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We just returned from SXSWi, where we were able to participate in many of the discussions on social media for brands and causes. There were plenty of brand reps, agencies, consultants and vendors in the crowds and on the panels- and wide ranging topics from ROI to Influence to Risk Avoidance. We saw some very interesting technologies and visualizations, and some of the panelists had good insights, but the overall impression we left with was that most participants had no hard numbers, no clear path forward, and that everyone was just trying to figure it all out.
In particular, the question of Social Media ROI was confusing to brands. One panelist even asserted "there is no Social Media ROI".
We think the difficulty stems from the fact that this channel and medium can be viewed through many lenses and across many time horizons, and with a wide variety of intentions behind the program, each of which have a different measure of return.
For example, some are doing Social Media for brand building, a long term and indirect value. Some companies invest their social media efforts to drive direct marketing with a measurable result, a la CPC, a short term and direct measure.
Companies also use social media at different points in the sales funnel, which makes measurement difficult. At the beginning stage, they may apply social media investments to generate broad awareness, lead generation and build new relationships. Others use SM to close business or drive sales. And others focus on a later stage retention interaction- using SM to stay in touch with their hard core fans, like a loyalty program. Others don't think revenue at all, but think about offsetting customer service costs- a tweet is less costly than a ticket. Some brands just listen to the stream to monitor the pulse of the market, and to get an early warning on risk. Others seek product insight and to crowdsource innovation.
Because Social Media can serve all those initiatives at once, it makes the ROI number hard to figure out.
Yet, being analytical by nature, we still look for heuristics that can get us there. Here are some ways the Socialogue team is thinking about ROI:
At a minimum, companies can calculate the value of social media traffic to their sitesand transaction streams.
Web Traffic Proxy Value:
Is this driving traffic to your website? What is the proxy value of that traffic from a CPC standpoint? In our application, we calculate this dynamically, watching social media traffic and doing the math for you. Right now, it's up to you to assign a CPC value based on your known campaigns, but that will be more automatized soon.
Direct Sales Value:
How much sales activity is being driven by social media directly? What promotions and posts are resulting in sales? This is somewhat reliant on your existing reporting systems on sales, but we can help you track overall directly correlated sales resulting from Social Media channels.
CPM Proxy: During one of the panels, Social Media Analyst Jason Falls asserted that "CPM is dead". We still find it valuable as a proxy for assessing the comparative value of building brand awareness, since print and broadcast are often more intent on branding than on inducing a transaction, and are still bought on the old eyeball metric.
Community Value: It may seem crass to try to create a value for a human- how many dollars are you worth to me- but it is in the nature of the marketing role to assess where best to invest resources, and for that we need some numbers. For more of the complexities of this, see our post Efangelists: Understanding the Value of Your Biggest Fans.
We may look for a simple proxy to start- one that gets more mature over time as we learn the relative performance of this channel to other channels, and you'll refine your value by community. For example, what would you pay to add a qualified email to your subscriber list? What is the expected investment by this community in your brand over time?
Operating Cost Improvements. Whether its a lower cost of responding to a client need, or a faster informal and low cost form of market research, these are unique to each company. By creating a place to allow for this return to be included in calculations, we acknowledge the potential derived from the channel for indirect returns.
Crisis Avoidance. Customer service can interrupt a bad customer experience whiles it's still in progress, and mitigate the fall out of bad experiences being amplified across the social web. There is also the ability to see sentiment trends across many users in real time, to see what problems or trends are consistently coming to the surface among users, and address those trends with policy trends. Since it is difficult to prove a cost that was never incurred, the metric may have to be a count of interventions, with a value assigned to that, derived from the customers own history of dealing with complaints.
The same investment numbers contibutes to all of the benefits we calculated above, which increases the complexity of the calculation.
The base costs of your social media manager, in time and dollars, and the expenses for running social media through your agency or software vendors, integration to existing processes and systems- these costs get applied across all campaigns and platforms. The campaign specific costs of creating campaigns, art, copy, media and ad buys contribute to long term brand brand building and direct action.
As we get more sophisticated about understanding behavior over time, and the relationships between gross metrics like community size and more specific targeted returns become clearer, the money moving into social media will get smarter and become increasingly effective for companies who participate in the channel.
We would love to know your thoughts on approaching ROI in this environment.
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Copyright 2011 Socialogue Inc. All Rights Reserved
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Christine Mason Mccaull
