During last week’s Leap into Digital event, there were numerous mentions made to monitoring and measuring social media efforts. Since the time allocated to the event did not allow for ellaborations on the topic, and since evaluation (and hence monitoring and metrics) are also part of strategic planning, we took the time today to talk about ROI.The arguments and information presented today cover the views of two practitioners: Olivier Blanchard, know as thebrandbuilder and author of the book Social Media ROI, and Susan Etlinger, Industry Analyst with Altimeter Group and author of A Framework for Social Media Analytics, including six use cases for social media measurement.

In essence, today’s lecture aimed to point out the following:

1. There is no such thing as social media ROI.

Social media is a channel. ROI is a business metric, a financial equation related to the gain and cost of a specific activity. Hence, ROI is not channel specific BUT ACTIVITY specific.

So next time someone asks you to tell them about the ROI of social media, ask them to rephrase their question and be specific. The question should really be what is the ROI of x activity in social media undertaken in y time frame?

2. There is only one way to calculate ROI.

ROI = (Gain from Investment – Cost of Invesmtnet)/ Cost of Investiment

In order to be able to calcute ROI, you to need to think about your objectives as well as about how how you will attain them. In this sense, the process from investment to financial impact needs to go though action (as in your tactics), reaction (as in the target audience reaction to your tactics) and non-financial impact (in metrics, targets that you will use to evaluate the impact of your action) before you can actually calculte ROI. To make this process more straighforward, you should think of actions in terms of “before” and “after” or “cause” and “effect” terms.

Establishing a baseline, creating activity timelines, analysing sales revenue and number of transactions, accounting for transactional precursors, overlaying data and looking for patterns should be part of your planning and analysis. Olivier Blanchard’s slides below together with this post and video will give you more details about these steps. Pay particular attention to the F.R.Y (frequency/reach/yield) method to evaluate transactions.

3. Reporting ROI should as simple as the formula is.

It should include clear information both about the gain from as well as cost from the investment. Blanchard’s post about 101 success stories will show you how a correct reporting a ROI should look like. Here’s a good example:

38. IBM. Crowd-sourcing identified 10 best incubator businesses, funded for $100 million, generatiung $100 billion in total revenue for a 10-to-1 ROI with a 44.1% gross profit margin. (Barnraisers, 2010 cited in Blanchard, 2012)

4. ROI is just ONE element in the social media measurement toolkit.

As I have already indicated in previous lectures, and so dit Jemma Watkins, our guest in lecture 4 for that matter, social and digital media can be used for a variety of purposes from sales to human resources, issues and crisis management or research and development. Only some of these goals and objectives would generate revenue, hence only some of these activities could generate ROI. For all other objectives, there are other measurements to be used.

Susan Etlinger’s Social Media Measurement Compass published in her Framework for Social Media Analytics represents 6 specific business uses for social media. Out of the 6, ROI can be clearly attached to only 2 of them. To all the others, measurements could include sentiment, conversation, influence, reach….They are not ROI. So when you talk about measurement of customer experience or innovation, be clear about what you measure and call it what it actually is.

Susan also offers a list of themes, insights, metrics and actions related to each of the 6 goals as well as a sample list of measurement formulas. While I find the examples to which the formulas are linked to to be quite broad, I believe there is merit in her attempt to provide a more focused approach to measurement.

We’ll have a chance to explore in more depth analytics and metrics and the way they answer/reflect objectives in the lectures to follow. In that context, we’ll revisit Susan’s challenges of social data.

5. Objectives need to be SMART. Objectives dictate tactics. Tactics dictate metrics. Metrics indicate what analytics and analytics tools you can use.

Remember that you need to use social media strategically not because it is there or just because you can. A strategic use includes the evaluation of the ways in which social media can help you achieve your goals as well as the analysis of the degree to which social media has helped you achieve them.

Advertisements

About Ana ADI

Professor of Public Relations/Corporate Communications @ http://www.quadriga.eu | Researcher | PR & Social Media Consultant | Advisory Board Member of SMCEDU | Fulbrighter

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s