ROI, Wal-mart and SKU reduction--and what we may learn about Social Media ROI

I've recently found myself in interesting discussions--one might call some of them debates--about ROI and Social Media.  In recent weeks, Social Media ROI was the agenda for meetings with several clients, the focus of a panel on which I participated at Digiday Social, and a lively topic of discussion at a dinner of marketing leaders in town for the OMMA Global event.  And today I read an article about Wal-Mart that got me to thinking about the dangers of too narrowly defining ROI.


It's interesting to hear the wide range of attitudes toward social media ROI.  Some companies measure quite a bit about their social media activities but do not evaluate ROI in its most literal definition:  The financial return generated by a specific monetary investment.  Others go through a great deal of effort to measure ROI, creating complex models to calculate an approximation of financial return. 


Some in the direct marketing space are beginning to value their social media efforts much as they do their PPC campaigns--assessing the cost of participation compared to the clicks, conversions and sales generated from trackable links seeded into tweets and Facebook posts.  This sort of measurement is essential and inevitable for companies that sell direct to consumers, but it's important companies not become overly narrow and begin to assess social media as just another click-generating channel. 


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Retailers Plan To Expand into Online Customer Service

There was an interesting article in The Wall St Journal last week about the value of social media. In a piece called “Entrepreneurs Question Value of Social Media”, Sarah E. Needleman quotes Pace University's Lubin School of Business marketing professorLarry Chiagouris regarding the challenge eBusiness executives face in assessing social media: “The hype right now exceeds the reality”. 

I agree that the reality has not always lived up to the hype.  But was the hype too good or the reality not good enough? 

The WSJ quotes a survey of US small business owners saying that only 22% made a profit from promoting their firms on social media, 53% broke even, and 19% lost money after promoting their business on social media. 

But profit doesn’t equal social media success. Social media can have many objectives and customer service is a growing goal. 

eBusiness executives are increasingly looking to social media as part of a larger customer service strategy; currently,  in our recent survey of retail executives (Q4 2009 US Retail Executive Online Survey), 54% offer customer ratings or reviews, 23% have an online community or forum, and 16% do customer support through Twitter.  These numbers are poised to grow in the next twelve months with a further 30% planning to implement customer ratings or reviews, 27% planning an online community or forum, and 21% planning to provide customer support through Twitter. 

eBusiness professionals must ask the following questions before they launch social customer service (or any social strategy) to ensure their implementation and subsequent assessment reflect the real potential:

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