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?