Measuring Social Media Return of Investment (ROI)

Social marketing was conceived as a concept by the marketing gurus Philip Kotler and Gerald Zaltman of Kellogg School of Management, Northwestern University in 1971.

These marketers defined it as “ …seeking to influence social behaviours not to benefit the marketer but to benefit the target audience and the general society.” It in short, created a dialogue between consumers and the brand and leveraging the value that was created in that process.

Social media is primarily Internet based: whilst your website provides company and product information and Internet tools such as search, pay-per-click, and webinars enable customers to reach further, social media is all about leveraging the connecting of people through dialogue and the formation of networks.

Social media is one part of the marketers’ multi-channel marketing tool kit. Its importance is in its ability to get under the skin of the consumer and gain invaluable insights into attitudes and behaviour of the consumer.

Social media sites represent a major entry into the internet. As current data from Alexa demonstrates, users spend more time on social networks in an average day than do most major portals like Google and Yahoo (as we point out here in Where do we spend most our time online).

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So how do we measure social media?

We are in an age of metrics. There is a constant pressure to measure the effects of every activity and to refine and reassess every aspect of the marketing budget. Marketers are asked to be effective (do the right thing) and be efficient (do the thing right).

So we use return on investment (ROI) as a measurement of output (return) from input (investment).

One of the dangers of measuring everything that is done within the marketing context, is moving to the default tactic of using communication tools that are more easily and accurately measurable. The problem with this is that the most effective channels of communication are not always easily measurable. This is especially true in social media marketing where qualitative measurement is needed rather than quantitative.

Marketing Sherpas carried out a Social Media Marketing and PR Benchmark Study in 2008. (See the chart below).

How accurately can you gauge the ROI of Social Media tactics?

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What this study demonstrates is that the respondents feel that advertising on blogs or social networks are the most easily and accurately measured. The cost of “advertising on blogs or social networks” is usually based on pay-per-click and conversion metrics, so advertisers are more motivated to use these tools and are more easily able to measure these tactics.

Near the bottom of the chart is “blogging on a company blog.” With this there are fewer direct costs other than staff time. This means that there is little inclination to measure the return on investment.

However, there can be considerable return if you measure this on a qualitative basis. Here we need to measure the quality of the comments on the blog rather than the quantity. You can have many comments but if the majority are negative then I would suggest that this particular metric is unhelpful. It underpins the need for quality measurement to be able to gain a deeper and richer insight and to see if the blog is, in Kotler and Zaltman’s metric, “ …seeking to influence social behaviours not to benefit the marketer but to benefit the target audience and the general society.” Quite simply, if a blog is seen to be placing a blatant brand message it has a far lesser impact than if it is seen as authentic, balanced and objective. The latter is far more effective for brand development.

The ability to measure qualitative values in these blog interactions is more challenging but not overtly difficult. If we don’t include qualitative factors in the measurement of effectiveness and efficiency, then we will find ourselves utilising marketing tools that are more easily measured, rather than those that more fully meet the brand’s development objectives.

So, even if social media is producing a good return in terms of a quantitative metric, if it isn’t increasing the business outcome it will be necessary to review the content of your social media programme and investigate and refine how you are measuring its contribution to your business objectives.

To Find out more about Social Media and how you can get a decent return on your investment give IP-SEO a call.

Contributor – Garry Titterton, CEO IP-SEO and Author of Brand Storming.