ROI for Social Media Marketing: It’s Complicated
At a recent Social Media Breakfast in Boston, Harvard Business School associate professor Andy McAfee had this to say about the age-old Return On Investment (ROI) question:
“There is not enough ROI for figuring out ROI. It is an intellectually bankrupt exercise.”
Got that? McAfee is not saying that measurement is not important, he suggests instead that it is simply not worth the trouble!
To be clear, when McAfee talks about the challenges in determining ROI, he is referring to Info Tech spending, as laid out in two posts published back in 2006. According to McAfee, the sum of his argument was succinctly laid out in his Harvard colleague Bob Kaplan’s seminal “Strategy Maps” tome. I am going to excerpt and bastardize Kaplan’s text, for my fellow marketers:
“No marketing program has value that can be measured separately or independently. The value of marketing derives from its ability to help the organization implement its strategy … Marketing programs seldom have a direct impact on financial outcomes such as increased revenues, lowered costs, and higher profits. (Rather,) Marketing affects financial outcomes through chains of cause-and-effect relationships.”
This is even more true in the Social Media era. Jason Falls wrote a rock-solid – and highly popular – post about Social Media ROI last month, containing this gem:
“The problem with trying to determine ROI for social media is you are trying to put numeric quantities around human interactions and conversations, which are not quantifiable.”
Or as David Meerman Scott is fond of saying, “What is the ROI of putting on your pants?”
At this point you’re thinking that I am anti-measurement. I’m not. I believe in measurement-by-objective: once you know which needle you want to move, decide how to make it move and how to keep track of progress.
The brilliant Peter Kim, a former Forrester analyst, outlined a framework for measuring Social Media in a September post:
- Attention. The amount of traffic to your content for a given period of time. Similar to the standard web metrics of site visits and page/video views.
- Participation. The extent to which users engage with your content in a channel. Think blog comments, Facebook wall posts, YouTube ratings, or widget interactions.
- Authority. A la Technorati, the inbound links to your content – like trackbacks and inbound links to a blog post or sites linking to a YouTube video.
- Influence. The size of the user base subscribed to your content. For blogs, feed or email subscribers; followers on Twitter or Friendfeed; or fans of your Facebook page.
There’s an “x-factor” that comes into play well: Sentiment. The spirit driving user participation matters. The net result of these adds up to a score for social media engagement.
So what’s the monetary value of a visit, comment, link, or friend? Well, the only honest answer is “it depends.” Only you know how much these interactions matter to your brand, regardless of industry, channel, or competitive results.
The just-as-brilliant current Forrester analyst, Jeremiah Owyang, also offers a whole series of posts related to the measurement issue – but my favorite of the group notes the fundamental difficulty:
(Until) we can measure the impact of a conversation between an employee and a prospect at a coffee shop, it (will be) difficult to measure social media…
What are you trying to accomplish? … (The) trick is to figure out what your goal is first – is it to spread a message among a community? Is it to reduce support costs? Is it to learn from your community? In each of these cases you’ll have to then assign the right attributes to measure against.
So, yea, basically it’s tough to measure ROI for Social Media. This doesn’t mean it is not worth doing! It just means that the justifications that professional marketers will make to qualify for budget are as likely to be anecdotal as analytical/quanitifiable.
What is the dollar value of responding humanely to an angry customer blogger in their public forum, or, say, on Amazon.com? Have you made that customer happier? Maybe. Have you made other visitors feel good about your publicly-displayed good intentions and responsiveness? No doubt.
But did the effort motivate more sales? How could you tell? There is no “I am buying this product because ____” form in the Amazon Checkout Cart.
How much money do you save by having the PR agency monitor Amazon.com, or the blogosphere, so that your customer support reps can instead be on-the-phone with live end-users? There could be a formula for that, but I’m no math whiz.
How much value can you place on the fact that the professional communicators at a PR firm trained the Customer Support reps on tone, responsiveness, etc., before letting them loose to represent the brand in the blogosphere? You can’t measure the value of something that didn’t happen (i.e., a blow-up in the blogs based on a poorly-trained public spokesperson).
Doth I protest too much?
Ironically, for all the hemming and hawing, it is sometimes easier to show “needle movement” via traditional PR. For one start-up client, “new users” was the metric we were asked to improve. They came to us with a base of 5,000 alpha users, and our outreach to traditional and social media outlets led to an additional 200,000 users in just two weeks! How’s that for ROI?
Lessons?
Know your objectives in advance. Start small, when possible: think “proof of concept.” Track the metrics obsessively. Make sure that your interactive marketing efforts are tied to the sales funnel (e.g., your vp of sales ought to be able to determine where most leads are coming from online). Report frequently.
Lather, rinse, repeat.
Subscribe by Email
Another great post on social media. Thanks so much!
Nice job spelling out the nuances of this discussion, Todd. Great post.
If you’re looking for the full video of the breakfast, I posted it here: http://blog.hubspot.com/blog/tabid/6307/bid/4405/How-Do-You-Measure-the-ROI-of-Social-Media-You-Don-t.aspx
Todd, over the weekend I pitched a client who has a very analytical, accounting background. The pitch was for a complete rebranding a la web 2.0, with the core being a better social media presence starting with his blog. At the end of the 2 hours, I felt that I had failed in convincing him that there was roi in what we were going to do. return on engagemnet yes-but his thinking was i spend a dollar i want to make a dollar or save a dollar. Lets not forget how hard the sale is before you even get a chance to measure.
In the old days we called this “Good Will”.
Great post Todd
I really like the line — “No marketing program has value that can be measured separately or independently” – which is really true – I think it is arrogant of a marketer to think one white paper or webinar means that anyone wants to buy anything from them
BUT
I think the opportunity to take and measure all marketing activities that drive to increased sales via lead nurturing is there – I have been doing that and it works
I spoke about this on my blog here – http://buzzmarketingfortech.blogspot.com/2008/07/marketing-metrics-rethinking-them-again.html
also whats the ROI of putting on my pants >??
well if I am going to work – the ROI is – it allows me to keep my job!
p
Todd,
Good post! I like how you’re covering the topic. I have a couple thoughts I want to share on this.
I believe that there are major, if not fundamental challenges to measuring ROI in social media marketing (PR and advertising too).
To Andy McAfee’s point, measuring ROI is a fool’s errand. For the simple reason that the greatest gains (as noted by Jeremiah) are often internal to the organization (learning), between organizations and audiences (relationships, trust, respect, credibility, etc), and in the age-old intangibles of marketing (impressions, awareness, brand image), etc.
What social media does by its very nature escapes easy observation — the net effects of a conversational campaign are unknown until something makes itself obvious. At which point the success story becomes a better reference point and proof of success for a company than than any numbers put behind it.
I think the issue here is “Who’s asking for ROI?” People who count things. Which means analysts such as ourselves (we get paid for results and use tools by which to provide some measure of them) and campaign managers (used to measuring ad and web traffic, hits, etc).
So I think the question of ROI is a question asked by those in the process of reaching a comfort level with social media marketing. It’s about creating a community of practice within and among organizations that accepts the “lost” or unobserved data but which can see value without having to see numbers.
At the point at which we understand the value of social media campaigns, we’ll be more confident in how to tell stories, create participatory branding campaigns, and deliver value without having to measure more than baseline traffic and reach. Nobody questions the value of a web site, or of search marketing and SEO — and tracking is used to supplement but not make the case for a web presence.
There are things we can’t measure. We’ll stop talking about ROI when we understand that we don’t need to.
cheers,
adrian
marc’s comment brings up an interesting point, and a bit of a catch-22 in my eyes. selling social media remains difficult, even though we continue to learn more and more about working in the space.
in my experience, the “sale” is based on demonstrating value. you can do that in various way, but it always comes down to the question, “why is this my best choice?”
demonstrating the value of social media can be difficult as we don’t have a silver bullet approach to measuring social media ROI. Thus, the ROI conversation becomes moot because we can’t even get in the door.
here at my agency, i’m trying to get us to move towards more social media engagement for our clients. touch to do for out heavily b-to-b client list though.
get at me on twitter, @mdd044, if you have any thoughts to add.
Awesome Todd. I just love McAfee’s comment.
Excellent post. We just delivered a Facebook outreach strategy to a client. We recommended using a Facebook Page, but pointed out that a lot of the metrics we can look at on Facebook don’t necessarily point directly to business objectives.
We don’t think we’ll have much trouble helping them get fans of their page, but we wanted to make sure that they look beyond purely social numbers to measure success. As you say, it’s complicated. We’re telling them to think qualitatively, examining the nature of conversations in addition to the number of conversations.
As Michael Daehn says, this is how you build goodwill. The value of these exercises may be intangible, but that doesn’t mean they’re insignificant. I’d trade consistent feedback and steady growth of goodwill over X huge amount of fans or followers any day.
Todd,
Go ahead and call me jaded because I work for a company that measures social media for brands, but companies are getting smarter in this space everyday and anyone in marketing who thinks that their social media programs can’t and shouldn’t be measured is just setting themselves up for problems down the road.