The Maturation of Social Media ROI

The debate over measuring social media investment inspired many brands to cannonball into popular social networks and join the proverbial conversation without a plan or strategic objectives defined. At the same time, the lack of the maturation of social media ROI standards unnerved many executives, preventing any form of experimentation until their questions and concerns were addressed.

In 2010, we’re entering a new era of social media marketing — one based on information, rationalization, and resolve.

The Maturation of Social Media ROIBusiness leaders simply need clarity in a time of abundant options and scarcity of experience. As many of us can attest, we report to executives who have no desire to measure intangible credos rooted in transparency and authenticity. In the end, they simply want to calculate the return on investment and associate social media programs with real-world business performance metrics.

Over the years, our exploration and experience has redefined the traditional metrics and created hybrid models that will prove critical to modern business practices and help companies effectively compete for the future.


Early ROI Adaptations


Where the ‘I’ in ROI represents investment, marketers have also explored ancillary elements to address the socialization of media, marketing, and the resulting dynamics of engagement.

Adaptations included:

Return on Engagement: The duration of time spent either in conversation or interacting with social objects, and in turn, what transpired that’s worthy of measurement.

Return on Participation: The metric tied to measuring and valuing the time spent participating in social media through conversations or the creation of social objects.

Return on Involvement: Similar to participation, marketers explored touchpoints for documenting states of interaction and tied metrics and potential return of each.

Return on Attention: In the attention economy, we assess the means to seize attention, hold it, and measure the response.

Return on Trust: A variant on measuring customer loyalty and the likelihood for referrals, a trust barometer establishes the state of trust earned in social media engagement and the prospect of generating advocacy and how it impacts future business.

But as we progress through the ten stages of social media integration, our views and techniques mature into more sophisticated strategies.

For many businesses, the case for new metrics can’t be made until we have an intrinsic understanding of how social media engagement affects us at every level. It’s not as simple as counting subscribers, followers, fans, conversation volume, reach, or traffic. While the size of the corporate social graph is a reflection of our participation behavior, it is not symbolic of brand stature, resonance, loyalty, advocacy, nor is it an indicator of business performance.


The Need for New Scrutiny


In 2010, social media endeavors are often still thought of as ‘pilot programs,’ launched to steer a brand toward perceived relevance. Budgets, for the most part, are borrowed from other divisions to fund the largely experimental programs. Where that money goes and comes from depends largely on the social media champions who push for this experimentation from the inside.

In many cases however, new programs are introduced without an integrated strategy. Money is allocated from existing programs. If we’re going to take away from something, we should determine whether or not we’re justified to do so.

In 2010, executives are demanding scrutiny, evaluation, and interpretation. Even though new media is transforming organizations from the inside out, what is constant is the need to apply performance indicators to our work.


The Business of Social Media


The CFO, CEO, and CMO of any organization would be remiss if they did not account for spending and resource allocation for social media. MarketingProfs recently published a study by Bazaarvoice and the CMO Club that revealed the true expectation of chief marketing officers. The bottom line: They want measurable results from social media.

However, the study found that the exact implications of social media still evade CMOs.

– 53% are unsure about their return on Twitter

– 50% are unable to assess the value of LinkedIn or industry blogs

Most importantly, about 15% believe there is no ROI associated with Twitter, and just over 10% cannot glean ROI from LinkedIn or Facebook.

I believe this is the direct result of a disconnect between social media activity and a clearly defined end game. We must establish what we want to measure before we engage. By doing so, we can answer the questions, ‘what is it that we want to change, improve, accomplish, incite, etc?’facebookinfo

Defining a clear strategy can help us reach our social media goals, including:

– Sales

– Registrations

– Referrals

– Links (the currency of the social web)

– Votes

– Reduction in costs and processes

– Decrease in customer issues

– Lead generation

– Conversion

– Reduced sale cycles

– Inbound activity


Customer Insight


Customer ratings and reviews rose to the top of useful marketing feedback, as they delivered tangible ROI insight. In 2009, 80% of respondents reported that customer stories and suggestions shape products and services. As a result, brands earn the trust and loyalty of their customers by listening and responding.

According to the MarketingProfs study, CMOs will have more opportunities to engage with user-generated content in 2010, with many reporting:

– A 400% increase in use of Twitter comments to inform decisions about products and services

– A 59% increase in the use of customer ratings and reviews

– A 24% increase in use of social media for pre-sales Q&A


Monetizing Social Media


Social media metrics will be increasingly tied to revenue in 2010. To what extent seems to vary according to CMOs. The study indicates:

– 80% predict upwards of 5%

– 15% optimistically hope for 5-10%

In 2009, those companies that aligned social media investments with revenue estimates:

– 5% or less revenue tied to social in 2009 foresee an increase of an additional 5% in 2010

– 6-10% of revenue stemming from social media is expected to increase more than 10%

– Those with greater revenues resulting from social engagement expect an escalation of revenue derived from social at 20%

Companies like Dell are not only tracking the impact of social media on revenue, but expanding lessons learned across the entire organization. According to Dell’s Lionel Menchaca:

‘Our 1.5 million followers on Twitter, and back in June we indicated that @DellOutlet earned
$3 million
in revenue from Twitter. Today it’s not just Dell Outlet having success connecting with customers on Twitter. In total, Dell’s global reach on Twitter has resulted in more than $6.5 million in revenue. In fact our Brazilian and Canadian accounts are growing rapidly too –- and it was Canadian tweeters who asked to make sure Dell Canada came online to Twitter. Dell Canada responded because the team heard our customers. In less than a year, @DellnoBrasil has already generated nearly $800,000 in product revenues. Similarly, @DellHomeSalesCA has surpassed $150,000 and is increasing at notable pace.’


The Forecast for Metrics in 2010


Earlier we mentioned generic forms of social media metrics. The survey revealed that indeed, 89% of CMOs tracked the impact of social media by traffic, page views, and the size of their social graph or communities. However, 2010 is the year that social media graduates from experimentation to strategic implementation, with direct ties to specific measurable performance indicators.

In 2010, CMOs will seek to establish a connection between social media and business goals. The study documents the adoption of three metrics:

– 333% surge in tracking revenue

– 174% escalation in monitoring conversion

– 150% increase in measuring average order value


A Call To Action


Defining the ‘R’ in ROI is where we need to focus, as it relates to our business goals and performance indicators specifically. Even though much of social media is free, we do know the cost of engagement as it relates to employees, time, equipment, and opportunity cost (what they’re not focusing on or accomplishing while engaging in social media). Tying those costs to the results will reveal a formula for assessing the ‘I’ as investment.

When we truly grasp the ability to define action and measure it, we can expand the impact of new media beyond the profit and loss. We can adapt business processes, inspire ingenuity, and more effectively compete for the future.
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Mark Montoya has been working in personal branding for more than a decade for hundreds of online and offline companies, small businesses and individual service professionals. His focus has been toward improving the way jobseekers find employment on the Internet. He has synthesized his expertise by helping job seekers obtain their ideal choice of employment over the Internet on his sites MyOnlineCareerSpace.com and MyOnlineCareerCoach.com, and through his books 101 Tips Every Job Seeker Should Know and The Ultimate Online Job Search eBook.

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5 thoughts on “The Maturation of Social Media ROI”

  1. “Earlier we mentioned generic forms of social media metrics. The survey revealed that indeed, 89% of CMOs tracked the impact of social media by traffic, page views, and the size of their social graph or communities.”

    I agree that measurement of your “Social Graph” is a reasonable activity. Earlier I filled a wiki Spreadsheet in our intranets to keep track of our followers on Twitter and fans of Facebook. Now we created a software that will launch soon that does this type of “egotracking”. It is called TwentyFeet (http://www.twentyfeet.com).

    What do you think? Relevant activity? Part of ROI movement? Or rather useless? I am looking forward to your feedback.

    1. As it looks like you are relatively early in development, I’ll reserve comment until the full system is up and running and I give it the 30 day free trial…

      …However, at first blush. I like it. I see the development of other 3rd party applications like Hootsuite and Tweetdeck moving toward the accumulated status of all the social media accounts an individual user might have and if you are able to be first to market with a defined advantage and value-add, it will definitely be relevant and worthy.

      The difficulty, as always is showing monetization of the activity – is this part of the plan for 20 feet?

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