How to measure the ROI of social media is a highly contested topic in the marketing world. In this paper we examine how you can start to apply metrics to your campaign, giving you a solid indication of your social media ROI.
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MEASURING ROI
The ‘Holy Grail’ of Social Media Marketing
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INSIDE SERIES Measuring ROI: The ‘Holy Grail’ of Social Media Marketing www.pomegranate.co.uk 1
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MEASURING ROI
The ‘Holy Grail’ of Social Media Marketing
The question of how to measure the Return On Investment (ROI) of social
l media marketing has long been a bone of contention. With the lightening
spread of social media usage, the lack of standardised metrics and the
pressure on marketing departments to prove they’re getting ‘bang for the buck,’ the
financial viability of social media marketing will remain a highly contested topic in the
business world, at least for the foreseeable future (Fisher, 2009).
A study by Knowledge Networks in 2012 revealed 15,100,000 consumers go to social
media channels before making purchasing decisions. Social media is where actual
and potential customers are interacting and engaging, with the activities taking place
on social media sites helping to shape the way they think and feel about brands and
products.
“ Social media is where actual and potential customers are
interacting and engaging, with the activities taking place on
social media sites helping to shape the way they think and
feel about brands and products.
Marketers and brands are fully aware of the benefits of social media marketing. Take
for example Oreo’s “You Can Still Dunk In The Dark” Tweet during the Super Bowl
blackout this year. In less than 24 hours it had received over 15,000 retweets and
20,000 Likes on Facebook, catapulting Oreo into the social media marketing Hall of
Fame and generating unprecedented levels of conversation and positive sentiment
around the brand.
Although such virility is hard to come by, it is the immense capability of the social web
to propel a brand to the forefront of consumers’ minds, for a fraction of the cost of
a print or television campaign that continues to make it so alluring to marketers and
brands alike. However, the ROI of such campaigns can be incredibly hard to measure
– how can an increase in customer engagement or reach on social media sites
translate to hard numbers and how does it impact on the bottom line?
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3. From the plethora of encouraging statistics and the array of awe-inspiring case
studies available, using social media as a marketing tool would seem like a no-
brainer. However, the inability to accurately measure ROI has been cited by marketers
as one of the most significant barriers to the adoption of social media tactics. It is
believed that over 70 per cent of online businesses that utilise social media as part
of their marketing strategy do not measure the ROI (Cohn, 2013). This figure seems
astonishingly high considering the millions of pounds made from online sales each
year.
WHAT IS THE PROBLEM?
Some marketers have tried to reinvent or change the meaning of the ROI acronym –
Return on Influence or Return on Engagement is the new ROI. Others have suggested
that ROI is old fashioned thinking and not in tune with social media. However, the
problem lies with the way in which marketers are approaching the measurement of
“
ROI, not in the meaning or applicability of the acronym.
It is believed that over 70% of online businesses that utilise
social media as part of their marketing strategy do not
measure the ROI
Understandably, managers need hard numbers to know whether or not their
investments in social media marketing are worthwhile. However, this ‘show me the
return’ approach is very short-term oriented; building ‘relationships’ and having
‘conversations’ takes time in a world where customers are very much in control of their
online experiences. Viewing social media as “just another” marketing communications
vehicle is a mistake, as it is largely a consumer-controlled environment, not a marketer
controlled one (Hoffman and Fodor, 2010).
Social media marketing is ultimately successful because it is about people, not money.
Community, conversation, sharing – all the social media ‘buzz’ words are people or
consumer-centric. Social media is not about sales, market share or profit margins;
web analytics alone are no longer adequate because customers are talking to each
other, with the majority of conversations taking place outside of a brand’s site (Benson,
2008).
However, the main problem is that social media has not been connected with the
bottom of the funnel were the conversion, sale or customer retention takes place. This
has resulted in executives having misaligned expectations as to where social media
fits into the sales funnel (Stelzner, 2013). Marketers are constantly under pressure
to measure everything they do and are all too often being forced to justify the cost
of social media marketing using conventional advertising metrics, regardless of their
effectiveness.
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4. “ Viewing social media as “just another” marketing
communications vehicle is a mistake, as it is largely
a consumer-controlled environment, not a marketer
controlled one
Traditionally online marketers have been able to quantifiably measure the results of
their efforts using safe, defined metrics: Unique Visitors, Cost per Clicks, Page Views
etc. However, when attempting to transfer these traditional metrics to social media
marketing, the results have proven to be inconclusive or inaccurate, as they fail to take
into account the qualitative aspect of user interactions. This often results in campaigns
that expect the customer to work for the brand, when in fact it should be the other
way around.
However, something must be measured in order to gauge effectiveness, so simply
bumbling along without clearly defined metrics in place is not an option. If you have no
goal, then you cannot measure against it and you cannot manage what you cannot
measure, so setting the objectives from the outset is a must.
SO WHAT CAN WE MEASURE?
A simple Google search of ‘ROI social media’ throws up over 2 million hits, many of
which put forward convincing and compelling arguments. With the overwhelming
amount of conflicting information available, it is impossible for marketers to know
which way to turn.
“ As an agency we are seeing clients request far more
accountability from their marketing across the board. At the
early inception of social, people were ecstatic to just track likes
and followers but the realisation has quickly set in that this
does not give an accurate indication of campaign effectiveness,
or ROI. The social sphere is a highly measurable environment
and it is essential that we try to track the complete user journey
across the marketing mix
Duncan Thomas,
Managing Director of Pomegranate Group
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5. Stelzner (2013) suggests we dispose of all social media lingo such as fans, followers
and likes and start thinking in terms of other marketing channels and what you
measure there. For example, if you measure how much you spend on content, agency
fees and total spend on social media marketing, then compare it to the value of the
conversions from social media, you can begin to understand the ROI. Therefore, the
question is not whether to blog or to post on Facebook, but what set of objectives
need to be achieved. The objectives will then determine which set of tools with their
corresponding metrics can best achieve them.
Although Stelzner (2013) makes a valid point regarding the current focus on social
media Fans and Likes being too narrow-minded, his approach still fails to emphasise
the importance of the qualitative data that can be extracted and measured by social
media sites. Another major flaw in this approach is that customers may not match the
social journey you expect them or want them to take. For example, someone may see
a brand’s Facebook post then return the following day to the brand’s website directly.
“ The focus should be on measuring the results of individual
social campaigns, as opposed to social media as a whole, as
this provides brands with a greater indication of the results
of their efforts
Despite its flaws, this approach will still provide marketers with a solid indication
of their ROI, but the focus should be on measuring the results of individual social
campaigns, as opposed to social media as a whole, as this provides brands with a
greater indication of the results of their efforts. For example when Southwest Airlines
added podcasts, videos and other social tools to their ‘Nuts About Southwest’ blog,
page views increased by 40 per cent and visitors stayed 26 per cent longer on the
company’s website (Berg, 2009).
Big brands such as Kellogg and companies such as Procter and Gamble have also
seen some success in terms of measuring ROI in this way. Procter and Gamble’s
social networking site links customer investments in brand conversation to sales. The
site has over 350,000 members and is credited with market response increases of up
to 30 per cent (Cummings, 2008).
Hoffman and Fodor (2010) go on to argue that turning the traditional ROI approach on
£££ its head is essential to measuring social media. They suggest that the focus should
be on consumer motivations to use social media and measuring the investments
customers make as they engage with brands, as opposed to calculating returns in
terms of customer response. Such an approach takes into account the long-term
returns of significant corporate investment in social media marketing, along with short-
term goals such as increasingly monthly sales. Marketers should therefore steer clear
of measuring traditional objectives such as direct sales or increases in market share
from social media.
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6. CONCLUSION
It is important to recognise that measuring social media ROI is far more complex than
the basic cost versus sales equation, and whilst it is possible to determine whether
or not it is having a positive impact on you business, it is not currently possible to
determine its full effect. Ian Lurie (2013) suggests that smart organisations value social
media within their own context and that everyone from the marketing team to the CFO
needs to understand that the value measured is only a fraction of the real value.
Moreover, the accuracy of ROI will be dramatically increased if you measure it from an
activity specific point of view, as opposed to a medium specific point of view.
Asking what the ROI of social media is can be likened to asking what the ROI of the
companies’ telephone system is (Pickstone, 2013). Measuring the ROI of a two-week
social media campaign as opposed to the ROI of a company Facebook page is a
much better stance to take. Such an approach combined with defined objectives and
overall business KPIs will help to tie activity to outcome and give a more accurate end
result.
Once you have defined and researched your target audience and determined your
social media campaign objectives, constructing a simple table such as the one below
can help to get some basic metrics in place for measuring the ROI:
OBJECTIVE ACTION METRIC
Increased footfall in a Drive people from a brand Use a facebook specific
store Facebook page to visit a voucher code or a specific
physical store link to an online booking
system to track users
bookings
Increase brand awareness Build ‘buzz’ around brand Monitor the number of
on Twitter brand mentions and pre-
defined keywords
However, there is reason to be optimistic about improving the effectiveness of social
media marketing, as the social web is a highly measurable environment. In a well-
designed social media campaign, consumers are likely to spread brand-related
content, share their experiences and tweet about the brand. Trying to measure such
behaviours lets marketers measure the bottom-line of their social media efforts whilst
focussing on strategies that take into account the objectives of both the brand and
the online customer. Although there will always be some behaviours that cannot be
accurately traced, such as offline word of mouth, carefully planned and executed
social media campaigns can offer up phenomenal opportunities for the cost-effective
measurement of customers’ online investments in a company’s brand (Hoffman and
Fodor, 2010).
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7. In summary, Chad Wittman (2013) makes a great point when he asks, “What is the
ROI on a glass of Coke Zero versus a glass of orange juice?” Should you look at the
sugar content or the calorie content? Coke Zero will win from a numbers point of view
every time but you know the orange juice is the better choice. Although brands need
to have an understanding of their social ROI, they must be careful not to become too
obsessed with it, as you then risk losing site of its actual value.
GET IN TOUCH
If you would like to find out more about how social media marketing could help your
business, get in touch.
E: hello@pomegranate.co.uk
T: +44 (0)20 7336 7322
www.pomegranate.co.uk
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8. REFERENCES
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Available at: http://conniebensen.com/2008/05/10/social-media-measurement/
[Accessed: 28th March 2013].
Berg, P “Southwest Airlines: Nuts About Online Communication” (presentation at the
Inbound Marketing Summit, Boston, May 27-28, 2009).
Cohn, M (2013). How to Measure Social Media ROI – Is It Even Possible? [online]
Available at: http://socialmediatoday.com/compukol/1121551/how-measure-social-
media-roi-it-even-possible [Accessed: 27th March 2013].
Cummings, B (2008) “J&J Takes Baby Steps Toward Social Media,” Brandweek,
Apr.13.
Fisher, T (2009). ROI of Social Media: A Look at the Arguments. [online] Available at:
http://www.emoderation.com/roi-in-social-media-a-look-at-the-arguments [Accessed:
28th March 2013].
Ghali, P (2011) Calculating Your Social Media Marketing Return on Investment.
[online] Available at: www.icontact.com/static/pdf/Calculating_Social_Media_ROI.pdf
[Accessed: 28th March 2013].
Hoffman, D and Fodor, M (2010). Can you measure the ROI of your social media
marketing? Massachusetts Institute of Technology.
Lurie, I (2013) What 5 Experts have to say about Measuring Social Media. [online]
Available at: http://www.seomoz.org/ugc/what-5-experts-have-to-say-about-
measuring-social-media [Accessed: 27th March 2013].
Stelzner, M (2013) Measuring Social Media: How to Determine Your ROI. [online]
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determine-your-roi/ [Accessed 28th March 2013].
Sterne, J (2010). “Social Media Metrics: How to Measure and Optimize Your
Marketing Investment,” Wiley, pp. 272.
Pickstone, R (2013) What is the ROI of Social Media? [online] Available at: http://
measurethis.co.uk/social-media-roi/ [Accessed: 27th March 2013].
Wittman, C (2013) What 5 Experts have to say about Measuring Social Media.
[online] Available at: http://www.seomoz.org/ugc/what-5-experts-have-to-say-about-
measuring-social-media [Accessed: 27th March 2013].
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