ROI of Social Media Marketing

Last month, Forrester Research’s Augie Ray published a report on The ROI of Social Media Marketing that I’ve recently had a chance to take a highlighter to: there are a lot of sensible nuggets in the document; it’s a must-read for any marketer.

For example, in making the case for a “Balanced Scorecard” approach to Social Media Marketing ROI, Mr. Ray posits that many brands fail to measure true business value.  “A mass of followers that ‘like’ the brand but never return to the fan page is far less valuable than a handful of followers who frequently share brand updates with friends.”

This gets back to SHIFT Communications’ oft-cited credo, “Campaigns do not create relationships but relationships can buoy campaigns.” In too many cases, the “best practices” espoused by digital agencies are less about “serving the community” and more about driving a rush of new fans, without much thought re: how to keep those fans engaged on a LONG-TERM basis.  But, that’s another blog post.

Mr. Ray also wisely notes that Social Media’s shiny-object status should not make it the best or only thing to measure:  “With offline, online, and social strategies increasingly integrated, attributing value to the ‘last touch’ on social networks can result in undervaluing other marketing vehicles.”  Halellujah.

Social-media-balanced-scorecardMost importantly, Forrester’s report demands marketers “align measurement to all corporate objectives, not just sales.”  A brand must take into account factors such as Risk Managment, Branding, and Digital Effectiveness as well as Financial ROI.  Mr. Ray provides a simple, great example of how these factors play together:

“Financial results are important but even when marketers can easily measure direct sales, they must not forget to test other important results.  Frequent promotions seeded into social channels may generate inexpensive sales but can damage brand health by decreasing the attention from consumers, or substituting affinity for the brand with affinity for discounts.” (Emphasis added.)

The “Balanced Scorecard” approach that Forrester ultimately proffers to marketers is well worth consideration … But I wonder how many corporate marketers have the tools and systems, partnerships and perspective required to do it justice??

Posted on: August 2, 2010 at 2:41 pm By Todd Defren
14 Responses to “ROI of Social Media Marketing”


  • Kevin Warhus says:

    Thanks for the great chart. I think keeping in mind long term and short term goals while considering online and offline results is highly important in measuring the ROI of social media. Social Media can be a tough thing to measure the effectiveness of, but things like analytics and running special social media promotion offers is a great way to see results.

  • Eric Myers says:

    Great article. Our business has been considering how much time to put into our social media portion of new years marketing plan. Its great to see what kind of ROI social media is capable of. Thanks.

  • NJ says:

    Let me set the scene.

    Me – Managing Director
    You – Marketing

    You – Boss, I would like to employ a social media specialist
    Me – What does a social media specialist do?
    You – Raises our brand profile using social media
    Me – Will it sell more of our products?
    You – If we target the right ‘followers/fans’ as they are known in social media terms we can reach out to many more potential customers
    Me – Social media is worldwide isn’t it?
    You – Yes
    Me – But we only trade locally.
    You – Boss it is really about ‘quality’ rather than ‘quantity’
    Me – Explain
    You – We don’t target everyone, we only target people who are of interest to us.
    Me – In other words locally?
    You – Uuuuhhh probably
    Me – So you produce a social networking campaign that targets potential local customers who fit our typical customer profile?
    You – Uh well you can’t really do that with social media.
    Me – Why not?
    You – It is really all a bit hit and miss – all very new and experimental.
    Me – So what you are saying is we employ a social media specialist who is unable to target our target markets, target segments and target customers.
    You – Boss social media isn’t so much about selling, as it is about relationships and sharing.
    Me – More than 50% of our business is via our website – will it increase our internet business?
    You – Can’t really guarentee it
    Me – I tell you what – I will do a bit of information sharing with you. I am not interested unless you can bring me the figures that show social media will increase our sales and at a profit.
    You – Boss it is about factors such as risk management, branding, and digital effectiveness as well as financial ROI
    Me – What are you talking about – does it sell products?
    You – Uh……..
    Me – Stop wasting my time. Bring me proof that it sells products, then we can talk.

  • Interesting read, yes. It echoes two things, one we’ve been stating for some time and the other we’re seeing more and more of; 1) it doesn’t matter how many friends/followers you have, it’s their individual value regarding transmitting your message (1 fan/follower who advocates is better than 1000 fans/followers who don’t) and 2) as real social ROI under the magnifying glass and fewer and fewer folks are able to make any equations stick, people are now advocating “It’s quality, not quantity”. This is an indication their existing metrics aren’t measuring up (no pun intended) so it’s time to start looking for other metrics (probably even muddier metrics than before).
    It reminds me of the move from conversion as “sale” to conversion as “they did something, anything, so we’ll call that a win.” That was another example of “the metrics we’re using aren’t giving us the numbers we’re wanting.”

  • Taylor Hulyk says:

    Great post! I actually just wrote a blog post about the tendency of corporations to undervalue social media marketing/PR based on only a financial report. That’s not the whole picture. I think you identify each of the contributing quadrants well. I wish I could read the entire Forrester study… That might have to be research I dig into.

    I think what all of this comes down to is companies establishing trust with their audiences. That is valuable in itself, but what is also important to remember is that increased trust transforms into increased sales.

    To check out my post on my agency’s blog, go here:

  • AUGIE rAY says:

    Thanks, Todd. I’m glad you enjoyed the report and found it worth sharing. I find that as I discuss Social Media ROI with other veteran marketers, we tend to agree. It’s gratifying to know my report fits into your approach at SHIFT!

    • Todd Defren says:

      Thanks for stopping by, Augie, I am honored. We are in violent agreement, and I’m glad to hear that other veteran marketers are of the same mind… I just worry about it when Social Media puts stars in their eyes, leading to bad decision-making … or, putting too little budget behind measurement concepts…

  • SAM JONES says:

    Thoughtful post; well said. Your concern about tracking tools is spot-on, and, I fear, there’s an attitude of corporate indifference. -slj-

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