One thing that a lot of marketers seem to miss is the fact that marketing and advertising need to show how and where they are helping the business. they need to show where they are adding value.
John Wanamaker was originally credited with saying, “I know that 50% of my advertising is working; I just don’t know which 50%”. Since those early days in the late early 1900’s, marketers have still wrestled with this issue of how and where to show a ROI (Return on Investment) for their marketing initiatives. So let’s take a look at ROI in a little more depth for Social Media in particular.
We travel all the way back to 18th century France where Voltaire – 18th century writer, historian and philosopher – first said something which rings especially true of our social media world of today.
No? Ok, maybe this will be a little more period relevant!
Spiderman – more correctly, Uncle Ben said that, “with great power; comes great responsibility!” This expression is especially true of social media.
You see, while we all acknowledge its power, we expect it to be accountable for itself. We expect that social media ought to be able to justify why it deserves increasing marketing attention, and by extension, budgets.
In fact, this has been the case with any new medium.
A logical progression of steps usually follows :
People take to the medium and soon they spend increasing time on it. (think radio and tv)
Marketers wake up to the opportunity this presents and get some experimental budgets approved by touting and leveraging the fear of being left out of something new and transformational.
Since they’re still a fair distance away from the laws of diminishing returns to settle in, they mostly see early signs of huge success buoyed by which they ask for increased investment.
At this point, typically, they’re asked for their take on those 3 magical words: return on investment.
So ROI for social media is pretty easy to determine then?
When it comes to Social ADVERTISING…. Yes…. It is simple enough…. The ads are served to only those who fit the ads demographic. If they are interested in the ad; they click on it and are funneled down the conversion path until they either complete the required task or bug out.
The real question is with regards to the ROI of social media in general…
There’s a hope that the ever-evasive ROI formula will finally be revealed in a flash of blinding light, paving the way for continued investments into social media; that in the immortal words of Captain Juan-Luc Pickard someone will “Make It So Number One”……..
You see, there are 3 pretty serious reasons why there is no such thing as Social ROI:
The burden of numbers!
Social media throws up many metrics – likes, follows, comments, views, shares and too many others to name here. The moment a medium has a multiplicity of data points, there is the looming weight of expectation of its ability to churn out one single other (simple?) number…like ROI.
ROI has its roots in project finance
Where the return was based on the cumulative cost of production – not just on a thin slice of it. The simple reason was that it is virtually impossible in most scenarios to isolate cause and effect – to separate out a component of “return” attributable to a single factor of “investment”, especially on a variable cost component like “marketing costs.” In fact, having a positive ROI on a variable cost is a complicated way of saying you can now print money.
In terms of social media today, we often hear questions like “what is the monetary value of a fan?”
Ironic, considering that we still have not fully defined the value of a TV commercial viewer. In fact, we continue to ‘invest’ in television and other mass media advertising, notwithstanding the fact that we still don’t know which (proverbial) 50% of our budget is working.
So what are we to do? We ll first we need to understand online conversions.
Conversions are every place on your website or digital platforms where your users are taking action. These conversions are them broken down into Micro and Macro conversions.
A Macro conversion is where money is physically going to change hands. If your site is an eCommerse site; it is where your visitor has been converted into a customer by clicking on the buy now button.
A Micro conversion is (if you remember ZMOT) everything else that could potentially lead to a offline sale (or conversion). These are the likes, retweets, comments, shares that take place on all your properties. Its how our audience educates themselves and engages with us online.
So now that we understand conversions; we can translate these conversions into 4 very simple and specific metrics that are applicable no matter which digital platform you are on!
Most brands act like they do on TV when it comes to social media. What I mean is that they do the same broadcast style “interaction” through their social channels as with TV advertising.
We don’t have to do that. With social media, we can get a very good sense of who is following / friending / subscribing to us. We can measure if what we are saying connects to them!
Conversation Rate = # of Audience Comments (or Replies) Per Post
What does it mean?
A high conversation rate requires a deeper understanding of who your audience is, what your brand attributes are, what you are good at, what value you can add to your followers and the ecosystem you participate in.
It forces you to do the right thing right away. And it is a lot of work.
So aim for a higher Conversation Rate. Build your own watering hole in the digital universe. Have meaningful conversations with your audience.
You can always be provocative, say silly things and get a high Conversation Rate. Pick polotics for your topic to ensure highly opinionated comments but that would not be very positive for your brand or sales would it?!
Remember we do not measure to manipulate the metrics, we measure to know if we are adding business value.
This is where social media really comes into its own…. When you think of another media – like TV, radio, even social media advertising…. You have a defined market. There are about 10 million people who watch The Bold & The Beautiful every evening on SABC 2 – which means that your TV advert which incidentally cost you R 130 000 for 30” of airtime in October 2012…
Social media however has got second and third level connections…. So let’s assume that your network has 1000 people in it. If this were TV; your maximum reach is 1000. However if only 100 people in your network read your post and share it and a corresponding 10 people in each of their networks read it and on shares it – you have amplified your network exponentially…!
On Twitter: Amplification = # of Retweets Per Tweet
On Facebook, Google Plus: Amplification = # of Shares Per Post
On a blog, YouTube: Amplification = # of Share Clicks Per Post (or Video)
What do we do with it?
Amplification is how your messages spreads – the more “share-worthy” a piece of content; the more it will be shared and the further it will travel.
Let’s assume that this was a blog post; which you “Liked” or “+1’ed”, you’ll not help me understand its relative quality, but when someone in our extended social graph does a search on Google for something like social media metrics your endorsement of this content will show up in the search results.
That’s reassuring to your social graph, and it is great for me because your endorsement makes this post stand out over others and I get a relevant visitor/customer.
Sweet, right? Your selfless social media contribution comes back to assist you in driving valuable business outcomes.
That’s why you measure Applause. It matters in ways you can’t imagine!
One Twitter: Applause Rate = # of Favorite Clicks Per Post
On Facebook: Applause Rate = # of Likes Per Post
On Google Plus: Applause Rate = # of +1s Per Post
On a Blog, YouTube: Applause Rate = # of +1s and Likes Per Post (or video)
What do we do with it?
This tells you what your audience enjoyed reading / viewing – the higher this number the better you are doing.
The real hard-core metric that we can’t get away from…. In some way or another – social media does cost real money; and therefore it needs to make real money back! Amplification, Applause and Conversion are all great metrics…. But they are soft right…?! They’re a little limp…
What they need is the little blue pill of metrics..!
We need a financial metric because; we don’t participate in social media to only drive business outcomes.
If that is our primary objective we are going to suck at it (and the above metrics will reflect very efficiently how much we suck).
Economic Value = Sum of Short and Long Term Revenue and Cost Savings
What do we do with it?
Assign a value to specific actions based on real life events. In other words; if someone visits your page from a Tweet that was sent out, credit that visit with a few Rand (for South Africans) or Dollars, etc. If the visitor came from Facebook, credit that with another value.
By keeping track of your macro conversions and referrals, you will soon get a good idea of which platform is converting more visitors and therefore you can assign higher values to traffic from those sites. It is not an exact science and there is a lot of trial and error involved before you can be sure that you are about 80% on the money with your economic values.
These metrics can be tabulated and reported on monthly to give a clear picture of how and where your social efforts are showing some positive return!