Brad Fry’s lecture was a good introduction to our discussion about ROI. His reference to conversion funnels and their associated models has been particularly useful, information which I recommend that you revisit when preparing to write your campaign evaluation section for your group projects.

To further clarify and expand on the discussion about measurement and evaluation of social media efforts, our lectures focused on the views of two practitioners: Olivier Blanchard, known 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.

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 investment)/ Cost of investment

In order to be able to calculate ROI, you to need to think about your objectives as well as about how you will obtain 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 calculate ROI. To make this process more straightforward, 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. Olivier’s powerpoint below has more details about FRY.

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, generating $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, that 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. (This is one of the reason why you need to revise and adapt the click attribution models presented by Brad Fry as well). 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 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.

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About Ana ADI

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

One response »

  1. […] students held by Brad Fry from Folk has more details. More details about campaign evaluation  and social media ROI are also on the DCSBU […]

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