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Social Media ROI Basics

Posted by in Analytics | 8 comments

Photo of Nichole Kelly Why is everyone up in arms about social media ROI? It’s likely a result of pressure from management teams to justify current social media spending. After all, many companies have been dabbling in social for 24-36 months so it’s natural to expect a reasonable return. Whether you are just getting started in social media or were an early adopter there is no getting around demonstrating social media ROI. These tips will prepare you to demonstrate ROI before your management team knocks down your door.

 

Lose the Lingo

The first step in successful measurement is that you need to lose the social media lingo when you are talking to your management team. If you are spending time explaining what a tweet, retweet, share or like is then you have stumbled on a dangerous road. Management teams don’t need to understand the nitty gritty details of social media tactics, they want to understand one thing: how is it contributing to the bottom line? Therefore, when you talk about the results of your efforts lose the lingo and break it down into terms they will understand. Your management team shouldn’t need a PhD in cool to understand your measurement report.

 

Measure What Matters

Now that you’ve lost the lingo, it’s time to normalize your metrics. As managers we want to understand our growth in fans, followers, @ replies, shares etcetera. However, management teams want to see impact on three things: sales (units), revenue and cost. Rather than trying to team management teams a new language, translate social media into the language they already understand. Ask to see a copy of the executive report and look at the metrics they have deemed are important. Then figure out how you can show social media’s impact on the core business objectives.

 

Measure What You Already Have

To truly measure return on investment (ROI) you have to understand the impact a status update has on revenue. This is a big one because there are a lot of articles about redefining ROI to something more meaningful to social media. We are never going to escape the ROI discussion because it is how all businesses measure their success for every other area of the business. Tying into revenue will require will require some integration with your social media engagement tool, web analytics tool, and your customer relationship management (CRM) tool. We’ve been able to successfully do this with a minor level of development work, but while you figure out what needs to happen there the one thing you can absolutely measure right now is cost. Social media tends to have a positive impact on costs when compared across the marketing channel.

 

Don’t Measure Social Media in a Silo

Finally, don’t present social media data alone. Instead compare social media results to public relations, online advertising, TV, radio, print, and search engine optimization results. This will allow you to make comparisons to how social media is helping other channels be more successful.

 

Bottom Line Metrics

There are three core metrics that will help you show early progress for social media and due to their long history your executives will understand them and have a baseline for what is deemed acceptable.

Nichole Kelly is the CEO of Full Frontal ROI Consulting, a proven social media firm that focuses on tangible gains and bottom lines. She has been published on several popular blogs, and has been well received at recent speaking engagements.
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  • http://adamjustice.me/ Social Media Marketing Expert

    Nichole has become Social Media’s go to girl when it comes to ROI. She has published an article about using Hootsuite to measure ROI that went viral because of the good advice it contained, and the value of setting up the program in the way she intended. SHe’s speaking at all of Jason Falls’ Exploring Social Media conferences this year, and she’s a guest at the upcoming Social Media Examiner webinar.

    I’ve always liked analytics, and have used just about everything out of necessity. Early programs to measure web analytics were hosted on your own server and you had to set them up yourself. Now most people look to Google’s free version or another alternative that their host set up automatically for them for those stats, but either way it’s easy to get basic measurements.

    What I don’t understand is why the detail is required. With traditional media, the measurements came from the business sales themselves; if the business grew, that meant the ad campaigns worked. They often tried to correlate the growth in market share or revenue with the number of ads shown, or some other metric to get a KPI. That is where the detail comes in, you need to see which one of your metrics correlate to tangible gains.

    Social Media is unique in the fact that it can be measured in so many ways. There is a ton of intangible value you can get from a well run social media campaign. Don’t stop your ROI at the balance on your Ad Sense account, match your metrics to your bottom line. Try and find out what your REAL return is. Odds are your bottom line is affected by social media more than you think, and you’d be surprised just how many times market share increases correlate to online growth. You’ll never know that, or if it pertains to your industry if you never measure or look.

    • http://twitter.com/Nichole_Kelly Nichole Kelly

      Thanks so much for the awesome compliment Adam! I think the reason people want detail is that many companies have cut back on marketing budgets and want to spend their money on the activities that will produce the highest return. We used to be able to get away with saying, we waste half of our marketing budget. We just aren’t sure which half. Now CEO’s and CMO’s are demanding to know which half, and that has led to more scrutiny over marketing data as a whole. But the good news is that social has a TON of data available as you pointed out. We just have to present the data that is truly meaningful and do it in a way that executives understand. It isn’t about fans, followers, retweets, comments or @replies. It is about how those metrics impact sales (units/service hours), revenue, and costs. :-)

  • Adele

    What/how do I measure when it comes to ROI?  I can prove that there is an increase in on-line sales and prospective clients leaving their details on the website, but how do I prove that Twitter & Blogs etc are having the impact and are responsible for that on-line increase in sales? The response is always that more and more people are buying on-line anyway, so an increase in on-line sales is expected and not necessarily due to Social Media activity.

    • http://adamjustice.me/ Social Media Marketing Expert

      Adele, you need to correlate your numbers to an increase in the increase. If your company experienced a 1% increase in sales in the quarter before your specific social media campaign, and then experienced a 2% increase after it, you can assume it’s related.

      Now here is the important part. If you can increase your social metrics (likes, subscribes, comments, hits, etc.) over the third quarter in our hypothetical company here by 100% (double the 2nd quarter) and instead of another 2% increase in sales you see a 3% increase, you can say that whichever metrics correlate are Key Performance Indicators. Over normal technology inflation (Ok, they’re buying online more anyway) you expect to see a 1% increase. If you add a social media campaign, you’ll get another 1%. If you double the effectiveness of that campaign, it doubles your extra 1% for a total of 3%.

      After you prove a correlation and define your key performance indicators, you need to focus on which activities drive those metrics (if it’s subscribers to your blog, focus on blogging and advertising the blog. If it’s comments, focus on increasing engagement), or ask that your client increase their investment.

      For a very large company, an extra 1% can mean millions. On a smaller company, these increases will probably be a larger percentage.

      Don’t forget that profit isn’t the only thing you can measure. If you put up a comprehensive FAQ or start publishing how-to videos (IKEA has took a similar initiative recently) you can cut back on the customer service costs (while at the same time improving customer relations). By cutting down on costs, you’ll improve your margins. 

      This is why ROI works best when you measure as much as possible. If you’re cutting cost and adding profit at the same time, you’re working double time on margins. If you’re improving metrics across the whole business, you’re doing social media right.

    • http://twitter.com/Nichole_Kelly Nichole Kelly

      Adele – Great question. It sounds like you are struggling with attributing the increase to your social media channels. The first step is to add campaign parameters to your shortened urls within your social media engagement tools so you can tell which status update led to the sale online. I use HootSuite and wrote a post with instructions on how to do this with HootSuite and Google Analytics here. 
      http://fullfrontalroi.com/2011/11/how-to-integrate-hootsuite-with-google-analytics-campaign-reporting/

      There a common challenge with attributing the sale that comes with any of the tools available. Google analytics will attribute the sale to the last campaign before the sale. It is quite possible that the interest generates on social media sites, but converts in organic search or paid search. The only way to solve this is to build full campaign tracking. I’m happy to discuss if you are interested, but it’s a lot to try and explain here.

      The next step is to build your reporting so that you are showing increases from all of your marketing channels side by side. We look at PR, SEO, Advertising, and Social side by side so we can look for differences. Many times we see higher conversion rates through social, but if all you were looking at was the social channel you wouldn’t see the improvement. Again, fantastic question. It is absolutely possible to attribute the increase to social if you start tracking campaigns and tie the results to goal conversions in Google analytics. I’d be happy to discuss further if you’d like. The how gets pretty granular in details based on the systems you have in place.

      Hope this helps!

      Nichole

  • http://www.Bedrosians.com/ BedrosiansTile

    So right about losing the social media lingo. The deer in headlights look is too common after talking about tweets and pinning. Thanks for all of your suggestions!

    • http://twitter.com/Nichole_Kelly Nichole Kelly

      Thanks so much for commenting! I think we’ve all fallen victim to the deer in the headlights, right?!? I always say, the minute an executive asks you, “what is Twitter?” you’ve lost. I stay away from the specific platforms and focus on the results. When the results show positive returns, the tools no longer matter. :-) Keep rockin’ the awesome.

  • http://roshanjoshi.com.np/social-media-marketing.html Roshan

    agreed. always in trouble when there are too much details for everyone. be responsible for single detail but report what matters.