Is “Social Media ROI” an Oxymoron?

B2C marketers have scored some big social media wins recently. For example, in the past month alone,  Nike’s “Write the Future” YouTube campaign during the 2010 World Cup and Procter & Gamble’s blockbuster Old Spice YouTube videos made headlines worldwide, connected with tens of millions of consumers and created what most of us think will be positive, long-lasting brand associations.

But, even so, one big question remains: How will all of that translate into sales?

Most marketers I talk to are still scratching their heads when it comes to social media ROI, and often it is a fundamental factor holding companies back from launching campaigns to engage with their customers online.

With ROI pressure looming larger than ever for marketers, no one wants to invest in an initiative that doesn’t pay off. And, with limited resources and budget, we want to make sure there is a positive return for the time, effort and budget expended. But, how do you evaluate social media marketing success in financial terms? Is that even possible? Maybe there are benefits to social media that aren’t financial? If there are, how can those benefits be measured?

Questions like these are thorny, timely and incredibly valid –and that’s why I was thrilled to see Augie Ray, an analyst from Forrester, tackle the issue of social media ROI head-on in a blog post earlier this month.

According to Ray:

Many marketers can draw a straight line between investments in social media marketing and financial results, but many more cannot.  This doesn’t mean social media marketing is ineffective; it just means that marketers have to recognize benefits beyond dollars and cents.  Facebook fans, retweets, site visits, video views, positive ratings and vibrant communities are not financial assets—they aren’t reflected on the balance sheet and can’t be counted on an income statement—but that doesn’t mean they are valueless.  Instead, these are leading indicators that the brand is doing something to create value that can lead to financial results in the future.

Ray then goes on to provide a “Social Media Marketing Balanced Scorecard” that considers metrics from four different perspectives: Financial, Brand, Risk Management and Digital. As he says, marketers can only make sound decisions about social media marketing investments after measuring results across this four-part spectrum. “It is only by recognizing all of the benefits delivered by social media marketing that the complete value of these efforts can be understood,” Ray concludes.

I would add one more wrinkle. I think that it’s also important to recognize the negative effects of ignoring social media. These days, customers increasingly expect to engage with brands online. They expect companies to offer information, assistance, or simply feedback. Surely, ignoring those kinds

of expectations is bound to prove detrimental as social media marketing approaches become more widely accepted.

But, what do you think? How is your company tracking and measuring social media marketing ROI?

7 comments

  • What a great summary. I actually printed out and posted the graph. I have been making these same points especially around the cost of not being engaged. There has also been some excellent studies recently that show how social media support is helping improve traditional response rates. Bottom line is that new stuff scares people but this is the future and we all need to get on board.

  • Thanks for taking this question head on Paige (and Augie). I think for many skeptics, the current discussions of followers, friends, and such sound like echos of the fixation with eyeballs in the halcyon days (or daze) of late 90s. But even though that bubble eventually burst, many of today’s respected brands, particularly in the media category but also in others, survived and thrived because they were able to engage a large audience with quality content. And the same basic strategy still works today. Neal Rodriguez’ piece on Social Media Examiner in HuffPo a couple of days ago is just one example. SM Examiner has generated $1M after just 9 months, mostly because they have high quality content and highly effective distribution.

  • Thanks Paige. I appreciate the blog post and further dialog. I agree with you as to the costs of NOT engaging in social media, BTW. Great point!

  • Hi,
    Social media ROI is a difficult one to pin down for sure! There are ways around it with some of the MA tools like Eloqua, which help you track user traffic so you can gage where people are coming from, how they’re finding your content and determine the best methods. ROI should also take into account the lead generation returns of social media, which can be a time consuming task to quantify, particularly if you’re using professional networking sites to generate leads. Either way though, I totally agree with you when you said – “I think that it’s also important to recognize the negative effects of ignoring social media. These days, customers increasingly expect to engage with brands online. They expect companies to offer information, assistance, or simply feedback. Surely, ignoring those kinds of expectations is bound to prove detrimental as social media marketing approaches become more widely accepted.” Something has to be better than nothing, surely! I gave some tips in a recent blog post – have a look and let me know what you think! http://astadiaemea.wordpress.com/2010/08/07/the-marketing-automation-triangle-%E2%80%93-are-you-making-full-use-of-it/
    Thanks,
    Elena

  • Thanks for all the great comments. Clearly social media ROI is something we marketers are all struggling with. The need to prove ROI for marketing programs combined with the fear of losing brand control can be a difficult combo to overcome for companies considering whether to start social campaigns. At my company, we are starting measurement on a small scale and expanding from there. Just measuring the increase in awareness, or the increased dialogue with existing customers for example, can be 2 easy ways to show quick value.

  • Pingback: Social Media, Mobile Strategies Increasingly Essential for Travel Industry « Social Media Paige

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