The ROI Of Social Media Marketing: More Than Dollars And Cents

Brands are making plenty of money in social media:  Dell Outlet’s Twitter account has generated millions for Dell, the Intel Channel Voice community has decreased costs by eliminating the need for expensive in-person events and P&G used media mix modeling to demonstrate that the BeingGirl.com community is several times more effective at driving sales than the brands' television ads. 

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.

Traditionally, few brands have wholly evaluated their marketing in directly measurable financial terms, and my new Forrester report recommends a traditional measurement approach for innovative social media marketing programs.  Using a Social Media Marketing Balanced Scorecard, marketers can evaluate a diverse set of short- and long-term benefits that are both financial and not.  This approach furnishes several benefits, such as aligning measurement to all corporate objectives and not just sales, providing a means for gaining consensus from diverse stakeholders and avoiding short-term gains at the expense of long-term brand health.

An affective Social Media Marketing Balanced Scorecard considers metrics from four different perspectives:

  1. Financial: Has revenue or profit increased or costs decreased?
  2. Brand: Have consumer attitudes about the brand improved?
  3. Risk Management: Is the organization better prepared to note and respond to attacks or problems that affect reputation?
  4. Digital: Has the company enhanced its owned and earned digital assets?

Social Media Marketing Balanced Scorecard

Marketers who only seek to measure results in one of these perspectives get an incomplete picture and, as a result, are unable to make effective decisions about social media marketing investments.  It is only by recognizing all of the benefits delivered by social media marketing that the complete value of these efforts can be understood.

Forrester subscribers can access the new report, The ROI Of Social Media Marketing, for more details, including examples of brands that are measuring their social media marketing in each of these perspectives.  I hope many will find this report helpful, and I welcome any and all feedback! 

Comments

Social Business BSC

Hi Ray, I believe that you are absolutely right about to see the social media ROI through Balanced Scorecard, because in the end the financial aspect is that matter most.

But we need to go further than you post. I think that companies need to integrate the social atom in it self, in order to live the culture of social network effect. I'm talking about Knowledge Management, Co-Creation Experience, Crowdsourcing, and Social Media. All of this components are capable of to influence the dimensions of BSC. I wrote an article about this in my blog http://bit.ly/9azRcN. What do you think?

I think we agree.

Since I don't speak Portuguese, I can't tell you if we agree or not, but I think we do!

In my role at Forrester, I focus exclusively on social media for marketers, which is why I focused on Marketing ROI in my blog post and report. But I very much agree that social media has to be integrated deep into the fiber of the organization!

Thanks for the comment.

Do you have this in english?

Do you have this in english?

Thanks!

I'll be using these concepts with clients. The level of skepticism among small business owners, nonprofits and small govt. agency over SM is often frustrating. This gives me a few more ways to talk over benefits with them.

Overcoming skepticism of social media

I hope the blog post helps you overcome the skepticism in social media marketing. Whenever we have moments of great technical change that affect marketing (think TV, the Web, and now social), businesses (understandably) want to make sure they are investing wisely and seek out the financial ROI. But social media is no longer that new, and we don't need to treat it as such. Instead, we can approach our investments in social media marketing the way we do our other marketing investments--with an eye toward financial ROI but also consideration of the other quantitative and qualitative metrics that demonstrate we're "moving the needle."

Thanks for the comment, and I hope this blog post helps!

Further complicating the

Further complicating the matter is the near impossibility of isolating and measuring just the impact of Social Media on overall ROI... ie how much of a company's Social Media success is the result of their other marketing efforts? Dell's Social Media success doesn't stand on its own...their history of successful marketing provided Social Media initiatives with the shoulders of giants on which to stand. A small unknown computer company could mirror what Dell has done in Social Media, and likely would generate just a tiny fraction of the revenue Dell did.

Growing evidence confirms what many of us have said all along: Social Media (and its ROI) doesn't exist all by itself. The more SM becomes a part of a well-constructed overall marketing strategy, the greater the ROI is...and the harder it is to break out its own ROI calculations.

Excellent point, Tom!

Tom,

I very much agree. In fact, at one point in my report process I had a section dedicated the challenges of isolating social media contributions in our integrated world. Unfortunately, there just wasn't room enough to include everything (unless I was writing a book, but Forrester already has one of those coming out soon--Empowered by Josh Bernoff and Ted Schadler.)

Thanks for the excellent contribution to the discussion, Tom!

Tom, couldn't agree with you

Tom, couldn't agree with you more.What may work for Dell may not work for another company lacking the overall marketing dollars of a Dell. There exists little proof that a company's social media inititive can produce bottom-line results (revenue) compared with the costs involved in company-wide social media training & training materials.

What still works, and where companies still invest their dollars (because its been proven to yield real ROI), is old-fashioned sales, product knowledge, and customer service training. Social Media has a place in a company's overall marketing strategy but I don't believe its as big a part as many social media consultants will have you believe nor will a lack of a social media strategy spell doom for your business...unless someone can prove otherwise?

Nuff said.

Social in Marketing

I shouldn't speak for Tom (although I do know and respect the guy quite a bit), but I don't think he's saying social doesn't have a big role in marketing, just that social benefits tend to span company silos. Not only are the benefits of social difficult to isolate from other marketing efforts in our very integrated world, but social MARKETING benefts are difficult to isolate from the social benefits that accruss to research, business intelligence, PR, human resources, etc.

As for social media for small business, I know of several enormous success stories of social for small business. Obviously social may play a larger or smaller role for some businesses depening on their audience and vertical, but it's going to be hard to ignore for business of any size.

Hey Dan. I know there are

Hey Dan. I know there are some who will cry "blasphemy" at your comment. I won't be one of those, even though we actually are one of those companies who offer Social Media consulting as one of our services to small-medium businesses.

However, I do need to say that we have seen Social Media generate real revenue for some of our clients, and we have seen our own use of SM create a huge spike of more traditional Web, e-commerce and email marketing business for our own company.

So many SMB's think that Social Media automatically means simply using every single Social Media site and tool available. I can tell you, there is no ROI in that.

The trick here is to first develop a strategy that identifies your target market and then determine which tactics and tools (both Traditional and Social Media) will economically and efficiently help you connect with that market and build revenue-producing relationships. Our most successful clients make sure that their other marketing is well defined and executed. If an identified potential market is big enough, and we can help them reach that market with an additional Social Media plan that won't be a resource black-hole, we pick one or two appropriate tools to integrate into the program.

And by one or two, we don't mean Twitter and/or Facebook. It might be a combination of an aggressive Social Media Monitoring plan and LinkedIn. Or a blog and a YouTube channel. But it's strategic, and it's also measured. And if it's not providing an ROI, it's replaced.

Blasphemy!

Okay, not really. I just wanted to post a comment with that title!

Thanks for the continued dialog, Tom.

Been saying this for a long time

Great post Augie!
I've been trying to tell people for a while that ROI on social media may not necessarily equal dollars right away, but rather loyalty and fans that will eventually turn into something monetary at some point.

Cheers,

Sheldon, community manager for Sysomos

Thanks Sheldon

Sheldon,

I appreciate the comment. I'm glad to know my approach matches with the attitudes and experiences of people like you, who've been doing this social media thing a long time!

We used to ask about the ROI of the Web; now we just invest in the Web, regardless of how much ROI can be validated in the short run--we just know it's necessary. Some aspects of social media will work the same way, while others will require (and prove) short-term ROI. But in the end, creating loyalty, awareness and purchase intent always pays off in the end!

Case-and-effect is murky

Totally agree with you Augie, and the other commenters. ROI is typically measured in $, and not all of social media can be measured in immediate $. The end goal is to drive topline growth, as well as grow the bottom line (without sacrificing quality - by creating better products and providing better service). However, the cause and effect relationship is murkier than ever. Your awareness is heightened if you see 5 of your friends tweet about some product, and a friend checks into it on Foursquare and you read an article on TC or Mashable, and then you see a webinar. You are probably also checking out competitors, and several social media experiences later, and months (or even years) down the road you are ready to buy. The social customer processes and shares information quite differently, and expects very different things from brands, so applying the same metrics is shortsighted and points to lack of understanding of how the space works.

Excellent post - going to link to it from an article I'm working on :)

- Maria Ogneva, social media director, Attensity
@themaria

Fog versus hose

Your comment reminded me of an analogy made by a marketing professor many years ago: Direct marketing is like getting the consumer wet by directing a hose spraying watner onto him or her; brand marketing is a fog that constantly envelopes the consumer and gets them damp over time.

You're right, of course, many social media strategies pay off only over long periods of time. Connecting the freinds' tweets, a friend's checkin, and an article on TechCrunch to a purchase months later made in the aisles of a big box store is not possibe. But using the brand perspective in the balanced scorecard, we can know we're having an effect that can lead to such a purchase.

Thanks for the dialog and input!

Love fog vs. hose

Love the analogy! Much more illustrative than the same ole branding vs. tactical conversation.

Cheers!

- Maria

Fog versus hose

And just to beat the analogy to death: One can measure the water coming out of a hose, but how do you measure fog? (With a balanced scorecard, apparently!) :)

ROI and substitution economics

Excellent post - and some great comments and food for thought. Here's a couple other ideas that I'd love to run by all of you. First: I think Rafael's point about KM, crowdsourcing etc is right on, but as a former (and current) CMO I also agree that marketing ROI needs to be a lot more tactical to start - and the 4 elements proposed in this balanced scorecard are a good starting point (for a top-down analysis at least).

Second, an interesting sub-dimension of 'Financial' and perhaps 'Digital' is looking at the economics of social 'channels' vs traditional/other options like email, online ads, etc. This type of substitution economics analysis can help to identify when ad spending should/will move from one channel to another, and also provides some of the best evidence for the value of doing campaigns with social marketing vs other options.

For example, one of our early customers was able to show that a Twitter campaign to their 2,450 followers 'performed' (response rate + conversions) similar to an email campaign sent to 70,000 customers - basically by 'going viral' via retweets. Many marketers still think in terms of audience/offers/response rates, etc, so coupling a top-down approach with these types of examples and datapoints makes for an even better story IMO.

I'd love to hear if any of you have similar examples of how companies have benchmarked campaigns on social vs other channels - anything like this in Josh and Ted's book?

Comparison modeling

Allen, thanks for the excellent addition to the conversation. In the report, "The ROI of Social Media Marketing," I use a P&G example of Media Mix Modeling (where they validated the impact of Social Media marketing vis-a-vis other marketing investments). We placed this in the Financial perspective (although we debated if this was more appropriatin the Brand perspective).

You're correct, there are some interesting examples of comparing the results from one channel to another in the manner you mention. The thing to be careful about is to make sure we're comparing apples to apples. For example, is an impression on Twitter the same as an ad impression in a magazine? On the one hand, the social impression is more authentic, attention-getting and persuasive. On the other hand, the chances of a potential impression becoming an actual impression isn't very large.

I'll have to review the Empowered book again to see if they have some other great examples of the approach you suggest. Thanks for being part of the dialog.

The real risk is in being absent

You're right on point with your post. It seems to me that if a company doesn't participate, it faces real risk of being left behind. Users expect their favorite brands to engage. Even though there's no "straight line between investments in social media marketing and financial results," as you stated, you risk damage to the brand by not developing a social media strategy that fits your business.

Being absent and risk management

Jim, you are absolutely right--there are substantial risks from being absent, so how does a brand quantify the benefits of being present? That's quite a challenge, and we attempted to capture this with our Risk Management perspective. Simply put, this perspective asks to what extent a brand can diminish the cost of future PR issues because it is present (listening, with assigned resources and procedures, and with fans).

Any other thoughts on how to capture the value of presence?

Capture the Value of Presence...

Several ideas jump to mind when considering how social could fit here.

- Incentives to create/sustain engagement
- Personal gatherings, tweet ups
- Regular dialogue with followers
- Cultivate a story through Q & A

Presence needs to have a quality element to it in order to create value for the users. Simply being in the space isn't enough. It's a start.

Social media balance scoreboard

I fully agree with your metrics for rating ROI of social media
Just would like to add 2 more

5. share of voice(making sure your company is talked about more then the competition)
6. sentiment analysis(increasing brand loyalty

but thank you so much

Are these part of the four perspectives?

Corey,

Thanks for weighing in!

I like the two metrics you suggest, but I'm not sure I see them as additional perspectives. In fact, they both seem to fit into one of the existing four perspectives in the social media marketing balanced scorecard. Share of voice is a great digital metric (which we define as enhancing earned or owned media.) And Sentiment Analysis may be part of the brand perspective (as you not--it's about increasing brand loyalty.)

A lot of different metrics can fit into those four perspectives, and I think you offer great examples of two that do. What do you think?

Yes, whats funny after i

Yes, whats funny after i posted my comment, I thought the same thing. My understanding at sometimes gets confused because certain ways i am understanding social media metrics involve so many different perspectives from all types of social media consultants,experts and blogs.
What my goal i am achieving for every minute these days is learning through deliberate practice, the initiatives that construct the critical to quality metrics with the most value which will achieve purpose maximization results for clients.
Meaning as simple clarity as possible, so this helps a lot. Please feel free to reach me anytime and feel free to read my blog http://coreybiggs.wordpress.com bests corey

Hello

I like concept of your post.Very reliable and informative..Thanks for sharing this.

-kathy
http://www.healthandwellnessconsultants.com

Experiential Learning

This is a great and timely post, this subject needs further study to help value the impact around social initiatives. In the project class I teach at Carnegie Mellon on Social media Analytics, we bring in several companies that are trained in valuing marketing tactics and campaigns in a certain fashion. They all need to be rewired to understand that the value drivers behind social are less readily apparent and the time necessary to deliver value differs based on the strategy. As more case studies are developed, there becomes a better body of knowledge (lessons learned, value metrics, strategies and tactics) for new entrants into the space.

Thanks Ari

I appreciate the interesting comment and experiences you shared. If you care to expand upon the social media balanced scorecard with some more ideas based on your social media analytics course, please do so!

Short and long term thinking

Augie,

Thank you for sharing these insights! I particularly appreciate the inclusion of risk management in the graph. In my experience it is the most difficult perspective to quantify and justify in advance. However, in a time of crisis, being prepared is everything and this perspective may prove invaluable.

However, I'd like to challenge you on the separation of perspectives into short term and long term objectives. Why not measure long term financial and digital effects, and plan for short term milestones in brand building and risk management efforts?

While short term gains provide early assurance of having selected the right path, it’s crucially important to always think long term. Social media, like public relations, is a process that opens the best opportunities and brings the brightest results over time. Every short term project must play a part in the bigger picture, not attracting and abandoning fans but building and nurturing relationships and contributing to the overall presence.

Therefore, instead of labeling the horizontal axis “Short term” and “Long term”, I’d draw two circles in the picture, with the inner one labeled “Short term” and outer one “Long term” – highlighting the need to evaluate every perspective in both terms. As for the horizontal axis, I’d propose “Sales focused” on the left and “Reputation focused” on the right.

I'd appreciate hearing your thoughts on the timeframes. Wrote about the idea on my blog too: http://juhaf.posterous.com/

Long-term financial

Thanks for the comments, Juha.

I'm not sure what you mean by long-term financial results. Since financial results are coincident indicators--meaning they happen at a point of time--I'm not sure what sort of metric would be a long-term financial metric. Perhaps I'm being dense, but how do we financially measure things that will happen in the future? It seems to me that improvements in brand measures are the sorts of things that can be measured today but provide financial benefits until the future, and that is how it seemed possible to measure today for value delivered in the long term.

I'm intrigued by your approach and hope you will reply with some metrics you think might fit a long-term financial and digital category.

What gets measured gets done

Augie,

Thanks for responding! Here's a few more thoughts on the issue.

My worry is that labeling financial and digital perspectives as short term goals only may lead to planning short term activities only. As examples, these might include price reductions, coupons etc to increase immediate sales, or promotional campaigns to quickly attract followers with less focus on relevance.

While the results for these short term measures are easily measurable, my point is that short term activities for financial and digital gain collide with the nature of social media and therefore lead to risks of negative perception and commentary. It's important to assess the relevance and contribution of each planned activity to the longer term goals.

As for measurement, the question is what are the long term goals of a company. In my view, the questions in your post (Has revenue or profit increased or costs decreased?; Has the company enhanced its owned and earned digital assets?) actually are longer term metrics. Short term equivalents could be measurements of revenue/profit/cost effect and impact on digital assets of specific activities and campaigns.

Guess I'll need to buy the report to dig deeper :)

Marketers need faith.

Augie, nice points. It is ironic that while marketers want "proof" that Social Media works, they have no problem writing checks with lots of zeros for mass media whose "proof" consists of miniscule samples and self-reported diaries. Yet they have faith. Experience has proven to them that mass media works.

So where's that faith in Social Media? I've explored that subject here: http://ht.ly/2e164.

http://www.quisenblog.com

Faith versus reason

Your comment makes me feel like we're veering into the territory of "Lost," discussing the value of faith versus reason.

I grant you that a little faith goes a long way. I'm a fan of Walt Disney, and he's a guy who did what he thought was right because he believed in it, not because someone produced a spreadsheet. (He left the pesky financial considerations to his brother, Roy.)

Still, I'm not sure asking marketers to have faith is the answer; that doesn't pay the bills. That is why we produced the report on the Social Media Balanced Scorecard. It provides a methodology for quantifying all the benefits received from social media programs, and not just financial ROI. While it might be argued that increased brand awareness or association doesn't pay the bills either, brand measures (one of the four perspectives in the balanced scorecard) are a leading indicator that validates brand value has increased (which means those pesky bills will be paid in the future.)

Thanks for the contributions and keep the faith!

Mixed thoughts

I'm struggling a bit with your article, Augie, and some of the comments. On one hand I agree with you so maybe my struggle is more about presentation.

To me, to determine the social ROI, you do need to understand the non-financial feedstock. What you call the leading indicators that will derive from various metrics. We agree on that philosophy.

What I'm struggling with though, is many of the comments seem to lean towards using the non-financial as the focus and a reason to forego the financial results. My problem with that is there's already much too much of that going on.

Social business/media can and should be valued.

In any case, I had more thoughts and captured them in my own responding article here.

http://www.kathyherrmann.com/blog/2010/7/20/social-media-rois-are-excell...

Return doesn't have to mean financial ROI

Kathy,

Thanks for your comments.

I agree it would be great if social media marketers could produce a worksheet that says "if you invest $250k in this program, it will deliver $500k in value." That sure would make the job of marketing easier! But unless a firm is in the direct marketing/ecommerce business and unless they treat social media as if it is a PPC-like model (measuring costs versus clicks/conversions/sales), there is little science that can draw such a direct correlation between costs and revenues or profits.

Think of the toilet paper company that launches a Facebook page. They have fans, people who contribute content, people who like the brand or its status updates, and a variety of other ways to measure engagement. But these same people are also touched by the brand's TV marketing, their Sunday FSI, a banner ad, and shelf talker on the aisle. How is this company to create a spreadsheet that cements the cost of maintaining a Facebook fan page to the value received?

They can't, and that's where the social media scorecard comes in. The toilet paper brand cannot know with much certainty the additional sales Facebook creates in the aisles of a big box store, but it can know:

- Brand: Through surveys, it can know that individuals touched by the Facebook page have greater affinity, awareness, purchase intent or other brand measures.

- Risk Management: The brand can consider how their fan page and other social media assets will allow them to better deal with PR issues in the future.

- Digital: The brand can evaluate that engagement is being created by tracking fan growth, engagement, pass alongs, and the like.

What this brand cannot know (unless it invests in more expensive methodologies such as media mix modeling) is the specific financial value Facebook has created in sales. And the methods for converting non-financial data into financial data are so riddled with assumptions and guesstimates as to offer no more science (and arguably less.) (I addressed my concerns about estimating the value of a Facebook fan in a prior blog post: http://blogs.forrester.com/augie_ray/10-07-08-what_value_facebook_fan_zero.)

There are brands that can easily track their social efforts through to sales, but there are many more that cannot. I don't see that as a major issue because these same brands have always struggled to track their Web and other efforts into sales in the aisles. The challenge with social media for these brands isn't unique, so the ways to measure success shouldn't be unique. By tracking traditional brand, risk, digital and financial measures, a complete picture of short- and long-term value can be uncovered.

Do you agree, or do you see methods for specifically tracking social media contributions into sales for a company such as our hypothetical toilet paper brand?

Hmmm, no

I agree with parts of what you wrote while disagreeing with others.

Any corporate initiative, social or otherwise, at an enterprise level tends to be complex and multi-faceted. Expecting absolute cause and effect from an plethora of tactical activities across multiple departments is unrealistic.

However, you can make correlations between activities and effects to give execs a financial perspective of how a business initiative is forecasted to or has contributed to the company's bottom line.

Additionally, there are specific strategies a marketeer can employ to help build a stronger correlation that does cross over into cause and effect.

Let me address this phrase in your comment..."converting non-financial data into financial data are so riddled with assumptions and guesstimates as to offer no more science"...because the objection is coming.

This is the most common reason given for avoiding economic analysis of social ROI -- and it's incorrect and misleading.

Yes, there are assumptions to be made in the conversion. The way to manage this is to make them defendable and couple them with appropriate risk.

BTW, this is no different from the finanical analysis of any other corporate investment opportunity (a.k.a., initiatives).

And therein lies a problem. Folks keep trying to view marketing initiatives as if they're some special brand of corporate inititiave - and they aren't. They're just one initiative (or a set of them) in a field of corporate opportunity. And Business 101 fundamentals still apply to them - just like every other initiative.

If you couple defendable assumptions with appropriate risk then you give an exec team context to make a business decision. And if you really want to take it further than Monte Carlo your analysis to show a P90 (minimum), P50 (most likely), and P10 (maximum) results.

It's no surprise that many execs continue to have concerns about social initiatives. Why would they want to invest what could be mid-six figures into seven when they can't understand the potential value on the other side? Show them the value, and if it meets or surpasses other initiatives, then why wouldn't they invest?

Here's where I agree with you though. The other factors you measure in your scorecard *are* important because they form the basis of the defendable assumptions.

Although in my analysis, I expand to include analysis of not only consumer insight and brand protection savings, but also call center savings as well as revenues from social marketing initiatives.

Great post. It is important

Great post. It is important to understand that just creating profiles on social media websites is not enough. Google will ignore these accounts until they “see” you are really updating them and really using them. Most people make the mistake of just creating the accounts, dropping a back link and moving on. Not good from an SEO perspective or from a marketing perspective. This is an opportunity to build a relationship with potential clients.

SEO and the digital perspective

Thanks for the contribution. Developing a plan and making sure resources are in place is certainly vital for social media programs. I appreciate you mentioning SEO, because search engine relevance is one of the reasons the digital perspective is important to brands. Developing inbound links, user-generated content, ratings and a vibrant community are all ways of creating value through SEO and can be measured with digital metrics like links, participants, views, submissions and the like

Thanks for being part of the dialog!

Deleted spam comment

I'd like to point out that commenting on this blog in a way that adds to the dialog while promoting your product or service is welcome here. But inserting a cut-and-paste promotion for a product or service is not welcome on this blog.

I just deleted a comment because it didn't reference the blog post or comments, failed to add to the dialog, and contained biolerplate promotional language for a product. I thought I'd share my approach to self-promotion in blog comments as a message to the person whose comment I deleted and to help avoid any confusion for others.

I hope you'll contribute to the dialog, and mentioning your product or service while doing so is not unwelcome. As with all things in social media, the key is to be relevant!

Social Media is the Grease in the Marketing Funnel

I appreciate your contribution here Augie, and so many of the thoughtful comments. I find myself using the subject line I posted above this comment often, simply as a means of orienting others from a big-picture perspective.

I like the fog analogy as well, but everyone in marketing is familiar with some version of the funnel. Of course, some social strategies are more conversion-based than others. Regardless, we should always pursue a better understanding of ROI.

ROI: holy grail or fool's errand?

Augie,

You and I have talked about social media ROI before, but I couldn't find that previous post of yours.

After reading all the comments, I think there are a few salient points worth noting:

1. Social media marketing – like all marketing – will mean different things to different people. For many, conversion and sales aren’t even part of the discussion – and rightly so. Content creation, influencer outreach, community management, etc. will largely be a PR function for many companies. In that vein, who can measure the “conversion” of a favorable story in the local newspaper? Can you track sales to an online review? Likely not. But we’ve been suckered into this ROI discussion because social media marketing is digital, so much of the driving force comes from those at the vanguard: the SEO crowd. They live and die by conversion. But social media marketing isn’t always direct marketing. In fact, it seldom is.

2. As social media marketing becomes “baked in” to business operations (not just marketing), it will become infrastructure. As David Meerman Scott points out in a thoughtful rant (http://bit.ly/afpW1Q), what’s the ROI of nice landscaping? I ask, what’s the ROI of having restrooms in your restaurant? Nobody knows because we can’t imagine running a business without a decent storefront and amenities. I predict social media will be the same way. You can’t operate without telephones and you won’t be able to operate without Web outreach and a feedback loop in the very near future.

3. Back to the PR function again, who can measure the cost of being slow on the uptake when a crisis hits? You might ask Motrin. Compare the Motrin debacle to the one Southwest Airlines experienced. Similar problems, with very different response times and outcomes. Bottom line: you can't wait around to respond in a 24/7 world and you can’t ramp up a bank of goodwill during a crisis. That said, you’ll NEVER be able to measure the benefits of having helpful connections and goodwill in the absence of a crisis. And you should thank your lucky stars for that.

4. Finally, as I have pointed out in the past and others mentioned here, success in social media is largely dependent upon a brand’s recognition and success in other channels. In other words, accurate measurement of ROI must include ALL the money a brand has spent on marketing from DAY ONE of its existence. Measuring incremental investment and results is largely a fool’s errand. I realize marketers need to do this to justify their existence (myself included), but we should be setting appropriate expectations about this. We should absolutely measure forward motion, benchmark and measure social mentions (and eventually sentiment – though that’s still voodoo), track progress against competitors, etc. But we shouldn’t be looking to ROI as the holy grail – unless we live in the land of fantasy.

Augie, I’d love to see your report, though I don’t think I have any clients who will spring for it. BTW, I’ll be in the bay area for most of September, so we should meet in person finally! :-)

@CarriBugbee
Social Profiles: http://www.CarriBugbee.com

ROI return on idea

Hi Augie

Thanks for this article. No doubt it is time that we gather ourselves and understand what is probably the ROI measure to Social Media because no matter what a corporate body at the end of the day will have to put it into their auditing system and P&L statement.

However as you have rightly shared that Social Media is made up of certain elements and hence all of them put togather would be then a benchmark for ROI.

Would like to submit that along with all this is the time facto. Allow me to explain this. Unlike any other sales call wherein you know very early if it will convert in Social Media thanks to SEO the longer your stay is the better is ROI.

the other part of ROI i would attribute to 'depth' of engagement between Customer sets and Brand.

allow me to explain:

If bringing target to a particular page is objective then it is SEO. Getting this same target revisit and engage more deeply will materialize into tangible achievement. This brings us to site stickiness aspect = same as depth and revisit. Again for all this time is greatest facto. because depends on the type of category you are writing about. If it is based on a very dynamic subject then expecting high involvement is natural but if category is not something that requires weekly update then how would we rate re-visits.

So this brings us to 3 more aspects namely: SEO, Engagement, Category

This article is of great

This article is of great value to anyone who has to address the ubiquitous ROI question which is very often asked very early on in any effort to shoot down social web engagement. The more convincing an argument can be made in favor of a more holistic view the better and this article goes a long way to make this point effectively.

While the request for ROI measurement is a valid one, social media efforts should not suddenly be judged on more demanding yardsticks than others in marketing. The overall benefit is long term and needs to be evaluated on that basis. While this might be difficult to understand for people totally fixated on quarterly earnings, that is just the reality in today's changed market environment.

In the not too recent past, branding efforts were - and often still are - questioned while it has become evident that brand value is a quantifiable asset and very much responsible to generate sales. It took time and effort to realize that and it will be the same for social web engagement. One thing seems clear to me, there is no alternative to becoming engaged with customers on a long term commitment basis.

Social with Impact

I agree with Joe. There is no alternative to true engagement. The brand value you build by encouraging an ongoing dialogue with your customers is immense. Never before have people who once thought they had no voice been so empowered.

We cannot undervalue the interaction nor can we disregard the impact of social media. The direct, one-to-one communication opportunities for consumers with brands is a defining moment for new marketing opportunities.

this is an important topic

Augie, thank you for taking a good hard look at the ROI picture from a holistic perspective.

I am a social media marketing guy, a big fan. Although I believe that it is simply one tool in the marketing toolbox. Multi-channel is, in my opinion, the way to go. All of these marketing efforts, social media and otherwise, must be able to accellerate the sales cycle. A lot of social media types don't seem to think this is important.

If there are no real business results and a way of actually measuring SM marketing activity, then all of this activity doesn't mean much to biz owners/C-suites. This doesn't mean we are "ignorant" as one social media person recent tweeted. What it means is that all of these activities have a cost and therefore should provide some measurable benefit to to the organization.

Over time, capital takes the path of highest return. I will spend money/time with SM marketing efforts that generate the highest return, both financial and otherwise. But if I can't see what that return is, I will be inclined to not invest in that activity again.

ROI or Results?

Augie

Thanks for the insightful post and report.

What I found most interesting is how much people love to debate around the notion of ROI, especially in the Social Media space.

If your social marketing efforts are aligned to your core business objectives (whether financial or not), and you can clearly demonstrate success, you won't need to get into ROI discussions. Instead focus on results and your efforts will self justified.

Bertrand

Well Done

I must add that I found this article had such a rich and powerful range of commentary; state of the art !!. Well Done to all.

As a finance guy, ROI had always clouded my perception and, in a real sense, had been one of the yardsticks I used to measure - usefulness or worthiness. This article and the commentary helped clear out those thoughts.

As an SEM, I too agree that

As an SEM, I too agree that initially Social Media Marketing does not equal dollars, but it does result in things that are important, such as brand recognition, loyalty and awareness which over time result in dollars. The key is to approach social media from many angles and not just throw all your eggs in one basket. Don't just focus on one social media avenue. You should have a multi-faceted approach to have an effective social media strategy.

Great post, Augie. The more

Great post, Augie. The more structure that we have around social media ROI analysis, the better. The diagram is especially helpful.

Digital asset part under valued

Great read and informative Augie, thank you. I have found that the digital asset part is very under valued so thanks for bringing it forward.