The FINAL word on Social Media ROI

ROI

The FINAL word on social media ROI is this… sometimes. Give me a few minutes of your time and I’ll gladly explain.

Right now people seem to be fretting far too much over ROI and social media. Right now the camps seem to be polarized and split into two very outspoken groups. One side chanting “Social Media has no ROI” the other side scream ” Yes it does and you’re an idiot for not thinking so.” It’s getting to be rather annoying actually.

Social Media is a tool… that’s IT. It’s a very versatile and extremely powerful tool with an immense amount of potential I believe we’re only just beginning to tap into. However, by itself it is just a tool and has no inherent value of it’s own.

A hammer laying on a table has no use or purpose until it’s swung into action and used to get results. Social Media is absolutely, positively no different than any other marketing tool out there on it’s own.

PPC (pay per click) has no monetary value (and so no ROI) on it’s own. Media buys, affiliate marketing, SEO, SEM, and blogging have absolutely no value on their own. What gives them the value, and thus the possibility of ROI being calculated is how they are used.

If you’re using a hammer to put a screw in the wall you’re not going to get amazing results and end up wasting a lot of time. Why? Because you’re using the wrong tool for the job. You’d get much better results if you used a screwdriver or a power drill.

This analogy moves right over to internet marketing and thus social media.

ROI is a financial equation, a metric and that’s it. It’s not the end all be all. It’s not the ultimate answer to a broad question (the value of social media).  At the end of the day when you write up your reports you need to have solid business metrics to back up your success or document your failures and that doesn’t just mean ROI, because honestly, it’s just one piece of this puzzle.

Recently I wrote an article about The GAP, ROI, and Awareness where I laid out the 4 basic types of marketing campaigns. Acquisition / Lead Generation, Awareness, Brand, and Loyalty. There are many sub campaigns that can fall under these, but these 4 cover the vast majority and each have their own metrics.

4 Types of campaigns and their metrics

1. Acquisition / Lead Generation  – These types of campaigns are used to gather information (like email addresses, profiles, home addresses, etc) with the goal of winding up with a list of people who are most likely to buy from you.  This type of campaign uses ROI,but only after you’ve determined what each lead is worth to you based on previous numbers.

2. Awareness – This type of campaign can be used to increase the awareness of certain products or the brand itself. Here we would be looking at Impact. ROI doesn’t work here because there are no sales being made and the goal is not financial.

3. Brand – Here the goal is to associate the company with it’s services and offerings. This type of campaign will have hooks into the sales channels, marketing materials will be laden with copy points surrounding what it is, does, or offers and will typically have a CTA (call to action). ROI is prevalent here as the goal is to lead them through your marketing and sales funnels and make a purchase.

4. Loyalty – When a company launches this type of campaign their goal is to reward their current, frequent buyers or to entice customers away from competitors with their awesome loyalty program. This can take the form of a discount card, some kind of point system, or keeping a list of your best customers and having an event in their honor. Here you’re going to be using a mixture of Impact and ROI. Impact for how it’s being received and picked up, ROI  on the program as a whole (which includes SM spend) to ensure the campaigns health.

Looking at it broken down like this you can see where both sides are coming from. Once side who seems to only think Social Media should be used for making money have the battle cry of “ROI or Die”. While the side more concerned with awareness and building brand affinity shout “You can’t put a dollar sign on a conversation”.

Before I expose you to a seemingly “new” term here’s what I have to say to both sides. You’re both right and you’re both wrong, metrics are not one size fits all. So Knock it the #$%* off and start using the metrics properly!

And now for something new

While discussing this with my good friend Rick Galan he made a great point about all of this. Why are we squabbling over certain metrics when there is something already in place that fits very well with social media, and that is KPI.

Wikipedia defines KPI as “A performance indicator or key performance indicator (KPI) is a measure of performance. Such measures are commonly used to help an organization define and evaluate how successful it is, typically in terms of making progress towards its long-term organizational goals”

By now we should all know that social media is all about the long haul. We should know that social media is just as much about building relationships & making a soft sell as it is building a solid online foundation for you to grow over time.

Let’s look at that last part of the definition again “…typically in terms of making progress towards its long-term organizational goals.”  Social media was built for that. Building your reputation and community while strengthening your brand over time.

I think we need to start a new chapter in social media, and I’m going to spend the next couple weeks creating articles that all run around this subject. Creating the KPI’s or adjusting current “accepted” ones for social media use. At some point you have to stop looking at only today and start looking towards the future.

All this debate about ROI is just going to keep going in circles until people remember that marketing has many facets as does social media. We need to stop point fingers, and start building the future of social media use in business.

What do you think the KPI’s of social media should be? I know that things will change based on goals of the business, but what basic measurements should be included in the overall KPI’s for a company?

Thank you for reading,
Josh “Shua” Peters

  • roxycross

    I am surrounded by brilliance in the UT Social Media market! You and Rick are wise and all naysayers on both sides should listen and quit trying to measure something with immeasurable value or saying that is can't be done! Social Media tools allow us to do things we never dreamed of and in a tiny portion of the time traditional things make puny dents. Suggest people educate themselves and become good at it.

    • http://www.shuaism.com Josh Peters

      Awww Roxy, you are just too kind. You're absolutely right that the more education people get in this area the better it will be and the more it will grow.

  • rickgalan

    That's a really hard thing to answer I think. A company's Key Performance Indicators will vary greatly with the type of product, company or service. I think a thing to keep in mind is that Social Media is a general term really, used to describe a set of tools and applications that are really just all about human communication. So putting a set of KPIs on Social Media is an attempt to measure the human interaction either with or about your brand. It's not an easy thing to do.
    So the real question, is what does your company hope to achieve by communicating directly with your audience/customers/evangelists/detractors?
    Once you have that worked out (is that all?), then you can design a way to measure or trend it.

    • http://www.shuaism.com Josh Peters

      I think you stated it perfectly. It's all about goals.

      When I was thinking about establishing “basic” KPI's that coincide with most businesses they were things like, increased conversations, raising (if needed) and keeping apositive sentiment towards the company and other basic measurables that typically coincide with a businesses goal of having their brand be equated with quality and have a good reputation.

  • http://twitter.com/ideasurge Kendall Thiessen

    Some really good observations in here.

    It does seem we often confuse WHAT we are trying to do (which for most companies comes down to maximizing $$) with HOW we measure it. Even brand awareness is only valuable once it becomes $$ or ACTION (in the case of charitable orgs).

    With that said, there is a great deal of uncertainly about how “things we can measure” meet those objectives so using PKI could provide a more organizationally aligned way of thinking about SM. Taking the same metrics that measure internal performance (PKIs) and applying them outside.

    'Course I am not convinced that this new approach will resolve the dispute/debate you mention above although it will shift the conversation and perhaps in a way that will lead to a productive breakthrough.

    I look forward to seeing your PKIs defined.

    • http://www.shuaism.com Josh Peters

      It is true that the ultimate goal always comes down to $$$, because without it the company won't survive. The problem is that even in social media directly associating an increase in purchases with an awareness campaign is hard to do.

      It's true that people will buy something when they become aware of it (and is a product they would buy) but sometimes that doesn't translate to immediate purchases. If there's a new toothpaste out I want to try I don't rush down and buy it. I put it on my grocery list or just keep it in the back of my mind till my current tube runs out. With other items people may need to save up (like cars, computers, etc) and so keeping yourself “front of mind” will pay off later when they are ready for that kind of a purchase.

      Thanks for the comment.

  • sharonhayes

    Definitely a thought-provoking post as always Josh. I started writing a comment then realized a. it was getting long and b. I was going off on a tangent so I decided to write a blog post to share my own thoughts: http://bit.ly/3cnn3O

    More directly tied in with the direction you are going – I think we're going to start to see standard metrics emerge within the sphere of social media as monitoring tools become more widely used. We also need to consider whether or not it's not time to start to adopt terminology to define what we are measuring. Reach, impact, influence, etc don't really do a fair job.

  • http://twitter.com/MikeMcCready MikeMcCready

    I agree with you completely. I've read and heard much about social media ROI and agree that it doesn't always lead to financial transactions, at least not directly.

    I really like the idea of looking at KPI's. As we struggle to justify and 'poke' at social media in higher education, it would be valuable to have some KPI's relevant to social media. I would be interested in what others have identified.

    One other reason that we're starting to leverage social media is that our competitors are there. If we are not there participating in the messaging, they will have an 'open mic' to our potential students.

    • http://www.shuaism.com Josh Peters

      “If we are not there participating in the messaging, they will have an 'open mic' to our potential students.”

      That is a very good rason to get involved, don't want your competition to have the stage all to themselves.

  • http://lava7.com/ Jack Hadley

    Great food for thought, Josh. Thank you. Well written. The Einstein quote is one of my favorites and I use it often speaking to groups about social media’s value. I am looking forward to the other articles you are developing around this topic.

    • http://www.shuaism.com Josh Peters

      Thank you and they are coming soon. I wanted to get them all written at once so that they would read as one constant thought broken up into 4 subjects.

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  • Ghost

    Your article makes no sense. ROI is a description of a result. A result of how many people paid for your product or service vs. how much money you spent to generate those payments. It's merely a Time Value Of Money calculation based on the Present Value of future cash flows. Twitter doesn't generate paying customers or cash flow, hence, there's no ROI. Duh. Yet, you speak about “Awareness, Loyalty, etc.” Those are merely attributes of customers that PAY.

    • http://www.shuaism.com Josh Peters

      Thank you for your comments, but first off Awareness is not an attribute of a customer in the way I was talking about it. I was talking about the type of campaign, which every company in the world runs to help people even know the existence of their products. Yes for a customer to make a purchase they have to know about your product, but no they do not have to be loyal. They may only but once from you to fill a specific need.

      Lead Generation is also a used most forms of marketing and the setup is the same for calculating if it's working or not. The difference is the medium that is used. PPC, email, direct mail, social media, etc.

      I don't know how it doesn't make sense, the financial based components of social media campaigns are valuated by ROI, the non financial components are measured using impact… it's pretty cut and dry.

  • Ghost

    You wrote: “It is true that the ultimate goal always comes down to $$$, because without it the company won't survive. The problem is that even in social media directly associating an increase in purchases with an awareness campaign is hard to do.”

    Why is this so hard to do? You measure sales without promoting on “social media” every other week, then you measure sales with “social media” every other week. Then compare the difference and value of the results.

    My guess is that there is no difference, which explains your fluffy nonsense.

    • http://www.shuaism.com Josh Peters

      It's hard to do because you don't always know exactly where someone heard of your product from.

      Lets say someone heard about your product on Twitter. They liked it, bought it, and then told a friend about it and the friend bought it. It's a direct result of your social media efforts, however you wouldn't know unless they told you directly.

      Also most sales cycles are longer than just a week so your method wouldn't work and would result in very skewed numbers. The best way to do it is to compare it to previous months where you didn't use it. Once again the difference is the difference is the methods and tools used to get the sales. Just like with any other tool or method. I don't know why you find that so hard to accept.

      Awareness is awareness no matter how you get it. You don't know that someone saw your billboard and then decided to come to your site later and buy something unless you ask. You don't know if someone saw your facebook fan page and then bookmarked your website to come back to later. You don't know for sure unless you have your analytics setup and they came through one of your trackable links, outposts, or portals.

      I'm sorry YOU think it's fluffy nonsense, but it's very sound thinking and is showing that social media is no different than any other tool or method one might use to market their products when it comes down to measurement.

  • Ghost

    Your article makes no sense. ROI is a description of a result. A result of how many people paid for your product or service vs. how much money you spent to generate those payments. It's merely a Time Value Of Money calculation based on the Present Value of future cash flows. Twitter doesn't generate paying customers or cash flow, hence, there's no ROI. Duh. Yet, you speak about “Awareness, Loyalty, etc.” Those are merely attributes of customers that PAY.

  • Ghost

    You wrote: “It is true that the ultimate goal always comes down to $$$, because without it the company won't survive. The problem is that even in social media directly associating an increase in purchases with an awareness campaign is hard to do.”

    Why is this so hard to do? You measure sales without promoting on “social media” every other week, then you measure sales with “social media” every other week. Then compare the difference and value of the results.

    My guess is that there is no difference, which explains your fluffy nonsense.

  • http://www.shuaism.com Josh Peters

    Thank you for your comments, but first off Awareness is not an attribute of a customer in the way I was talking about it. I was talking about the type of campaign, which every company in the world runs to help people even know the existence of their products. Yes for a customer to make a purchase they have to know about your product, but no they do not have to be loyal. They may only but once from you to fill a specific need.

    Lead Generation is also a used most forms of marketing and the setup is the same for calculating if it's working or not. The difference is the medium that is used. PPC, email, direct mail, social media, etc.

    I don't know how it doesn't make sense, the financial based components of social media campaigns are valuated by ROI, the non financial components are measured using impact… it's pretty cut and dry.

  • http://www.shuaism.com Josh Peters

    It's hard to do because you don't always know exactly where someone heard of your product from.

    Lets say someone heard about your product on Twitter. They liked it, bought it, and then told a friend about it and the friend bought it. It's a direct result of your social media efforts, however you wouldn't know unless they told you directly.

    Also most sales cycles are longer than just a week so your method wouldn't work and would result in very skewed numbers. The best way to do it is to compare it to previous months where you didn't use it. Once again the difference is the difference is the methods and tools used to get the sales. Just like with any other tool or method. I don't know why you find that so hard to accept.

    Awareness is awareness no matter how you get it. You don't know that someone saw your billboard and then decided to come to your site later and buy something unless you ask. You don't know if someone saw your facebook fan page and then bookmarked your website to come back to later. You don't know for sure unless you have your analytics setup and they came through one of your trackable links, outposts, or portals.

    I'm sorry YOU think it's fluffy nonsense, but it's very sound thinking and is showing that social media is no different than any other tool or method one might use to market their products when it comes down to measurement.

  • justinhillier

    Great post and certainly a topic of hot debate. I come from the field of using Social Media as a recruitment tool and the ROI debate is hot. We have our different views as to its importance and I have wriiten about this here, http://bit.ly/7VZBSm

    It's important to remember nothing in Social Media is one size fits all and that's how we should be viewing it.

    • http://www.shuaism.com Josh Peters

      “It's important to remember nothing in Social Media is one size fits all and that's how we should be viewing it.”

      I think that sums it up pretty well. Thanks for the comment!

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