Our lectures this week were dedicated to the justfication of the success and/or failures of using social media for marketing, advertisign or PR. For this reason we shifted our attention from metrics to return of investiment.
Measure for measure – Paul Miller
For our early-afternoon lecture we had the pleasure to welcome Paul Miller, Head of Digital from CISION, who spoke about ROI and measurement from both his practioner’s experience as well as in reflection to more recent academic research and publications.
Paul made some very interesting points:
- That in industry, whether sales driven or not, there is a very high emphasis on justifying costs and proving impact.
- That there is no one-size-fits-all measurement or measurement strategy.
- That there are plenty of tools out there that crunch social media numbers and while they are interesting and sometimes fun to use, what one should really do is check the formulas of how those numbers are crunched and the definitions of what those numbers mean. In this sense he spoke about the variety of Influence measurement tools and indicated how different their definitions were as well as how different the concept of influence would be interpreted in relation to various platforms. Influence on Facebook is not the same as Influence on Twitter.
- That there is a huge amount of data online in which marketers and communicator see a great potential but do not yet know how to use it fully. This explains the variety of interpretations out there of measurement and data.
He mentioned a number of white papers and research papers. Brian Solis’ report published with Altimeter “The Rise of Digital Influence: A How-to Guide for Businesses” is one for you to read.
ROI, one tool of social media measurement
Our afternoon lecture revisited some of Paul’s points but tried to link them with the more specific requirements of our group assessment as well as with the wider discussions into industry. We used two main sources to inform our lecture. These included Oliver Blanchard’s blog and Susan Etlinger’s “A Framework for Social Media Analytics, including six use cases for social media measurement”.
ROI is activity specific.
Hence, there is no such thing as “social media ROI”. That is too big, too vague and impossible to measure. The right question to ask is what is the ROI of x activity in social media undertaken in y time frame?
The ROI formula – money in, money out
ROI = (Gain from Investment – Cost of Invesmtnet)/ Cost of Investiment
In short, ROI is about the money you have to spend/invest in oder to do something that leads your target audience to do something that you want them to do in return which brings you profit.
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.
When you report ROI, that should reflect the formula – how much did you pay/invest, what did you do, what were the reactions (these include non-financial metrics) and what was the financial outcome of it? Read Blanchard’s post about 101 success stories for some good and bad examples.
ROI is just ONE element in the social media measurement toolkit.
Since social media can be used to support a variety of activities (such as customer service, human resources, idea generation, advertising and much more) so some of the goals and objectives it will be used to fulfill will not be financially related. For these cases, the measurements for success should be different than ROI.
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….
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.
Some more readings:
Another one from Altimeter – The Social Media ROI Cookbook.