The Question is Not Can You Measure Social Media ROI? It is Should You?

A lot of interesting discussion has centered around the question of measuring Return on Investment (ROI) on social media in recent weeks.  The main themes are based around whether a) it is possible to measure ROI in social media and, b) how do you measure ROI in social media.  I would suggest that the question should be “Should we be measuring ROI in social media?”
The question of whether it is even possible to measure social media becomes all the more interesting once you have the input of a few marketing professionals. In a recent discussion on one of the LinkedIn Groups, Jacob Morgan argued that
“Marketing across the board has always been understood to be a “black box,” meaning nobody could really ever justify the ROI (and oftentimes impact) of marketing spend … The issue at large is marketing accountability as a whole, and social media is just one component of that.”
(See also his blog post fro MarketingProfs – Forget Social Media ROI, What About Marketing Accountability? – http://www.mpdailyfix.com/2009/07/forget_social_media_roi_what_a.html)
By ‘marketing accountability’ Jacob is referring to to the need to understand all the factors involved in the marketing infrastructure before you can ‘measure’ anything – such as knowing the customer life cycle, the target audience, the average price per transaction, the acquisition and/or retention costs, and so on. Either that, he argues, or pick abstract objectives and measuring impact – which can include brand building.
Roger Kondrat added -
“Despite these marketing accountability deficiencies the vast majority of organisations don’t seek out any marketing research either bespoke or off-the-shelf to support their objectives. Without research asking your business partners to give you a plan with relevant ROI or even Impact metrics is a huge huge request, one could say an impossible one”.
In a separate blog post, Olivier Blanchard  - http://thebrandbuilder.wordpress.com/2009/07/09/roi-and-social-media-101-financial-vs-non-financial-impact/ defines ‘ROI’ – in business terms – the ‘R’ = $ investment > action > reaction > non-financial impact > financial impact (measure the ROI here). With clear goals and ‘marketing accountability’ financial ROI should be readily measurable. But financial returns don’t really give you the whole picture when it comes to the benefits of social media.
Alex Schultze of Social Media Academy points out that -
“On the surface social media is a marketing and sales gig. Under the hood it is a major cross functional engagement model. Using customer engagement models for product feedback, customer integrated support models, social network based product launch, social media sentiment analysis for procurement planning and of course sales and marketing.”
Social media is many things and whereas it is relatively easy to see how you could achieve a measurement at the non-financial impact stage, measuring financial impact may not give you the whole story.
Therefore, it begs the question should even be trying? One of the most interesting – and telling – comments on the subject were from Lionel Menchaca of Dell in a recent presentation at BlogWell San Francisco.
http://vimeo.com/5484057  from the BlogWell San Francisco Case Study Presentation – http://www.socialmedia.org/video-case-studies/ – Dell’s Digital Media Manager Lionel Menchaca gave some important insights into the ongoing development of Dell’s social communities. Interestingly, right at the end of his talk and in answer to a question from an audience member about ROI, Lionel said that driving sales was not part of what they are trying to do, even though it may result in sales – so they don’t worry about that or try to measure it “that’s not the goal on the enterprise side, or the consumer side either for that matter”.
“I frankly don’t care that we’ve done $3 million in revenue through Twitter – but I do care that Stephanie Nelson is out there answering questions and engaging with customers.”
Their’s seems to be much more customer service orientated approach to social communities than sales orientated  - is there a lesson to be learned here? Is that the point when it comes to social media – as soon as you actively try to drive sales to a community you go back to the old methods of PUSH marketing and they are all turned off. Dell still manages to integrate their Dell.com eCommerce operation with their community activities, but they don’t do it in an overt way – just in a ‘how can we help the customer better’ sort of way. Isn’t that how it should be? Although costs are always a consideration for any company, perhaps, in terms of measuring a ‘return’ on something as encompassing as social media, the non-financial impact of engaging the community of our customers is as far as we need to look. However, Jeramiah Owyang today emphasized the  “The Importance of Social Media Audit”s – http://www.web-strategist.com/blog/2009/07/28/the-importance-of-a-social-media-audits/
Just as brands conduct audits of inventory, employees, and budgets on an often annual basis, they should also survey the landscape to find out what customers, influencers, partners and employees are participating on the social web. Audits are key for identifying priorities, benchmarking previous efforts, and planning for future efforts; the same applies for social media.

A lot of interesting discussion has centered around the question of measuring Return on Investment (ROI) on social media in recent weeks.  The main themes are based around

a)  whether it is possible to measure ROI in social media and,
b)  how do you measure ROI in social media.

I would suggest a better question is “Should we be measuring ROI in social media?”

The question of whether it is even possible to measure social media becomes all the more interesting once you have the input of a few marketing professionals. In a recent discussion on one of the LinkedIn Groups, Jacob Morgan argued that

Marketing across the board has always been understood to be a “black box,” meaning nobody could really ever justify the ROI (and oftentimes impact) of marketing spend … The issue at large is marketing accountability as a whole, and social media is just one component of that.”

(See also his blog post from MarketingProfs – Forget Social Media ROI, What About Marketing Accountability?)

By ‘marketing accountability’ Jacob is referring to to the need to understand all the factors involved in the marketing infrastructure before you can ‘measure’ anything – such as knowing the customer life cycle, the target audience, the average price per transaction, the acquisition and/or retention costs, and so on. Either that, he argues, or pick abstract objectives – ‘we want to be the leaders in X’,  and measuring impact , say as part of brand building.

Roger Kondrat added -

“Despite these marketing accountability deficiencies the vast majority of organisations don’t seek out any marketing research either bespoke or off-the-shelf to support their objectives. Without research asking your business partners to give you a plan with relevant ROI or even Impact metrics is a huge huge request, one could say an impossible one”.

In a separate blog post, ‘Defining Social Media ROI once and for all, and understanding the action-reactive-return narrative’, Olivier Blanchard  defines ‘ROI’ – in business terms, as -

R’ = $ investment > action > reaction > non-financial impact > financial impact (measure the ROI here).

With clear goals and ‘marketing accountability’ financial ROI should be readily measurable with today’s analytical tools. But financial returns don’t really give you the whole picture when it comes to the benefits of social media.

Alex Schultze of Social Media Academy points out that -

“On the surface social media is a marketing and sales gig. Under the hood it is a major cross functional engagement model. Using customer engagement models for product feedback, customer integrated support models, social network based product launch, social media sentiment analysis for procurement planning and of course sales and marketing.”

Social media is many things and whereas it is relatively easy to see how you could achieve a measurement at the non-financial impact stage, measuring financial impact, though possible, just may not give you the whole story.

Therefore, it begs the question should we even be trying? One of the most interesting – and telling – comments on the subject was from Lionel Menchaca, Digital Media Manager for Dell, in a recent presentation at BlogWell San Francisco. Menchaca gave the audience some important insights into the ongoing development of Dell’s social communities. Interestingly, right at the end of his talk, and in answer to a question from an audience member about ROI, Lionel said that driving sales was not part of what they are trying to do, even though their activities may result in sales – so they don’t worry about that or try to measure it “that’s not the goal on the enterprise side, or the consumer side either for that matter”, he stated.

“I frankly don’t care that we’ve done $3 million in revenue through Twitter – but I do care that Stephanie Nelson is out there answering questions and engaging with customers.”

Their social community building seems to be based on a much more customer service orientated approach than a sales approach.  Is there a lesson to be learned here? Is that the point when it comes to social media – as soon as you actively try to drive sales to a community you go back to the old methods of PUSH marketing and you just end up turning them all off. Dell still manages to integrate their Dell.com eCommerce operation with their community activities, but they don’t do it in an overt way – just in a ‘how can we better help the customer’ sort of way. Isn’t that how it should be? Although costs are always a consideration for any company, perhaps, in terms of measuring a ‘return’ on something as encompassing as social media, the non-financial impact of engaging the community of our customers is as far as we need to look. That is not to say there is no accounting.  Only today, Jeramiah Owyang emphasized the  “The Importance of Social Media Audits”.

“Just as brands conduct audits of inventory, employees, and budgets on an often annual basis, they should also survey the landscape to find out what customers, influencers, partners and employees are participating on the social web. Audits are key for identifying priorities, benchmarking previous efforts, and planning for future efforts; the same applies for social media.”

Such an audit would soon highlight whether you were getting ‘value for money’ or not and, in the end, isn’t that what you want to know?

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16 Responses to The Question is Not Can You Measure Social Media ROI? It is Should You?

  1. Pingback: Social Media Trends That Social-smart Answers Part 1: How Social Media is Defined « Social-smart : The Social Media Marketing Blog

  2. Pingback: How Social-smart Answers the Social Media Trends PART TWO: Barriers to Social Media Use/Adoption « Social-smart : The Social Media Marketing Blog

  3. Pingback: How Social-smart Answers the Social Media Trends PART TWO: Barriers to Social Media Use and Adoption « Social-smart : The Social Media Marketing Blog

  4. Pingback: How Social-smart Answers the Social Media Trends PART FOUR: How Marketers are Measuring the Effectiveness of Their Social Media Efforts? « Social-smart : The Social Media Marketing Blog

  5. Hi (anonymous person),

    I really liked this blog post and you definitely hit the nail on the head on the third prong of this huge discussion – ‘should we measure ROI’.

    I think its great that this discussion is now starting it means we are maturing and getting traction on the ROI discussion (in my mind anyway) and thought leaders like yourselves are now thinking ‘what next’.

    Before the ROI chat we focused on developing new techniques, learning how to measure impact and then blurring the line between ROI and impact which wasn’t good.

    Then we recently (as with all of social media) moved to ‘hey, you cant talk about ROI like that’.

    Once we move on as a group from that chat to what you have very effectively foreshadowed, I have no doubt that question will get serious attention. In may seem to you that we (Social Media lovers) are getting stuck on ROI but in case you do I would caution you to reflect on the broader history of the chat and see it as a sequence of logical discussions that will likely include discussion points.

    Thanks for bringing it to the spotlight and thank you for quoting me. I was very honoured.

    R.

    PS. As a participant in many group blogs of the years, I highly recommend distinguishing between authors. As a reader it is frustrating not knowing whom is the writer.

  6. Jasper Blake says:

    Hi Roger,

    Thank you for your input to this important discussion – I was very happy to quote you.

    I also agree with anonymity-wise and will see what we can do about that. Most of the recent posts are mine, though Mark Rowntree is also a contributor from time to time – our details can be found on the ‘Who We Are’ page at the top of the blog. Your feedback is very much appreciated.

    Cheers, Jasper Blake

  7. Jasper Blake says:

    Here is another interesting insight I read today on Viral Garden – http://moblogsmoproblems.blogspot.com/2009/08/social-media-mavens-interview-with-besy.html

    Mack Collier interviewing Best Buy’s Gary Coelling –

    When it came to ROI, Mack asked “Are you focusing more on numbers, or helping your employees connect and share information?”

    Gary’s reply was “What are numbers? I don’t care, it doesn’t interest me. In fact it makes me sleepy. The other reason is that my sponsors have never asked for it. Not only do they see the value but they understand what happens when you measure things you don’t fully understand.”

    The key point I think is that if measuring is important to you then those measurements have to be planned into process from the very beginning. We are working with one large corporate client where measuring results is very important to them. Knowing that from the start helps us to create specific programs and channels with measurement of results very firmly in mind. It certainly can be done!

    I notice that it is always the big boys who don’t worry about ROI – is it that they are in a position where they don’t have to worry about ROI whereas the smaller guys do, especially in these hard economic times? Do the results of the big boys indicate that smaller companies should not worry about ROI – the main argument of the post? Or is that too hard for the smaller guy on a smaller budget to swallow?
    Answers on a postcard to . . .

  8. Pingback: 5 Fundamentals for Companies Looking at Social Media « Social-smart : The Social Media Marketing Blog

  9. Jasper Blake says:

    Interesting – Mack Collier also poses the question on his blog – Are We Too Worried With Finding the ROI of Social Media? -http://moblogsmoproblems.blogspot.com/2009/08/are-we-too-worried-with-finding-roi-of.html
    and provides some additional feedback from social media managers that he has interviewed on what they do or do not track in terms of ROI. His takeaway from these insights -

    “1 – None of them are mentioning the direct ROI (in terms of dollars) on their social media efforts.

    2 – All of them can see the VALUE in their efforts, and apparently, so can their companies.”

    It is always useful to get the inside story from people who are actually doing this stuff – thanks to Mack for his input on this question.

  10. Hi Jasper

    I think there is a dichotomy of opinion here and it is based on experience with either larger or smaller organisations.

    Larger organisations such as Walmart or Best Buy are focus on brand building or maintenance.

    Smaller organizations tend to focus on (most often) sales e.g. ROI for a variety of reasons of which I am hoping I don’t need to go into here.

    So I think it really depends on who the client is and what their needs are, but you are right often their need for an ROI number will fall along the ’size’ dividing line.

    Also I find Gary Coelling’s comments wholly ignorant and typical of someone in an expanding field where growth is easier to acknowledge or the work is ’sexier’ than say buying ad spots on TV. I will wait patiently to see how his tune changes in 3-5 years, as it will no doubt when his work inevitably falls under greater scrutiny.

    Future questions that come to my mind are ‘Gary how come we lost 5,000 followers this week or why have we only grown by 10,000 in first 6 months of this year’. When Gary doesn’t have the answer tell him to give me a call ;)

    Roger

  11. Jasper Blake says:

    Here is an interesting article regarding the relationship between CMOs and CFOs regarding spending on digital media. If the CMO can help the CFO understand the concepts and measurability of bought vs. owned vs. earned media, “companies can fine-tune their marketing to ensure their investment is driving the maximum results. And that’s a business case the entire C-suite can support.”

    http://adage.com/cmostrategy/article?article_id=138724

  12. Jasper Blake says:

    An interesting statistic from a post on Mashable today – “84% of Social Media Programs Don’t Measure ROI” – http://mashable.com/2009/09/22/social-media-programs-roi/ – though it seems that a lot of those don’t measure ROI because they don’t know how to. For those still seeking answers on this topic the comments to this post contribute some valuable insights.

  13. Jasper Blake says:

    Here is an interesting post (and link to a report) relating to the importance of a Customer Communication Management (CMM) strategy as a holistic approach that goes beyond what has become a fragmented system of Customer Relationship Management (CRM) – Beyond CRM: “How to improve customer interactions -
    Time for a new strategy for communicating with your customers”. http://software.silicon.com/applications/0,39024653,39534335,00.htm

  14. Jasper Blake says:

    Yet another great example of a company who doesn’t measure ROI of their social media in dollars – from Mack Collier’s Viral Garden Blog. In an interview with Patagonia Blog (Cleanest Line) managing editor, Kasey Kersnowski, Mack asked about measuring ROI – Kasey’s response was clear:

    “Through conversation you build a relationship, and the bottom-line of any worthwhile relationship isn’t dollars, but trust.”

    Here is the link to the full article – http://moblogsmoproblems.blogspot.com/2009/09/social-media-mavens-interview-with_30.html

  15. Jasper Blake says:

    For those intent upon measuring ROI, a new post on Mashable appeared today which readers might find useful – http://mashable.com/2009/10/27/social-media-roi/ – including some measurement tool suggestions. Key takeaway – “You can’t evaluate the ROI accurately without a baseline.”

  16. Pingback: It is about the Conversation… Not ROI silly. Huh? -

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