One of the reasons measuring the return on investment (ROI) of social media has sparked so many discussions is because it’s not easy. The main barrier to end-to-end measurement is the lack of a true social customer relationship management (CRM) solution.

While Salesforce and others are working hard to bring a full solution to market, many marketers are simply cobbling together data they receive from web tracking solutions and social monitoring solutions.

Unfortunately, this will only give you pieces of the story. Those with proprietary CRM systems will have the toughest hurdle, which is a challenge I have personally faced.  In the short-term, the only hope is to integrate tracking cookies on your site and work with a development team to integrate with your CRM.

However, you can build an effective measurement strategy if you take a holistic view to social media lead generation. Here are four tips to make sure you are measuring the full impact of social media on your bottom line.

#1: Define Your Inputs for Lead Generation

In order for any type of measurement strategy to be effective, it’s critical to determine which key factors should be included. From a lead generation standpoint, there are two key lead generation inputs.

• Indirect and Direct Response Conversion Points—These may be different based on your business model, but generally speaking, you would want to measure those who filled out your lead forms. These would then be given a lead score that defines the prospects’ interest level. Then you would break these scores into meaningful ranges and measure your social prospects within each range. Specifically look for the number of leads and the growth rate in each range.

• New Business Campaign History—This is likely one of the most undercounted areas where social media plays a large role. Look at all of your new business for the month against the campaign history that has been reported in your cookies. How many times was social media an “assist” at any point in the campaign history leading up to the sale? How many times was social media the direct “conversion point” for the sale? How many times was social media the “originating lead source” for the prospect? Are these numbers growing at a healthy rate? If not, where do you need to adjust your strategy? Define a dollar value for different points in your lead cycle, define the costs for those efforts including the staff time required to execute and see where social media is showing the most impact for ROI.

Add the social media "assist" to your ROI reporting.

#2: Use Lead Scoring to Place Leads Into the Proper Place in the Sales Funnel

When marketers talk about measuring the ROI of social media, many consider it a very cut-and-dried discussion. Either social media is delivering profit to the company or it isn’t.

While I agree with the premise, I also recommend that you take a step back before you make decisions based solely on numbers.

We discussed using lead scoring to define where customers are in the buying cycle. While there are likely very lengthy formulas for lead scoring that companies are using, I’ve found the best approach is the K.I.S.S. (keep it simple, stupid) philosophy. Break your leads into three distinct pools of prospects. Define timeframes for conversion based on your business and the standard buying cycle.

• Slow—These prospects are likely in the pre-research/awareness phase. They find what you say interesting and they want to follow it, but they aren’t looking for a solution right now. You want to stay top of mind with these prospects for when they are ready to buy, but you don’t want to invest a lot of time from your sales force. This is a great opportunity to send these leads your relevant FREE content at some regular interval that isn’t annoying, but enough that you don’t fall off the radar.

• Medium—These prospects are in the research/consideration phase. They are looking at products to be considered as a solution. You want to find the tipping point for these prospects to move them into the next stage in the funnel. It is likely that most of your marketing dollars get spent converting these prospects.

• Fast—These prospects are in the decision-making/buy phase. They want a solution and they have a clear time frame for when they need it. It is likely that most of your sales team spends their time actively working these prospects. Generally, marketing takes a back seat on special marketing offers in order to not “delay” the sale.

Integrating lead scoring into your sales funnel.

This gives you a framework for what you want to measure along the way. For it to be a true measure of ROI, you have to compare the cost of social media efforts against the revenue brought in for each point in the campaign history and the cost associated with converting each range of lead scores.

#3: Understand Where Social Media Efforts End and Sales Efforts Begin

Why are these different points in the buying cycle important to social media measurement? Because social media is just another lead generator. Once the lead comes in, your normal sales process takes over. That process may include marketing efforts and sales team efforts.

However, if you are reaching prospects at the pre-research/awareness phase with social media and you do not have marketing programs or sales processes to support it, you may cut bait on the only marketing effort that is touching this group. A hard-sell approach with slow prospects risks losing their business forever. Before you write off social media as not delivering the ROI you anticipated, make sure to review your sales and marketing efforts.

If you don’t have an awareness program as part of your strategy, it could be the reason you aren’t converting these leads. Evaluate social media for the value it really brings to the table and make sure you don’t overlook some of the areas where social media is already delivering ROI to your company.

#4: Ask Yourself Where You Need to Optimize Your Social Media Lead Generation Efforts

Here are some key questions to ask when evaluating your social media efforts:

• Is there a bottleneck in your lead funnel? Review where leads are getting caught and reevaluate your approach.
• Are you able to convert leads at the same or lower costs than other channels with social media?
• Do you need to stop any activities that are causing leads to fall out of the sales funnel?
• Are you reaching people at points in the buying cycle when other channels can’t?
• Are you placing more people into the sales funnel at a lower cost? At what rate is it growing?
• Have you aligned your sales process with leads that aren’t ready to buy today?

This post is just a starting point for discussions around ROI measurement. There are many variables specific to each company that make it difficult for generalizations to provide a solution.

Related Posts:

• 4 Ways to Measure Social Media and its Impact on Your Brand
• Is Social Media Marketing Measurable? The Big Debate
• How to Measure Social Media Marketing Performance

What are your thoughts? How are you measuring? Are you measuring the social “assist” in your organization? Do you have marketing messaging, marketing campaigns and sales processes that cater to the research/awareness phase?

It’s time to debunk the big myths that are keeping business owners and marketers on the social media sidelines.

Myth #1: My Customers Aren’t on Social Media

Wow, if I had a dollar for every time I heard this one….  Seriously, this myth keeps more businesspeople from interacting with potential customers through social media than any of the others.

The fun part is all you need is a little data to convince people that their target customers are indeed on social networks.

For instance, 80% of female Internet users have become fans of a product or brand on a social network site and 72% said they learned about a new product through social media.  As the graph here shows, more than half of Facebook and Twitter users are over 35, not to mention LinkedIn.

Social networking is a true cultural phenomenon, and there is no demographic that isn’t represented substantially on one or more sites.

This chart shows demographic information for social media sites, demonstrating that they are accessed by a wide variety of age groups. (Courtesy of Pingdom.com.)

Myth #2: I Can’t Measure the Impact of Social Media on My Business

The social media return on investment debate has been picked apart by so many intelligent and creative marketers, you would think it wouldn’t make this list.  But it continues to rank high on the list of objections about social media and I completely understand why.

Since the interaction mechanisms are different with social media than traditional marketing, judging purchase intent and likely customers from social media behavior is a new skill for many marketers.

It doesn’t have to be overly complicated though, and if you put in place some of these methods to tie online behavior to offline actions, you can track the impact social media is having on your bottom line.

Pay close attention also to the referrals from social media sites on your web pages and these people’s behavior compared to users who get to your site through other means.

Myth #3: I Don’t Have Time to Manage Social Media

Learning how to interact on social networks is very easy, because it simply involves talking with people and having candid conversations about interesting topics.  Though you do need to spend some time interacting with people and posting useful, engaging content, the returns on your time should be enough to make social media interaction worthwhile.

After some basic exposure, you’ll see how similar social media interaction is to offline conversations, and it should come naturally.

Some helpful tools can make interaction a breeze, including HootSuite or TweetDeck for Twitter interaction, and Ping.fm to post updates to multiple profiles from a single interface.

Ping.fm client for managing multiple social media profiles from one location.

Myth #4: If I Engage on Social Media Sites, I’ll Get Loads of Negative Comments

Nobody likes to hear negative feedback about their work, product or service.  Many businesspeople fear that their social media profiles will be overrun by people posting complaints and competitors “flaming” their brand.  But the beauty of social media interaction is that transparency and responsiveness rule the day.

If a customer chooses to voice a complaint publicly, you have the chance to demonstrate your customer service ability to a wider audience.  If the person is unreasonable and continues to post negative information, people observing the dialogue are more likely to admire your efforts to right the situation, rather take to heart the angry customer’s complaints.

Plus, sometimes your customer base does the heavy lifting for you, like this gem from the American Airlines Facebook page.

Myth #5: Social Media Is Hard Work

Well, this one isn’t a myth, but it’s worth addressing while we’re at it.  Sure, successfully growing and interacting with a community on social networks require dedication and reasonable, sustained commitment.

If that sounds like hard work to you, well, it is, but the rewards justify the effort. If you’re allergic to hard work, then you probably shouldn’t be in business anyway.

Take some pride and joy in the interactions you have with your community and soon, what may have felt like another item on your to-do list will actually be one of the best parts of your day. And when you start demonstrably affecting sales and capturing purchase intent with social media interaction, then the hard work will be worth it.

I hope these myths won’t hold you back from engaging in social media interaction any longer.  There are customers out there waiting to talk to you and all you have to do is join the conversation.

Which other social media myths do you think need to be “debunked”?  Have you fallen victim to any of these? Do you have anything to add when addressing these myths? Leave your comments in the box below.

“It’s not possible to quantify social media marketing,” says one pundit. “Anything can be measured,” says another. Then come the phrases such as return on invested time, return on objective, return on participation, share of voice, and the list goes on endlessly.

If you’re a little confused, you’re not alone! The dreaded “How do I measure the effectiveness of social media?” is one of the biggest questions marketers want answered, according to the Social Media Marketing Industry Report —a study of over 800 social media marketers.

So what is the answer?

I gave myself a mission: Find out the best way to measure social media return on investment (ROI). I queried marketing executives at major corporations, scoured all the leading thinkers’ writings and contacted my peers. What follows is an important discussion on measuring social media return.

Start by Defining Social Media

The first thing I discovered is it’s essential to rethink the common phrases we use. And that starts with social media.

Social media is bigger than you might think. Social media communities could include sites like Twitter, Facebook or LinkedIn. But they also may incorporate people commenting on your blog and your YouTube videos. They may even include forums and private communities hosted by your company.

Think about your social media activities the same way you think about the groups, clubs and organizations you belong to (i.e., poker gathering, parent-teacher associations or even your church).

You participate in real-world groups because there’s a lot of intrinsic value—something that’s hard to measure. Maybe you do it for your kids, to give back to others or to find companionship.

Your customers and prospects are all there too, in one group or another. Just like in the real world, they’re organizing online.

Chances are pretty good that people in your target market are involved with multiple social networks, whether they realize it or not. Be honest, that’s what turned the marketing cogs in your mind in the first place, right?

Now an important question… Why are you here? Why is social media marketing attractive to you? The answer to this question will take you one step closer to determining social media ROI.

“At Avaya we use social media mainly to support our customers,” said Paul Dunay, Global Managing Director of Services and Social Marketing at Avaya.

Why are you using social media? Here are a few ideas (a possible cheat sheet):

• Gain more exposure
• Find prospects and leads
• Increase site traffic
• Find new business partners
• Improve search engine rankings
• Reduce marketing expenses
• Close more business
• Improve brand awareness

And the list goes on. Come up with your list and you’ve got a starting point for a good ROI discussion.

What’s Your Investment?

The next question is what do you mean by return on investment (ROI)?

In the traditional marketing sense, ROI means for every dollar invested, a measurable return can be calculated. Back when marketing was predictable and the channels were few, this was a science. Invest more in channel X and watch the sales flow in.

Social media changes the game. Social media marketing doesn’t need to cost much. Actually, for most businesses it doesn’t cost anything.

“The problem with trying to determine ROI for social media is you are trying to put numeric quantities around human interactions and conversations, which are not quantifiable,” says social media strategist Jason Falls.

Folks who say you can’t measure ROI use some strong analogies.

For example, they’ll mention real-world networking. What is the ROI of passing out a business card while in the grocery store line or shaking hands at a networking event? Yes, everything has a cost. Business cards cost something and maybe you paid admission to the event.

But what about activities that are so instinctive that you could never really measure the cost? How about sending an email to a customer that simply says, “I appreciate you.”

Tim Ferriss, author of the 4-Hour Workweek, argues, “Whenever technology becomes fashion, ROI tends to get lost in the excitement of the latest .com catwalk.” He was referring to the media sensation with Twitter. Ferriss is a big proponent of measurements and argues you can actually calculate a return on your social media activities.

But, to calculate a return, your investment must be measurable. It really is hard to measure the cost of social media activities. A tweet here. A Facebook status update there. A LinkedIn friend request…

Time is the most obvious choice to measure. It’s a fixed asset we all wrestle with.

If time is your metric, then naturally you’ll be able to determine how much time you’re putting in as a starting point. Why not come up with a value for your time? For example, a guy I know puts a $250 per hour price tag on his time. So every 4 hours he puts into social media each week is costing him a grand.

But let me warn you… If time is your metric, you need to be fair in your calculations. All marketing activities take time; for example, writing copy or proofing ads. If you use time as your measurement, just be sure you measure time for your other marketing activities as well, for an apple-to-apple comparison.

Once you know your investment costs, it’s time to look at returns.

What Return Are You Hoping For?

What do you hope to achieve? A key to measuring return is determining what you’ll actually track.

“One thing many people do is measure how many Facebook friends, LinkedIn connections, and Twitter followers they have. In my opinion, that’s a hollow metric. It’s not important how many names we collect, but rather how many we engage, build relationships with, become our brand advocates, and exchange info with,” said marketing consultant Elaine Fogel.

The range of measurable returns is wide and deep.  According to marketing measurement expert Katie Delahaye Paine, State Farm measures employee morale and Red Cross measures how sites like Twitter save lives and avoid harm.

Yes, there are hard metrics you can track.  Consider Avaya. “We measure the number of social media mentions per week of Avaya, and the number of support issues we resolved that week,” said Dunay.

In other cases it’s about growing a targeted following. “For networks like LinkedIn, if you are starting a group, it is simply the member count of the group or the number of particular people (like CEOs) who join,” said Mark Amtower, a government marketing professional.

Greater exposure may be another goal.

“Are you using social media to spread your message? Then count the mentions. There are no silver bullets, but the more specific we can be with our marketing goals as they pertain to social media activities, the better,” said Joe Pulizzi of Junta42.

The Next Step

Once you’ve got a clear understanding of the investment and the desired returns, you need tools to track the results.

I’d like to hear your thoughts. Are you struggling to answer the social media ROI question? Let’s engage. Tell me what you think below.