5 Reasons You Should Measure Social Media Return on Investment

social media viewpointsAre you wondering if measuring social media return on investment (ROI) is important?

Do you cringe when you think about putting together another report?

You aren’t alone. But times are changing for social media and these reasons will show you why it’s time to get serious about measuring your results.

Do I Really Need to Measure ROI?

Let’s start by addressing the elephant in the room. Is ROI the right measure of success for social media?

There are many who would argue that a financial return doesn’t show the true value of social media for the organization. I would agree that ROI doesn’t paint the full picture.

However, the bottom line is that executives and business owners sleep, eat, and breathe ROI. It has been the measure of success since the beginning of their careers and while we can jump up and down and tell them it isn’t a complete picture, they aren’t going to believe it until they see it.

Therefore, it’s time to get serious about ROI, but that doesn’t mean that you should sacrifice other types of metrics that help to round out the story. You need both and this is why.

get serious

Get serious and measure social media results. Image source: iStockPhoto.

#1: ROI is a Necessary Evil

Regardless of whether ROI paints the pretty picture that we want for social media’s value to the organization, it is the universal measure of success for business.

We’ve seen new metrics like Return on Influence and Return on Engagement being talked about. Some marketers like these metrics because they feel they do a better job of telling the story of social media’s value.

I understand the need to have a holistic view on where social delivers; however, we can’t redefine ROI because it doesn’t suit our needs or it doesn’t paint the picture we want. If you don’t start to measure the real return on your efforts, someone is going to do it for you.

And if they do the measurement, you won’t have the opportunity to clarify what ROI isn’t showing and present metrics that help to round out the perspective. You’ll look like the person who was trying to hide a negative ROI to save your project. And yes, when you measure it the first time it will likely be negative.

So it’s time to embrace that ROI is a part of the story and it is our job to make sure we balance ROI with other metrics that show where social delivers incremental value.

clear roi

Clear ROI is part of a successful social media strategy. Image source: iStockPhoto.

#2: Your Boss Will Demand ROI

There is no denying that management teams and business owners are questioning whether your efforts are delivering results. The 2011 Jive Social Business Index Survey revealed that only 27% of executives with budget control for social media felt that social media is a top strategic priority. 47% of the respondents said a social plan was necessary but not a strategic priority.

This shows you that the jury is still out on whether social media is a mission-critical piece of the marketing mix, at least for those who control the purse strings.

The majority understands that social media is important at some level for the business, but it’s clear there’s still skepticism. I think we can all admit that if the people who control our budget still aren’t sold on whether social media can drive business results, they will continue to invest cautiously.

This means it’s important to be able to show quantifiable results from your efforts. If you aren’t able to demonstrate the strategy is delivering a financial return, you may find that optimism quickly turns to pessimism as other activities are shown to produce results, and your budget could just as quickly disappear.

results

Show quantifiable results. Image source: iStockPhoto.

#3: Social Media is Resource-Intensive

I think we can all agree that the days of saying that social media is FREE are over. We realize that a successful social media strategy takes a lot of time, and for many of us it’s time we simply don’t have.

The Social Media Marketing Industry Report revealed “a significant 59% of marketers are using social media for 6 hours or more and 33% for 11 or more hours weekly.” That’s a lot of time, considering that social media isn’t our only job. For many of us, social media is something that has been added to our already full plate.

This has led more people to start outsourcing aspects like content development because they simply can’t produce enough content to generate results in the time they have.

One of the first questions I get from executives is whether they should include the cost of employee time and/or salaries in their social media ROI calculations. They want to understand whether the time employees are spending is worth the expense.

It isn’t because they are trying to launch a war against social media. It is simply a matter of prioritizing resources to the highest-performing initiatives. And if social media can’t be quantified to show a return to the organization, it gets harder to justify the time and budget that is being dedicated to it.

budget

Include the cost of employee time. Image source: iStockPhoto.

#4: You Can’t Expand Without ROI

There are a lot of companies out there that have seen tremendous success in developing large followings and now they’re asking, “Now what?”

The smart marketers didn’t jump into every social media network right away; rather they tested and became awesome in a couple that matters to their business. But now they feel they have demonstrated that social media can work and want to expand into other social networks.

In other situations, marketers realize they need to produce more content because they see the most positive results around the release of new content, but they can’t handle any more internally.

Whatever your scenario is, you won’t be able to secure additional budget dollars to fund your expansion plans if you haven’t demonstrated that the budget that has already been invested delivered a positive return to the organization.

Return isn’t measured in fans and followers; it is measured in dollars and cents. If you want to expand, you need to get serious about measuring social media’s bottom line.

what you need to know

Understand your social media ROI to expand and extend your reach. Image source: iStockPhoto.

#5: Optimization is Critical to Success

While all the other reasons relate to why social media ROI is important for the needs of other people, this one is for you. You are spending time, energy and budget on making social media a success. If you really want it to be successful, it’s critical that you understand what’s actually working and what isn’t.

We all want to prioritize our efforts to the things that produce the highest result, but if you aren’t measuring what’s delivering, you have no idea what you should be doing more of. Further, you won’t be able to test how little tweaks impact important things like conversion rates.

If you truly want to show that social media is a mission-critical element to business, then you need to measure ROI so you can tell exactly what’s working or showing promise and then optimize it.

Optimize until you can’t optimize any more. Imagine if you knew which status update delivered the most conversions for the day. Or which path from social media to the website converted the most leads. Information like that would really help you show a positive ROI in no time.

data

Get the data you need to improve your results. Image source: iStockPhoto.

What do you think? Why is social media ROI important to you? Why is it important to your boss? Are you measuring today? If so, what type of results are you seeing? Please add a comment in the box below and join the discussion.

Images from iStockPhoto.

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About the Author, Nichole Kelly

Nichole Kelly is the president of SME Digital, the digital marketing division of Social Media Explorer. They provide digital marketing strategy, implementation and measurement using the Full Frontal ROI methodology. Other posts by »




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  • Lea

    Nichole–great article! I work for a company that actually helps businesses measure their social media ROI, and you can download a free whitepaper here: http://info.ottopilotmedia.com/free-whitepaper-determining-social-media-roi

    Because there are so many different social media sites to choose from, it’s really important to optimize your business’s time and energy spent on specific social media (like you said).

  • http://www.blogpreneurs.com/ Devesh

    Hey Nichole,

    I never thought about measuring social media return on investment but sounds interesting. It would be awesome to knew which status update delivered the most leads.

    Great stuff.

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  • http://www.stuffedweb.com/ Sam Scholfield

    I completely agree that companies need to measure the ROI of social media, otherwise it’s very hard to justify why you are doing it beyond giving away free information (which as good as it is, it isn’t going to put food on your table).

    However saying that, I don’t think you can have a completely accurate ROI as the funnel can get a bit blurred at times, e.g. if you promote an e-book using social media, a customer downloads the e-book, then decides to purchase one of your products. Unless they click a link on the e-book, or purchase within a couple of days of downloading, you probably won’t know where that customer came from, therefore can’t relate it back to social media.

    I would love to hear your thoughts on this.
    Sam

  • http://www.seotrafficsearch.com/ Suneeta

    This is an interesting read. Return on investment or better
    known as ROI is something that everyone craves for. I agree with your point ROI
    is a necessary evil. I appreciate the effort you have put in to bring us such exclusive
    information on how to measure social media ROI.

    Thanks for sharing!!
     

  • http://www.ottopilotmedia.com/ Lea

    Nichole–great article! I agree completely that measuring your business’s social media ROI is imperative. Without this measurement, how would we be able to effectively use our time on these sites? Thanks for the article!

  • http://twitter.com/TonyShays Tony Shays

    I agree that measuring social media ROI is important, and most companies request it. What are some ways that you measure it?

  • BethRFinch

    Tony, that’s my question, too. I know the value. How should I measure it so I can also defend its accuracy and validity? My boss thinks of it as “online chit-chat” and a waste of my time.

  • Brett Hallinan

    Measuring the ROI is really required.  Today most people view social media success as purely getting an action to be taken, but this will follow the path of all marketing programs and require a true ROI analysis.  The challenge in doing this is two fold, 1) what can you actually measure, i.e. what signals can you monitor in the organic web (much easier said than done).  2) what value do you put on each of the actions taken by users.  Not all actions have equal value in terms of influence; not all individuals have the same reach, which also changes the economics of the ROI calculation.  

    You’ll be temped to measure click stream conversion (down to purchase), life time value or further segment your audience, but those are very very difficult to measure in the context of social media.

  • http://buhlerworks.com/wordpress JEBworks

    This has to be by now the longest running debate about social web marketing. The perennial runner about ROI. To me it’s about the right definitions.

    Way before social media, marketing efforts have been under the gun to prove an ROI. This is nothing new. I agree with the author that ROI doesn’t paint the full picture. This is why the argument has to start at the highest possible level and paint the full picture. All the expected results have to be defined based on overall objectives.

    This makes it clear that the outcome at the bottom or financial result depends on other, non-financial outcomes. Again, this is no different than having to prove the ROI of general brand marketing activities, be they TV commercials or print ads etc. None of these will have a straight line, measurable impact on the financial bottom line of a company. So why should this be expected of social web activities?

    Customer engagement via the social web is part of an overall integrated program, or should be and be measured as such, with the correct tools. Their outcome will always be different than the one for a direct marketing campaign with an immediate, trackable and attributable call to action resulting in an order.

    Any C-suite occupant who today dismisses any kind of interaction with customers, potential and actual using the tools of the social web, as irrelevant shows how irrelevant he/she is in today’s business environment.

  • ndawkins

     Sam, I think you hit the nail on the head with this comment.  It isn’t that social media marketers don’t want to measure ROI; rather, it is the difficulty of doing so that drives them to take the position that ROI measurement shouldn’t be pursued.  There are some things that can be done to demonstrate business value — for example, customer data analysis (ltv’s of social connections versus customers who are not social connections), running specific campaigns and using attribution tracking, developing value models that take into account the soft conversions delivered by social media (more info on these and other methods are in this white paper: http://bit.ly/GGXa78).  But doing those things well takes time, skill, elbow grease, and above all the right data.I also think that there is a distinction between performance metrics and ROI metrics (performance metrics tell you how to optimize what you are doing to get more engagement, grow communities/connections/reach, how you are doing with influencers, etc. ). And even if marketers are NOT making the effort to measure ROI yet, performance metrics are critical and are often a first step in connecting the dots to business impact.

  • http://twitter.com/MatterOfBiz Business Research

     The easiest way of knowing is just asking: ‘did you buy our ebook because of… (a)… (b)…?’. Otherwise, if your customer base is big enough you can make use of statistical sampling and ask only a fraction of the buyers.

    More elaborated methods consider social media is just another channel, another bit in the marketing-mix, and add it to statistical models that try to estimate impact in dollars from every campaign (i.e. shop discounts, promotions, aisle location, web banners, or any social media activities).

  • Robert

    This is a complete no brainer, there’s no reason for not doing it

  • Tiago Castro

    What Tools do you think is best to measure Social Media ROI?

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  • http://www.assemblelink.com/ Edwin Choi

    You should measure EVERYTHING – even if you can’t or don’t want to measure ROI. That way you can always be improving!

  • http://www.karenkefauver.com/ KarenKefauver

    What I want is an article called “Five Effective Ways to Measure Your ROI.”  I don’t need to be persuaded to measure it, just need to know up to date tools to use! Hope you write this article next. Some others in the comment section have asked for the same. 

  • http://www.windowcleaning2you.com.au/ window cleaners sydney

    agree completely that measuring your business’s social media ROI is
    imperative. Without this measurement, how would we be able to
    effectively use our time on these sites

  • Subhash Kumar

    Hello Lea, can I know more about the measurement tool?

  • Kate Owino

    I agree with you there BettyBlueEyes…how can I demonstrate that that “online chit-chat” may just be one of the ways in which you can keep your clients engaged?
    I work in editorial, and I have to use whatever communication tools my sources are comfortable with to reach out to them – and that includes social media. I have interviewed a number of frequent contributors for articles through Facebook chat – it’s helped get the information I need, but how do I fully justify that to my boss who knows little about how Facebook works?
    A concern raised by Sam Scholfield earlier is tracking the origin of the customer. Allow me to add identity hackers to that list – in terms of information security, and how it affects the organisation’s reputation. And we do know how reputation matters.
    Indeed it is a delicate and dynamic field, but with the way social media greatly influences the quantity & quality of interactions in this day and age it doesn’t hurt to at least investigate whether it can improve our businesses, especially in terms of how we can reach out to existing and potential customers.

  • Nichole_Kelly

    Totally agree! Thanks so much for commenting.

  • Nichole_Kelly

    Karen – Awesome. I’ve written several pieces on this. Here are a couple, but if there is something specific you are looking for let me know and I’ll see if I have something published. I’ve written about measuring for lead generation, brand awareness and customer retention. 
    http://fullfrontalroi.com/2012/03/measuring-social-media-roi-hootsuite-white-paper-series/ 
    http://fullfrontalroi.com/2011/11/how-to-integrate-hootsuite-with-google-analytics-campaign-reporting/  I hope this helps. 

  • Nichole_Kelly

    Totally agree Edwin! Thanks for commenting.

  • Nichole_Kelly

    I’m a fan of using HootSuite’s integration with Google analytics. 
    http://fullfrontalroi.com/2011/11/how-to-integrate-hootsuite-with-google-analytics-campaign-reporting/ And I’m also really impressed with Raven Tools. I hope that helps!

  • Nichole_Kelly

    Sweet! Thanks for commenting.

  • Nichole_Kelly

    Great comments. My feeling is that we have to measure ROI because executives want it and they control our budgets. However, I like to add in other types of metrics that help to tell the full story like the cost per engagement. Social performs very well in engagement and it helps to show a slice of perspective on the relationship building that happens. Thanks so much for commenting.

  • Nichole_Kelly

    Brett – The tools are getting better to measure click stream conversion. HootSuite’s integration with Google analytics and Argyle Social both help with this. I totally agree that we have to prioritize the metrics we use and we also need to make sure that the metrics we use to show the value of our programs to decision makers are the metrics they care about, not the metrics we care about. :-) Thanks so much for commenting.

  • Nichole_Kelly

    Kate, Pretty Blue Eyes and Tony, 

    I’ll answer you all here together. I apologize for the delay. I am at BlogWorld and there wasn’t any internet connectivity yesterday. 

    I posted a couple of links to articles I’ve written that are how-to posts and white papers with instructions. I agree the How-To piece is the big question that everyone wants and the hardest to figure out. It is difficult to provide the complete perspective in a single blog post or a white paper. So I wrote a book about it with hands on exercises and step by step instructions called Measure Up. It just went up for pre-order but it will be out in the fall. 

    Kate – I hear your challenges. It sounds like you are using social media primarily as a efficiency tool. If that is the case I would try to quantify the time savings for you boss, i.e. I did an interview in 15 minutes on Facebook and it normally would’ve taken me 30-45 minutes on the phone. You can also attach the cost of your time to that if he/she wants a hard metric. I hope that helps!

  • Nichole_Kelly

    Hi Tony – I provided some links in a response to another poster. Social Media Examiner has to approve the comments because they have links, but I let them know they are there. You can also do a search for nichole kelly here. I’ve written several how to posts for this site. 

    I hope that helps. :-) Thank you so much for commenting.

  • Nichole_Kelly

    Agree! Thanks so much for commenting Lea.

  • Nichole_Kelly

    Suneeta – Thank you so much! I’m thrilled you found it useful.

  • Nichole_Kelly

    Sam – Yes, you are 100% correct that tracking through the funnel can be a challenge. The tools are getting a little better for this. HootSuite now integrates directly with Google Analytics so you can add custom URL parameters to every link you put in a status update. Then it pushes the data into Google Analytics so if you have goals and funnels set up you can start to see more of the story. Google Analytics just released social reports which tells you not only direct social conversions, but also the social media assists you’ve generated. None of these are perfect. Because they skim the surface of the real information we’d all love to have. I really want full campaign tracking, end-to-end every campaign or communication a prospect or client has touched. Tools like InfusionSoft help to narrow this gap.

    I guess what I’m saying Sam, is that we can get fairly close to understanding the path to conversion, but you do need to have some tools in place. At a minimum, I like the HootSuite and Google Analytics integration because it is inexpensive and gets you better data than you had before with campaign tracking.

    I hope this helps! Thank you so much for commenting. 

  • Nichole_Kelly

    Great points. I agree that social is just one channel in the mix. There are customers who touch the social channel, but they always end up touching another channel if they become a customer. The challenge with asking customers is that many times they forget what drove them to action, only report the last thing that made them take the last action rather than the 5 things before, and they false report when they don’t know the answer. I like attribution tracking using campaigns because it removes the subjectivity of asking, but I think a combination of both would be insightful as well.

  • Nichole_Kelly

    Thanks so much! I’m thrilled you enjoyed it.

  • Nichole_Kelly

    Lea – Sweet! 

    I work for a company that does that too. ;-) Thanks for commenting.

  • ndawkins

    Nichole, Social Snap is also integrated with Google Analytics.  I hope you will take a look!  Would love your feedback!

  • http://buhlerworks.com/wordpress JEBworks

    Exactly. Social web marketers have to avoid falling into the trap of trying to make direct comparison to activities that can provide a straight to the bottom line measurable result when asked the ROI question.
    That approach will fail to satisfy the critics who all too often have a narrow view point. Social has to be evaluated in a larger context that even goes beyond marketing. Social engagement can only be successful with the right mindset which starts at the top of the organization and once the question of WHY? is answered. We are in transition to social business which will result in more significant changes within and outside organizations. This goes far beyond a mere financial ROI discussion.

  • Robert

    Why should social media activity be subject to different rules, this is only a cop out and an excuse for the fact that currently ROI metrics are at worst non-existent, and at best unreliable.- this attitude of trying to say that social media is in some world of its on, immune to critcism, is a nonsense. look at the Facebook share price, that’s what happens when reality sets in. We live in a world, more than ever, of scare financial resources, so for many shrewd and smart business people, social media woll not be an option if you can’t measure ROI – simple – there are other projects competing for marketing $’s remember

    Are you telling me that GM pulled all its Facebook marketing because it was unable to measure ROI – well actually perhaps it did – - – - - 

  • http://www.stuffedweb.com/ Sam Scholfield

    Hi Nichole, Thanks for replying!

    I currently use Google Analytics and Sprout Social for my tracking, which is working great for me at the moment. I will certainly take a look into Infusionsoft as per your recommendation. 

    Full campaign tracking would be great! The data that it would provide would be invaluable. Hopefully there will be a complete tool in the near future.

    Thanks,
    Sam

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  • Nichole_Kelly

    JEB – Nice! I’d love to follow your story for a case study down the line. Reach out on Twitter or LinkedIn so we can get connected. :-)

  • Nichole_Kelly

    Robert – The intention of the post is to say that social media shouldn’t be subject to different rules and that you won’t be able to get budget without accepting that ROI is necessary. Sorry if that didn’t come across clearly. 

    On the subject of GM, I think the jury is still out on why they pulled their ads. They say it wasn’t performing, but there are a lot of variables that can lead to under-performance and it isn’t always the channel. It’s quite likely that they just had really bad ads and that’s what lead to them not working. I’m not arguing that Facebook works for everyone, but I’ve seen several brands have great success when the creative in the ad is specifically geared to the FB audience and the actions that make the most sense.

    Thanks for commenting.

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  • http://jcdawkins.com/ JC Dawkins

    This article does a good job of explaining why it is important to measure social media ROI.

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  • http://twitter.com/MatterOfBiz Business Research

     Sure! Regretfully we don’t have the massive resources the big boys have for tracking and sampling (i.e. customer panels). If we can’t (access those resources), then we need to address the question in such a way we avoid those biases. Campaigns are a good alternative, but you need to account for off-line purchasing, so then: specific phone lines, coupons, and (why not?) packaging/lot size/specs… :)

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