user actions are stronger than other brand marketing activities because it is a voice coming from a “trusted agent.” Well planned social media endeavors are apt to cause word-of-mouth. It is the equivalent of asking a friend a good place to grab some dinner. Is that not a lead that yields a sale? But how do you track that scenario … pretty difficult.
Getting people interested, engaged, and loyal to brands are some of the great outcomes of social media. Word of mouth, another byproduct of social media, is the most powerful lead generation source. All of these things lead to sales. To use a hockey analogy, if sales is the goal, social media is the assist. The NHL does score players 1 point for goals and 1 point for assists when calculating individual scoring statistics. And yes, awareness, consideration, loyalty, and advocacy are all assists of sales and can all be measured.
As I’ve mentioned a number of times, here are some examples of how you can measure each of the assists to sales within a social media paradigm:
Awareness – look at digital assets you do not own (blogs, portals, other tweeter accounts, etc.) and count the number of mentions of your brand and URL mentions of your site. Use a social media monitoring tool.
Consideration – look onsite and measure the number of visits and pageviews to your site. Use Google Analytics.
Loyalty – derive an equation that includes number or fans, followers, comments, interacts, subscriptions, and return visits to your site. Use Facebook, Twitter, and community analytics as well as Google Analytics to measure return visitors.
Advocacy – look on and off of your digital assets and measure referrals, mentions, positive sentiment, retweets, and reblogs. Use social media monitoring tools, and site analytics tools.
The approach I take with clients is to first baseline measurements for the four categories. Then continue to look at the measurements either week-to-week or month-to-month. Do not worry about an individual period of slippage. You are likely to see a zigzag line over time, but normalize that line. Positive results are somewhere around a 10% increase month-over-month on the normalized curve. Put all line metrics on the same chart. Do you see relationships between the lines? Are you converting those that are aware to consideration? Those considering to loyalty? Those loyal to advocate? There is likely some degree of drop off from stage to stage, but is the percentage of drop off getting better over time? Also add in a sales measurement and see if you can determine a correlation between your social media measurements and sales. I often suggest that there is a “gestation” period between social media awareness and consideration to sales. There is a definite lag of these parameters. Do this type of measurement over a rolling 12 month period. Learn to modify your social programs based on measured results. If you implement this correctly and have a strategic approach to social media, execute with the right tactics, and modify your social program based on measured results, you will have a winning social media program that can be quantitatively justified.
Back to ROI … the technical definition of ROI is (sales – investment) / (investment). It is that sales component in the equation that makes it difficult to measure social media ROI. This is for two reasons: 1) social is not a channel for direct sales. While some use it successfully for sales, overall it is not the best use of social. 2) It is extremely difficult to tag a sale with a social media tracker.
As we roll into 2012 and social media is finally well accepted as a very strong brand marketing initiative, you must show measured value for your efforts. I am certain that somewhere along the line someone is going to (rightfully so) ask you for social media ROI. You now have the background to answer this question. It is now up to you to put a measurement tracking and reporting procedure into your social media program. Ready to deliver measurable results?
Make It Happen!