Warning: rant to start in 3… 2… 1…
One of the many blogs in my RSS reader is Marketing Pilgrim. It’s a great blog staffed with smart marketers. A few days back Joe Hall, who I don’t know personally but find his writing to be both insightful and entertainment, published a post entitled “Social Media? Think Again Genius!” where he argues:
Calculating ROI for advertising is easy because it is based on definite variables that can be measured. How do you measure the emotion from a positive exchange with a favorite brand on Twitter? How do you calculate the feelings of community in some forums? You can’t, and you aren’t supposed to.
To which I say: AHHH! Seriously? *headslap*
Sorry Joe, but you’re wrong about social media
Anyone who owns a business or is responsible for a P&L statement will tell you that when it comes to marketing and advertising the only thing that matters is does the expenditure generate more money than it costs. That’s it. We can disagree about the timeline (e.g. brand development can take longer than a lead generation campaign); we can disagree on the measures (key performance indicators do not always equal return on investment); we can even disagree about what makes for good marketing and advertising – but when the rubber meets the road no company that wants to stay in business is going to continue to invest in social media in the long-run unless they can measure its return on investment.
Correlation does not equal causation
A few weeks back I had the opportunity to meet with the COO for a $1 Billion+ per year in revenue company based in the southeast. This well-respected manufacturer has an excellent direct sales force, a solid public relations team and invests heavily in social media. They’re active on all of the major social networks and from what I’ve seen regularly take a creative approach to engaging their stakeholders in conversation. In speaking with the COO I told him I was impressed with their efforts and asked how they were measuring social media ROI… to which he said they weren’t. Like many brands (large and small) they’re monitoring brand mentions online, and they’ve seen an overall increase in traffic to their website, so he felt social media was having an impact.
Just because social media ROI is hard to measure doesn’t mean it’s a useless effort
Time is running out for squishy numbers and loose correlations. Unless marketers get better at measuring social media’s ROI, and defending it to those who control the budgets, social media as a marketing and advertising tool will be short-lived. Why? Because if your boss has data to demonstrate that email marketing, direct mail or even that television commercial is ringing the cash register than they’re going to invest more in those tactics because that’s the logical thing to do.
So is social media a dead man walking? In my opinion, absolutely not. There are a number of great companies that provide social media ROI tools including Argyle Social, Radian6, ViralHeat… heck, even Google Analytics or old fashion customer surveys can be used to measure social media ROI in the hands of a knowledgable marketer.
That doesn’t mean that the code has been cracked either. Social media is an emerging communications channel and as such businesses are still trying to figure out how to engage prospects and customers within it, much less measure the results. But the promise of social media – indeed all digital marketing – is that each engagement, conversation, click and conversion generates data which can be analyzed. There’s a huge difference between saying that markets need to do better at learning how to measure social media ROI effectively and arguing its not an task worth tackling.
Best short-term options for measuring social media return on investment
There’s obviously no silver bullet answer for social media ROI, but at the minimum we recommend to our clients that you evaluate implementing the following:
1. Set up goal funnels and/or event tracking tracking on your website so that you can properly track conversion. The process for doing so difference depending on your analytics platform, but if you’re using Google Analytics I recommend reading Naoshi Yamauchi’s post on event tracking and read Google’s help article on setting up goal funnels.
2. If conversion doesn’t happen on your website, but instead by phone or in-store look for other ways to capture conversion information. If you have a small team you can ask your sales people to simply ask the customer where they learned about the product/service (and of course, log that information) or you can look into using a phone conversion tracking system like Mongoose Metrics.
What’s important isn’t that you use a specific tool or process to track social media ROI. Rather, its that you capture the right data and know how to interpret it. If you need help figuring this out let me know and I’d be happy to discuss it with you. But don’t fool yourself into thinking that social media ROI doesn’t matter – because if you’re investing any time or money into it for your business than it absolutely does.