As marketers become increasingly aware of the benefits of engaging with their target audiences online, global investment in social media marketing has grown rapidly.
However, there is still a considerable amount of debate about how to measure social media ROI. If marketers want to sustain this investment they need to be able to prove that it is beneficial to the wider business.
Unfortunately, as marketers struggle to provide this proof, budgets are already starting to be pulled – especially in some of the more conservative market sectors. Indeed, research this year by Pearlfinders found that while in the fourth quarter of 2011, 22 per cent of financial services companies polled were investing in social media marketing; by the second quarter of 2012 this number had fallen to six per cent.
Luckily for marketers there are a number of simple steps you can take to prove the ROI or value of your social media efforts. These measures may vary somewhat from those of other channels, but the bottom line is that you can get there. Once you do, you’ll be able to clarify the impact of your social campaigns to upper management. At the same time, you’ll ensure more predictable success going forward, because you’ll have objective data to inform you about the types of campaigns and tactics that are working for you over social media.
Setting yourself up for success
If you want your efforts to be successful, there are a number of key questions that need to be answered before embarking on any social media activity. Fail to answer these and from the offset you’re setting yourself up for poor results and disappointment.
- Why are you are you undertaking this particular activity?
- Who is it that you want to reach through social media?
- Where can they be found online?
- What would success look like?
It might be that your particular target audience rarely uses Twitter but is very active on LinkedIn, or they might avoid social media entirely – in which case a radical rethink will be needed, but at least you know this from the start.
To the baseline
To truly know the impact of your social efforts, you also need to know the difference between where you were before you started and where you are after your social media activities. This means establishing a baseline of your key metrics before the start of a social media campaign. By developing metrics and baselines at this stage, you will also force yourself to clearly define the goals and corresponding metrics of your social campaigns.
Measuring up
The method you choose for measurement will very much depend on the parameters you have set for what success looks like. Are you looking for increased sales, brand awareness, searchability or engagement with customers or just to spread a particular piece of news? Many marketers only measure their social media success in terms of the volume of activity occurring around their online properties and the number of people participating in that activity. Popular metrics include the number of fans, friends, followers, retweets, site visitors, blog comments, social mentions, etc.
However, these metrics don’t constitute ROI. In reporting ROI, you do need to rely on numbers, but you also need to be able to provide the “so what” behind those numbers. What do they affect?
To truly prove the ROI of your social media efforts you have to show that they are either generating revenue or reducing costs. The metrics mentioned above will be a factor, but only as a starting point. You need to track how your fans, followers, and other social connections transform into leads or prospects and then track when they convert into sales. You can achieve this type of tracking in a variety of ways, from special promotion codes for Twitter followers, to actual coupons from your Facebook page.
Prior to kicking off your social media activity go back to you baseline volume of mentions and calculate the corresponding revenue number – i.e. the current revenue of the product at the latest date possible leading into your social media campaign. If you then track mention volume in relation to revenue for the product during the course of the campaign, you will then be able to overlay the tracked data with the below revenue/sales metrics:
1. Product revenue
2. Revenue per transaction
3. Number of transactions per customer (retention rates)
4. Volume of net new customers (which can also be measured against number of new social media connections to create a ratio for making predictions)
5. Volume of sales transactions (to show how growth in social connections increases transaction volume)
And it’s not just about increasing revenues; ROI can also be shown as a cost reduction. Online communities often spring up, helping take the pressure off costly customer service lines. Again, start off with the right data set and this kind of activity is eminently trackable.
Summary
We have presented ROI here in terms of revenue generation and cost reduction, yet social media offers so many other ways to achieve ROI. In the end, whatever your goal, if you can put in place robust ROI measures, your social media team can gather more budget to do justice to its strategies and earn deserved respect from upper management.
