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November 15, 2007

Measuring ROI on social media investments

(Posted by francois to: Strategy | marketing )

need%20help%20sm.jpgA lot of people and companies are struggling to come up with good ways to define an ROI for social media investments - Patrick Schaber's recent post on the topic is just one of the many thoughtful pieces on the topic.

The key to measuring your investments in social media is to first define what it is you are trying to do - are you trying to increase sales, improve the SEO of your site, get more new product ideas into your new product development funnel, trying to improve customer service, or enhance your PR by getting a bigger share of voice in the social media space? And yes, you can do all that with various social media strategies - we have case studies in each and every one of them.

So once you have defined what it is you want to do - measure it the same way you would measure any other program deployed for that same purpose. If you already track idea sources and various percentages to gauge the success of your new product development pipeline, just add a category for the new social media-based community and measure everything else the same way. If you want to increase sales, just measure the efficacy of the social media based campaign the same way you would measure any other lead generation program. And if PR/awareness in the social media space is your goal, then there are many more tools at your disposal in the social media space to measure progress than there are in traditional media. One bonus of social media-based programs is that they will impact multiple marketing functions much more so than traditional marketing programs. So in effect you might develop an ROI in one area and see the cost of doing business in other areas go down at the same time.

Now, the real problem is that we measure traditional marketing programs the wrong way. Almost everything in traditional measurement programs is customer transaction-based - how much will it cost to get a customer to buy...ONCE. What we really want to measure is how programs affect a customer's life-cycle value - including his/her ability to influence others in making buying decisions. The other problem with most traditional measurement yardsticks - and ROI is perhaps the most famous of them - is that they are trailing indicators, not leading indicators. Not enough companies measure things in ways that give them indications of where their business is going, or how sucessful add-on programs will be.

We are currently working with Deloitte on a research project to uncover how companies are measuring the progress and success of various social media-based external communities. If you would like to help with that or if you have opinions on the subject, feel free to email me at francois [at] emergencemarketing [dot] com.

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Posted by francois at November 15, 2007 3:49 PM | Bookmark This

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Comments

Hi Francois:

Great subject. As a social media branding & communication consultancy, we are very interested in measurement of results.

We have developed an index called Online Promoter Score which we can track with our tools. In conjunction with MINI and Northwestern University, we have been tying chances in Online Promoter Score to changes in sales. Very promising work.

See more here:

http://www.motivequest.com/main.taf?p=1,2,1,1

Tom O'Brien

Posted by: Tom O'Brien at November 16, 2007 11:22 AM

OK, here is my post on social media measurement:

Social Media Measurement

Tom O'Brien

Posted by: Tom O'Brien at November 16, 2007 11:55 AM

Francois, my partner, Tom, wrote about blogging ROI a few months ago... I'd be interested in your reaction to his viewpoint on the topic. It's over at our blogging blog, http://www.businessbloggingbootcamp.com/2007/02/extending_forre.html

Yvonne

Posted by: Yvonne DiVita at November 16, 2007 12:05 PM

Thank you for the comments - Yvonne, I will leave a comment on your blog as well...the post had a lot of interesting points.

The main issue with ROI in marketing is that people do not know how to measure what they do now and so they are having trouble measuring new things as well.

Rob Bois from AMR research makes that point in the Facebook Marketing 2.0 group where I started a similar discussions by saying that "Our surveys are showing that CP companies are investing very little in marketing 2.0 and blame a lack of ROI as the primary reason. However, they can't even effectively measure the ROI of their traditional campaigns, so this is really a red herring. With the average tenure of a VP of marketing hovering around 2 years, it seems nobody is willing to rock the boat."

Posted by: Francois Gossieaux at November 16, 2007 3:07 PM

Francois - your community might enjoy the podcast I did with Peter Kim and Marianne Richmond titled - Blog Analytics: A Step Towards Credibility?? http://tinyurl.com/2mqcl6

Looking forward to the results of your research with Deloitte.

Posted by: Toby at November 17, 2007 10:23 AM

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