2011 Trending Topic: Social Media ROI

From Social Media Explorer:

Did you get a larger social media budget for 2011? Are you being pressured to deliver ROI from your new budget? As the buzz around social media finally made it to executive’s ears their willingness to open the proverbial purse strings loosened, but it came at a price that many marketers were unprepared for … accountability.

If you ask me, social media has finally made it … BIG TIME! The fact that marketers are being told that they MUST measure social media and its impact on the business are great signs that executive teams are close to understanding where social media fits within the marketing organization. The bad news is there is no silver bullet that is going to suddenly be able to measure the ROI of your social media strategy. As marketers grapple to figure out how to measure ROI it is critical that they start to transform the mindset of their executive team and set proper expectations now.

As a marketer who has successfully measured social media ROI there are some things I recommend you be prepared for.

#1 Measuring Social Media ROI is Rocket Surgery

53% of Marketers said their social media budgets increased in 2011

That’s not a typo. It’s more complicated than Rocket Science and Brain Surgery combined! If anyone tells you that measuring social media ROI is an easy feat, they’ve never done it. To do it effectively you must navigate through some complex technical systems and find a way to interject the social equation. As a marketer you will need to immerse yourself into geek speak with technical systems or you may never be able to connect the dots. And you will need to have a really SMART software engineer as your best friend to truly make it happen.

#2 What You Need to Measure Social Media ROI is NOT Social Media Software

This one probably won’t win me any friends amongst the social media software industry, but I believe this down to my core. There are a lot of great social media software companies out there that are doing a lot of really great things, but they are merely adding data points into the ROI measurement process they can’t deliver the number themselves. To measure social media ROI you need to figure out how to pass data between your web analytics software, your customer relationship management (CRM) software, your online marketing software, your social media engagement platform and your company’s reporting system/data warehouse. That sounds really scary, but you probably have 85% of the pieces in place today and are actively using them to measure the results of other online marketing activities. The key is to know where to look, what you are looking for, and a few creative solutions to get around the complexity of dealing with multiple systems and platforms.

#3 It IS Possible

Just because you can’t buy a pretty box of software to measure social media ROI, doesn’t mean it isn’t possible. It absolutely is and depending on your systems it can be done with a relatively low level of effort. To put it in perspective, I was able to do it with 12 software development hours. But while you are working on getting it done, I highly recommend you also make sure you can also measure the 8 social media metrics listed in this article too. They will help you make the case for social media after you understand #4 below.

#4 Your Social Media ROI is Negative

Sorry, there just isn’t any easy way to say it. Most companies haven’t been doing social media long enough to truly show a positive return yet. That doesn’t mean the return isn’t valuable, but if your executive team is looking for a nice shiny picture of positive ROI they are going to be disappointed. You will need to start level-setting their expectations now so they understand that with any new marketing endeavor it takes time to build audience, to engage the audience, and then finally to see conversions from that audience. Right now you are at the early stages of measuring the ROI of something equivalent to what advertising did for brands in the 70’s. It is a long term brand building strategy that will deliver value and ROI to the company by enhancing the brand, however in isolation the effects may be difficult to correlate. If Coke measured the ROI of each commercial or advertisement they did in the 70’s it would probably show a negative return from the data that was available back then. But today we know that those early branding initiatives drove it to be one of the leading brands in the world. If they had stopped then because the “numbers” didn’t show positive ROI, they would likely never be who they are today.

#5 Social Media ROI is Only ONE Piece of its Return

As a recovering measurement junkie, no one loves to measure the ROI of activities more than I do. And I truly believe that social media will show positive ROI in the next couple of years. But I think there are other factors you can look at today that show where it is adding value to the organization and why it should continue.

Here’s an exercise that may help you frame the discussion.

1. Take a look at all of your marketing activities
2. Determine what metrics are used to evaluate its success
3. Divide those metrics by the cost it takes to deliver those results
4. Apply the same metrics to social media
5. Divide those metrics by the cost it takes to deliver those results
6. Smile

Eyeball for eyeball social media delivers more cost-effective impressions, clicks, and site visits than any commercial, pay-per-click ad, or news article. Bank on that!