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Not Tracking Social Media ROI is Your Fault

Authors: Jay Baer Jay Baer
Posted Under: Social Media
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Jay Baer Blog PostLast week, Susan Etlinger from Altimeter Group published the Social Media ROI Cookbook. It contains significant quantities of solid thinking, and provides a useful framework of six primary ways to measure social media effectiveness. (click here to view and download the Social Media ROI Cookbook on Slideshare)

Social Media ROI 6 ways to calculate

There’s no question that the social media ROI question continues to befuddle business – 41% of respondents to an eConsultancy survey of 1,000 companies and agencies in late 2011 had absolutely no idea of social media’s financial impact.

But that inability isn’t the fault of social media as a channel, or the fault of social media software, or the fault of Facebook, or the fault of any other outside force. It’s the fault of businesspeople. If you’re looking to place blame for why you can’t measure social media ROI in your company, grab a mirror.

Track Social Media ROI by Giving Customers Trackable Assignments

Is social media ROI attainable? Of course, but you have to set up your social programs from the outset in such a way that the data is available and unblemished. The best way to do that is to define and measure specific customer behaviors.

The optimal place to measure the effectiveness of social media is in an e-commerce environment, because you can track behavior all the way through sale. But even if you’re not e-commerce enabled, could you provide coupons, or even an offer redeemable offline? If you want to neatly measure social media ROI, give your customers and fans a clear assignment with tracked clicks and post-click landing pages and forms.

Instead of creating these traceable opportunities, companies too often are falling into the vortex of “engagement” and measure fans, “reach” and similar metrics with dubious ties to revenue, and then attempt to make mathematical sense of this touchy-feelism by breathlessly downloading the latest, inapplicable “how much is a Facebook fan worth?” white paper.

Social Media ROI California TortillaThis is one of my favorite examples of self-contained social media ROI, from the fast casual chain California Tortilla. Here, they have a Facebook-only special offer, redeemable at all store locations in the form of a secret password. California Tortilla informs store managers (who then inform pimply-faced teenagers working the register) that the secret password is “Fresh”. When a Facebook fan shows up and says “Fresh” the special offer (free chips and queso with any burrito purchase) is keyed into the register, and reported through the centralized POS system. They can then determine ROI based on redemption rates and over customary store sales and average ticket.

Doable? Yes. Responsible party for setting it up right? You.

Drive Social Media ROI with Content Marketing

B2B companies in particular should have multiple lead-generation opportunities on their website, including contact forms, content downloads, email subscriptions, Webinar registrations, etc. Social media’s impact on this lead generation is relatively easy to ascertain, especially using social CRM software that ties to web analytics, such as Argyle Social (a Convince & Convert sponsor and what we use), Awareness, or Expion. These software packages “tag” the lead by link and source, and enable your sales and marketing teams to ascertain total booked revenue that came from particular social initiatives. The accuracy of this reporting is improved with multi-channel attribution that shows when customers use multiple means (for example: google search, twitter, linkedin, blog post, webinar) before purchase.

The software does the math, but it’s only as good as the set up. Remember, social media success is about the wizard, not the wand.

Doable? Yes. Responsible party for setting it up right? You.

Turn Social Media ROI Upside Down

A third area where we’re to blame for not measuring social media ROI effectively is in thinking about social effectiveness purely through through prism of new revenue generation.

Here’s my prediction: We’re going to look back at the early days of social media and say “why did we think this was about customer acquisition, when it’s clearly about loyalty and retention?”

The people that are fans of your company on Facebook? Current or former customers (84% says research from DDB). The people that read your company tweets? Current or former customers. The people that read your company blog and watch your videos and look at your pins? Current or former customers.

Social interaction is a trailing indicator of purchase, not a leading one. And in that way, it’s more like email – keeping your brand top-of-mind among people who have requested it – than it’s like banner ads and TV and Google Adwords, yet we keep banging our head against the wall trying to unlock social media ROI from the perspective of net new revenue. Even The Social Media ROI Cookbook includes little discussion into social’s critical role in loyalty and retention.

Why aren’t you using social CRM and database software (or at least random sample customer surveys) to isolate social media’s impact on purchase frequency, total size of purchase, lifetime customer value, and customer advocacy? We do this via survey for tourism clients, investigating the role of social interaction and content consumption on travel intent, length of stay, likelihood to return, etc.
Social Media ROI Positive ImpactsBroadening the social media ROI conversation to include current customers also spotlights the extraordinarily important (and monetizable) benefits of socially-enabled customer service, product development, and market research.

The Social Media ROI Cookbook surveyed corporations and found that 84% said that customer insights were a primary benefit of social media measurement. Yet, how much time do we spend calculating the value of those insights? Not enough. Instead, we want to know how to justify the cost of Facebook ads and Twitter contests.

Doable? Yes. Responsible party for setting it up right? You.

“Proving” Social Media ROI with Correlation

One of the parts of  cookbook I especially liked was the emphasis on correlation as a sound measuring stick. I believe that it’s mathematically possible for every company to figure out social media ROI. But there’s no question that it’s more complex and daunting for some companies than for others. At some point you have to ask “what’s the ROI of precisely calculating ROI?”

In those situations, I prefer using correlation studies to try to demonstrate social media’s value to the organization. The best way to measure correlation is to track a lot of data points (including social metrics, revenue, sales, churn rate) over a lengthy period of time, and try to isolate simultaneous or conflicting moves in the data. You can’t absolutely prove impacts using correlation, but you can determine where something appears to have an impact, and sometimes that’s all you really need.

It requires some discipline and time to see patterns emerge, but it doesn’t inherently require separate software or other magic.

Doable? Yes. Responsible party for setting it up right? You.


Here’s the deal. If you want to measure social media ROI, stop wasting your time doing software demos and attending webinars. Just figure out what you want to track, where you can track it, think about both current customers and new customers, and go do it.


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