ROI and Social Media

3 Aug 2010 by Randall Helms, No Comments »

Via Social Media Explorer, I found out that Forrester Research have just released a new report on the ROI of social media marketing:

Many marketers can draw a straight line between investments in social media marketing and financial results, but many more cannot. This doesn’t mean social media marketing is ineffective; it just means that marketers have to recognize benefits beyond dollars and cents. Facebook fans, retweets, site visits, video views, positive ratings and vibrant communities are not financial assets — they aren’t reflected on the balance sheet and can’t be counted on an income statement — but that doesn’t mean they are valueless. Instead, these are leading indicators that the brand is doing something to create value that can lead to financial results in the future.

For me personally, this is quite a timely report, because one of the recurring themes of my research has been how exactly you measure the impact of social media marketing.

What metrics do you use?

What does ‘success’ mean anyways in terms of social media?

And, once you have defined what success is in the social space, how do you link that to what happens on the balance sheet?

Perhaps unsurprisingly, my interviewees have offered a wide range of responses to these questions. Some people are very skeptical of the value of social media marketing, precisely because, they feel, the existing metrics do not reflect the actual impact on their business accurately enough. After all, you can track how many Facebook fans you have, or followers on Twitter, and what level of discussion your brand is attracting on blogs and message boards, but how does that really affect your business?

Other people I have spoken to see the matter differently; for them, they see social media as a different beast from traditional marketing avenues, and so they see a purely or primarily monetary sense of return on investment as a faulty way of measuring success. For many of them, engagement is its own reward – getting people to engage with the brand online, and then using that process to better understand the consumer and then feed that information through to other areas of the business, like new product development or customer service. This viewpoint sees using socially-sourced information to build better products and then market them in a more targeted way as the real return on investment.

It’s also important to note that defining ‘success’ in social media is generally situation-specific; as more than one person has pointed out to me, different campaigns have different purposes, so often it is a matter of selecting different metrics to measure how successful a campaign is – there are no universal ways to say that something has been a social success. Others have also noted that many of the metrics that define success with traditional marketing channels are themselves flawed in some ways – for instance, you may know how many people drive past a billboard in a typical hour, but what does that really tell you about how many of them are actually paying attention to it and not fiddling with the radio, or yelling at their kids, or even just paying attention to the road in front of them?

What has been interesting in my interviews so far is that there has been a broader range of opinions amongst brand practitioners than amongst agency/consultant types – with more skeptics amongst people who work directly for brands than for those on the outside.

Why is this the case?

Firstly, I should not dismiss the possibility that this is the result of a small sample size distorting the results. I am not doing a quantitative survey but a series of qualitative interviews, so I am only speaking to a relatively small number of people, and it may well be the case that those I have spoken to are unrepresentative of brand practitioners and/or agency/consultancy workers.

However, I don’t really think that this is the case, because this division chimes with what I have noticed from my secondary research, and that you will have probably noticed in your own reading of blogs, books, magazine articles, etc about social media. I think there are several possible reasons for this (and be warned that I am painting with a pretty broad brush here!). One is simply that agency/consulting types make a living from being on the cutting edge and are for this reason more likely to gravitate to what is ‘new’, whilst those who work for brands directly are more likely to take a more pragmatic approach, wanting to see what the ‘new’ can add to their tried-and-tested methods. After all, they have the responsibility of nurturing the long-term health of their brand, and thus need to make sure that their use of new (or newer, anyways) marketing tools is appropriate.

A second possibility as to why I have experienced this division is simply that the FMCG sector is, as several of my interviewees have stated, a bit behind the curve when it comes to digital marketing. Many, even most, consumer goods products are relatively low-involvement and as such do not have the brand resonance to inspire the kind of engagement that consumers make with high-involvement products like, say, cars or holidays. This makes some intuitive sense to me, but until I interview more brand practitioners from other sectors I would not like to make any definitive statements about this.

A third possibility is a question of resources – if there are limited resources available for marketing purposes, as there are for all but the most wealthy and/or profligate companies, then it may be the case that brand professionals feel more comfortable assigning these resources to better understood channels than social media. This argument applies more to manpower than financial resources – developing social media campaigns are not necessarily that expensive in comparison to television or print, but doing social media right requires a substantial investment of time to create, monitor, and engage, and some organizations may feel that there are better uses of staff time.

Quite a few of my interviewees told me that it is better to do nothing with social media than to dip your toe in half-heartedly and give up, since it looks worse to do an initial blitz of blogging, tweeting, and so on before stopping abruptly. When I interviewed the owner of the Edinburgh restaurant Illegal Jack’s last week, he said that he has to live the brand persona from when he wakes up to when he goes to bed in order to make his social marketing work. It’s a big commitment, and this may help explain part of the skepticism – how clear is it that all of that effort will really pay off?

My own feelings on the Return on Investment question probably tend more to the side of the true believers than the skeptics. Used well, social media can assist your business in many ways, and a ROI that focuses on just money is a crude approach that misses out on the real value that it can offer in terms of improving your products, improving your understanding of your customers, and improving how you target those customers.

Nonetheless, I would say that it is always necessary to be at least somewhat skeptical, especially when people start proclaiming that things really are different now. If recent history has shown us anything, it is that any new business trend will inevitably develop cheerleaders whose rhetoric is untethered from reality, and some of these people will be true believers whilst others will be merely charlatans. This was the case with the dotcom boom, and it was also the case with the derivatives explosion and the housing bubble – social media is also, surely, the same.

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