With the recent economic downturn there has been an increase in the number of people contacting our company wanting to understand the ROI for social media. Blogs on the subject are increasing and you see the subject mentioned on sites such as Twitter on a regular basis. Jason Falls wrote a blog entitled, “What is the ROI for Social Media?” which recently spurred a follow-up post by Paul May, “Social Media Measurement: Yes, ROI Matters.” Both are good reads.
A consistent mistake many online commentators are making is equating ROI to money. As a CEO, I understand the link. Marketing dollars, especially now, are precious and it is responsible and prudent to ensure that every dollar you commit to marketing shows a measurable and positive return on your bottom line. As a CEO who runs a Social Media company it is imperative we have simple case studies to help our clients understand the importance of relevant social media strategies and implementation. In addition, we also use Social Media to promote our company. Like most CEOs, I do want to find out if I commit x dollars towards my marketing what return I am going to see on my bottom line and how I am going to measure that. By the way, I want to see this information efficiently too.
This current economic climate leaves little room for experimentation. No company can afford to gamble on something that might bring huge rewards, but might just as equally fail.
In my research for this post I came across a blog post that I think sums up where many people are going wrong. Jay Deragon suggests that you cannot look at social media as having an ROI. You can’t quantify it in monetary terms, and if you are trying to do so then you are approaching it incorrectly. Jay argues that trying to establish a definitive ROI for social media is wrong, and he suggests that you spend your energy on ensuring you are participating and engaging with your customers.
While I appreciate what he is trying to get at, I disagree with his argument. Measurement and analysis are key to any social media strategy. ROI refers to Return On Investment, and this return does not necessarily have to be measured in money.
Take, for example, the 2008 U.S. presidential election. Obama, as part of his comprehensive marketing campaign invested heavily in social media for his campaign and his return on the investment was winning the election. Another example can be found in the increase in social media around sustainability. The return on investments here can be identified as the change in people’s behavior and the rise in their level of awareness.
If achieving your goal is the ROI, then start off by understanding your objectives and setting your goals. Understanding how you will define your ROI has to be the starting point.
I teamed up with Alasdair Munn to create this checklist on how to get the most out of your social media campaigns, in short, the best bang for your buck. Every situation is different and requires a different approach. The following serves to illustrate how a typical campaign might be approached.
- Start with a full analysis of your current position.
- What are you trying to sell? To whom/who cares?
- What marketing is working for you?
- How are you measuring the success?
- What is not working?
- What is your , 1, 3, 6 month, 1 year or 5-year plan?
- Do a SWOT analysis.
- How strong is your brand? How are you measuring it’s strength and weakness?
- Is using social media the right decision for your company?
- Look at what your competitors are doing.
- What is your positioning statement?
- What are they doing right?
- What are they doing wrong?
- What is your USP?
- How can you leverage that?
- Where are the gaps? And/or how are you going to go about identifying the gaps?
- Understand your audience, their learning styles and how they are/are not using social media.
- Set goals and objectives. What do you hope to achieve from your social media campaign? Do you understand social media? It’s a good question to look at.
- Engage an agency or person to create a social media strategy. There are few entities/individuals who can truly do this well: Your strategy needs to align to your social media goals and objectives, your organization’s 5-year plan and all other marketing initiatives. Your strategy will also need to assign roles and responsibilities as well as set budgets and action steps. Elements of your strategy might include:
- Understand which social media tools are best for your goals and objectives. These may take the form of social networking (Facebook and LinkedIn), sites that allow people to discover and share content (Digg, Magnolia, Delicious, Stumbleupon, Newsvine, Reddit, etc.), video clips or photos on YouTube or Flickr, branded software, images, blogs, forums, user comments, and much more.
- Who is responsible for executing the strategy? What resources can you afford to dedicate to your strategy?
- Understand which measurement and analytical tools work with those chosen social media tools. For example, Google Analytics, AideRSS, Xinu, and Feedburner are useful, helping companies leverage SEO efforts.
- Integrate the social media campaign into your entire organization (get buy in). Terry Starbucker has written a good blog post about the effectiveness of social media in a business context. His view concentrates on SMO (Social Media Optimization) and how, among other things, it has to be relevant to the organization and how the people within the company need to truly understand social media and how to “speak in it”.
- Integrate your social media strategy into your CMS and/or LMS. This is not appropriate to all social media strategies and companies; however, through integrating social media tools into your CMS and your LMS you can create effective communication tools, both external and internal, that have measurement, analysis and functionality built in.
- Start by listening and understanding the rules. Different social media sites and tools have different rules of engagement. They have their own norms, rules and protocols. Jumping straight in without understanding these, or without first gaining trust can be costly.
- Engage your audience. Catch their attention and provide compelling content that fits your message, goals and objectives.
- Participate/build relationships. Allow users to fully engage with your brand identity and spend time fostering new and established relationships to expand your user base.
- Measure again.
- Analyze. It is no use gathering all this information and measuring it if you are not going to let it inform and guide you.
- Adapt strategy to reflect customer attitudes and responses.
- Measure once more. Your new strategy and direction needs to be measured against your old strategy. Is the new strategy working? Are you achieving the results you had hoped to? Do you need to refocus?
- Re-engage, measure, analyze, and re-focus. Continuing to engage, measure, analyze and refocus are key to any lasting social media strategy. It is a dynamic process that never sits still.
Jacob Morgan’s blog post entitled, “Why Social Media is More Measurable Than Traditional Media” is a good read for people who want a simple understanding of why you should be measuring your social media campaigns and how you can go about it.
In closing I do wish to offer a few thoughts. Setting goals and objectives, measuring against those goals and objectives, analyzing results and revisiting strategies are all important. However, do not lose sight of the following:
- ROI is a trailing indicator, not a leading indicator. ROI focuses on historical data. This helps us make sense of where we have been and allows us to make informed decisions as to its historical effectiveness. Any future direction cannot be made solely on historical data, especially when you consider the pace of change within social media and its qualitative nature.
- Do not overanalyze. With social media, over analyzing each individual part will make you lose sight of the whole. There are too many variables to consider. We do need to remember that we are dealing with people and people do not always make sense. They say one thing and do another and their emotions come into play. The Pepsi Taste Challenge leading to the introduction of New Coke, followed hastily by the reintroduction of the old Coke under the name Classic Coke, is a testament to the fact that pure data and research does not take into account loyalty, perceptions and human behavior.