Companies and brands are finally beginning to fully embrace social media. eMarketer reported in September that 86% of those who responded to a survey of professionals from various industries said they had adopted social technologies. Most said they were using the tools for marketing (57%) and internal collaboration (39%), while almost 30% reported using social technologies for customer service and support:
But despite the broad adoption of social media, measuring its effectiveness lags behind. Only 16% of those polled said they measured ROI for their social media programs:
In addition, more than 40% of respondents didn’t even know whether the social tools they were using were capable of measuring ROI. This means that companies are jumping into the social-media pool without actually accounting for how it will impact their business and what, if any, value it will add.
As of December, about 25% indicated that they had reached the “strategic” phase of their social-media efforts. Those in the strategic phase are significantly more likely than those in earlier phases of the process to measure their success across all objectives. An increase in Web site traffic was the No. 1 goal targeted and measured by all marketers:
It’s easy to rationalize by saying, “Social media will increase sales” or “Social media will improve customer engagement”, which is probably the case for a lot of brands. But without measuring how these tools work, it’s an uphill battle trying to make them more efficient — how can you improve engagement if you can’t quantify the level and quality of the social interactions you’re already having with your audience?
Companies need to be able to measure the consequences of social media, for better or worse, in order for it to have an impact. But many companies don’t have the faintest idea about where to begin when it comes to measuring the ROI of their social media campaigns and strategies. Measuring social media ROI isn’t impossible, but it can be challenging because many of its components are difficult to track.
As a standard formula, ROI is a pretty basic algebraic equation
ROI = (X – Y) / Y
where X is the gain from your investment and and Y is the cost of your investment. So if you invest $100 and get back $300:
ROI = (300 – 100) / 100 = 2 times your initial investment
For financial purposes, ROI is solely a measure of dollars and cents. But the principles behind it can be applied to any type of investment — including what I like to call Return on Involvement.
2 Great Primers
Social Media ROI, the latest video by Socialnomics, showcases companies that have thrown themselves into social media and gives examples of social media ROI on campaigns. One of the best points made on the Socialnomics blog is that we shouldn’t try to measure social media as if it’s a traditional channel. Erik Qualman, the author of Socialnomics, makes a great analogy: “What is the ROI of your phone?”
(If you’re unable to see the video, you can watch it here.)
And Olivier Blanchard’s presentation, Basics of Social Media ROI, is also a terrific introduction to this topic. It covers covers the definition of ROI, the case for business justification of social media, the actual ROI equation, a step-by-step method for creating a social media ROI proof of concept, and real world no-nonsense advice:
(If you’re unable to see the SlideShare presentation, you can view it here.)
Define Explicit Goals
Before you try to monitor and measure your social media returns, you need to have a clear idea of what you want to accomplish. Having concrete goals and baselines is crucial to calculating your return on investment.
Once you’ve defined your goals, you need to determine the baseline for your levels before starting or changing your social strategy. For example, if your goal is to increase social media mentions of your brand, you need to begin by determining where you stand now in order to quantify the ROI of any actions taken toward that goal going forward. It’s impossible to accurately determine ROI without a baseline.
Some Metrics Tools
ROI is not equivalent to metrics. But traditional Web measures like number of comments, traffic stats, Facebook fans, Twitter followers, etc. are important components of ROI calculation. Pay attention to what the numbers are telling you instead of focusing only on the numbers themselves. Does a spike in Web visitors correlate with higher sales? When people find your Web site via Facebook or Twitter, do they go directly to the e-commerce portion of your site or click on your product pages or elsewhere?
Mashable’s list of 50+ Tools for Measuring Web Traffic reviews packages focusing on real-time tracking and graphical representations of visitor data. Here are a few options for measuring social media:
- HootSuite: HootSuite is a great Twitter manager that also offers powerful visualizations of link statistics. The click data enables you to see whether clicks translate into impressions or transactions. Graphs show summary and individual tweet stats.
- My.ComMetrics.com: Created by CyTRAP Labs GmbH, My.ComMetrics.com is a Web-based tool that benchmarks social media campaigns and blogs in real time, helping companies and professionals improve their performance (impact, engagement, etc.). CyTRAP Labs GmbH developed the FT ComMetrics Blog Index, the industry standard for ranking corporate blogs of FT Global 500 and Fortune 500 companies.
- Omniture: Omniture has quite a few services for companies, including components that track Facebook and Twitter metrics. SiteCatalyst helps increase the relevancy and effectiveness of the latest Web 2.0 tools by optimizing social networking, consumer reviews, blogs, etc.
- PostRank Analytics: This suite of tools takes top-level data from Google Analytics and layers social media engagement on top of it. You can monitor page views and visitors (PostRank Analytics will pull this data from your Google Analytics account, if you have one), and you can also track “Engagement,” which is an aggregate score based on how many times your content is commented on, how often it’s mentioned on Twitter, how many people bookmarked it using Digg, etc. You can see the comments and messages that contribute to your stats.
- TweetMeme Analytics: If you use TweetMeme’s retweet buttons on your site, this is very useful. It enables report generation for any story on Twitter to help you analyze the spread of content. It also provides data on the tweets, retweets, clicks, domains, users, and locations with the ability to export the information.
What About Sentiment Analysis?
A metric for Twitter mentions doesn’t mean much if you can’t tell whether those mentions are positive or negative. This is where sentiment analysis comes in. It’s helpful to look at sentiment before changing or implementing a social media strategy and trying to calculate your ROI. Here are some tools to check out:
- Crimson Hexagon: Crimson Hexagon’s VoxTrot, an enterprise-level tracking tool, is a listening platform that provides companies with actionable insight into consumer opinion of their product, brand, or market. It analyzes social media mentions by identifying statistical patterns in the words used to express opinions on different topics and helps determine customer sentiment toward your brand.
- Twendz: Waggener Edstrom’s Twendz is a Twitter-mining Web application that leverages Twitter Search to highlight conversation themes and the sentiment of tweets. Tweets are parsed into three categories: negative, neutral, and positive.
- Viral Heat: Viral Heat is is a social measurement platform that aims to be a one stop shop for understanding social media. It analyzes hundreds of viral video destinations, Twitter, and millions of blogs and Web sites enabling you to track campaign performance. Its analytics can show you the most active tweeter, identify the quantity and percent of retweets, calculate the percentage of tweets with URLs, show you which Web sites and videos people are sharing, etc.
Interpreting the Data
Finding trends and tracking them back to their inception is the key to measuring ROI. After defining your baseline, you need to use the metrics derived from your monitoring tools to determine how they correspond to improved customer retention, higher sales, increased Web site traffic, or whatever your primary goals are.
- Is sales your key measurement? If your sales have increased, see how many referrers on your e-commerce site come from Twitter or your Web site.
- Did you give away coupons in conjunction with a Twitter or Facebook campaign? Calculate which sales are directly correlated by quantifying how many of those coupons were used.
- Do you see any trends? Does traffic to your store rise after posting on your Facebook Page? What about Twitter? Does store traffic correlate with more sales when evaluating that same data? Does a higher sentiment analysis on Twitter lead to more visits or sales?
What’s your take?
Do you measure social media ROI? What tools do you use? Is “ROI” the best terminology for measuring social media’s impact, or should it be called something else? What have you found to be good measures of what works and what doesn’t work when deploying social media as part of your strategy? Please share your thoughts!