Every day marketers are charting new territory due to the constantly evolving social internet, enabling limitless marketing opportunities and potential competitive advantage through constant innovation. It is abundantly clear that traditional marketing has exceeded its ROI potential, for example it costs $3,800,000 for 30 second TV commercial during the Superbowl. Seriously, why aren’t marketers asking what the ROI is of that? You can’t even click through, or measure how much revenue can be attributed to it.
Social media is a pre-pubescent teen
Because social media is now evolving into a prepubescent teen, it is expected that there is a certain level of skepticism about how effective it is. Is digital marketing really worth the money being budgeted for it – money that is being taken away from more traditional marketing efforts?
In reality, it is far easier to measure ROI from social media than any other traditional advertising channel, with the exception of maybe POS offers or direct mail coupons. If you put up a billboard you just have an estimate of how many people drive past it. If you post a branded image on Facebook, you can tell exactly how many people saw it, interacted with it, their age, gender, location and even their favorite movie.
My simple answer to the question “what is the ROI of social media?” is to test what happens if you don’t do it, and see where your company is in five years against your competitors. Please try me and let’s see what happens.
‘Traditional-only’ marketers will soon find themselves unemployable
The only reason this is such a hot topic is because marketers need to change tact quickly and reassign their budgets but they are afraid of the unknown. I applaud marketers that have a passion for digital, but it does not impress me. Marketers need to embrace this new medium or they will soon find themselves unemployable and incomplete. It’s no different to marketers in the 1950’s saying “I don’t need to learn about TV commercials, nobody watches TV anyway.”
Social not so intangible
Common opinion is that social media benefits are largely intangible, and cannot be measured or compared directly to revenues. But traditional marketers found ways of measuring the intangible before, for example brand equity, customer loyalty and brand awareness, to name a few. So why are marketers struggling to do it with social media using tools that provide actual numbers and customer data like impressions, fans, engagement, shares, website traffic and online purchases?
I think the only reason social media is getting a reputation for not having a measurable ROI is because it is the new kid on the block — a totally new way of marketing.
Measuring social media ROI
I’ve always maintained that it’s simple to measure social media ROI. The real challenge lies in how you measure your data before and after engagement.
The established ROI formula is this:
ROI = ((benefit-cost)/cost)x100
Simply put, your return on investment positive, when your measurable benefit exceeds your cost. Using this formula, you can measure the ROI for different marketing objectives that are being driven by social media interactions and strategies.
Here are some key areas you can start measuring ROI in immediately:
For social media driven marketing, the important metrics you should look at are purchases, impressions, engagements, and fans. It should be noted that measuring these metrics is going to be context driven – that is, it is dependent other external factors. I love to cite purchases to make my point. For example, if your company has an established e-commerce capability then tracking purchases is going to be very easy. On the other hand, if your company has not established an e-commerce solution, but instead, relies on brick and mortar point of sales, then tracking purchases will be a little more complicated (but of course, still measurable). A very simple method to achieve this is to use exclusive offer codes and tracking these through your POS. A method no different to tracking a traditional marketing campaign.
Social Customer Service
Calculating for the ROI on customer service means having to take into account all of the costs involved in driving your social media efforts. You should then compare it with the cost savings you get from call deflection, and the difference between the average handling time for voice and social. Other intangible customer service benefits driven by social media marketing are the strengthening of customer loyalty through your human interactions online, and the ability to identify crises or negative feedback quickly and potentially turn them into a positive experiences for your customers.
The online community
Leveraging the community you’re building around your brand is another key area to start gaining measurable returns. This can pay off in several different ways. For example, you can leverage your community to establish a culture of mutual assistance where they help each other out. UK mobile company GiffGaff successfully implemented this scheme and it has paid off. The company has a very small customer service team because customers are incentivized to help out fellow customers through a gamified community environment, not dissimilar to Quora.
Another opportunity for a very tangible result is to provide advertising opportunities to other brands within your community. If you have 3 million fans you can easily charge other brands for ad placement, or sponsored content that gets huge mileage. Forget about putting expensive print ads in magazines with distribution of only 100,000. Community owners can charge by click through, impression or simply real-estate. This concept is relatively unexplored, but it is only a matter of time before you will find community brokers willing to place your ads for you.
I believe that measuring ROI based on your digital marketing efforts is easier than measuring your ROI in traditional marketing collaterals like billboards and TV commercials. Digital marketing is the future and it’s in your business’ best interest to get on the digital bandwagon, or get left behind in the dust.