I've been avoiding writing an article on how to measure ROI for a year or so, mainly because the landscape of social (and how this channel works in concert with a cross-platform marketing plan) changes so quickly and so often. What's the point of discussing the ROI when the clients can't decide on which type of metrics are the "right" metrics? For instance, many of my clients in 2010 were concerned with increasing the number of FB fans and Twitter followers, even though I knew that once the metrics got past the CMO to the CEO, the conversation would turn to how social has impacted sales.
To head off those convesations, I would often bring the Social Metrics Pyramid (from Altimeter Group, below) to meetings to show that while many Social Media Strategists may consider social indicators like fans/followers important, and Client stakeholders often link success to engagement metrics like Share of Voice and Word of Mouth, the only thing that really matters to most CEOs is increased sales.
I'd often end up having to give multi-tiered presentations on ROI that called out specifically how a social media approach could impact each role/metric level, and thereby satisfy the business objectives for each level as needed. Even though this was successful as a presentation strategy, it was ultimately frustrating to me because it just shed light on the silos that still exist within corporations, silos that often impede a company's evolution into a truly consumer-centric company. After all, the consumer isn't interested in how a company is internally organized. They just want a relevant, seamless consumer experience.
Additionally, the complexity of a multi-tiered ROI approach just seemed counterintuitive to me. As a rule of thumb, I belive the best approach is often the simplest approach, and a multi-tiered ROI framework seemed a little too convoluted to be the best solution to Social Media metrics.
So after putting off my POV for so long, I can finally say I think I've landed on the Ultimate (for now) Measure of Social Media Success. This Ultimate Measure isn't dependant on Sales only. It's not a simple equation like ROI:
(Image, Altimeter Group)
Instead, base your social media success on business value overall. Business value isn't always restricted to selling more, sometimes it can mean decreasing costly call center calls and improving customer experiences, or increasing consumer retention via better customer service or proactive support. These success measures may not map directly to sales increase, but they ultimately map to increased revenue.
But how do you DO this, you ask? How do you measure this impact on revenue? Well, it's not easy. It's not effective to measure social in a vaccum, so you have to have an idea of which business objectives you will be priortizing to put KPIs toward. I think it's just this type of objective prioritization that causes the confusion in most businesses, because the businesses aren't internally organized in a consumer-centric manner, so they are only aware of their division's business objectives.
And this kicks off a reactive vicious circle between client and agency, where both organizations become paralyzed by the dizzying labrynth siloed metrics create. If acquisition is your goal and you are going to measure Share of Voice and new leads, you may create a program with high touch programs that build your new consumer base, but infuriates your existing customer base by over-messaging.
More to come on the practical application of social soon...Let me know your thoughts on this post in the comments please.