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Tom Nixon

Measuring the real ROI of social media

Here’s an interesting presentation about measuring the real ROI of social media that’s been doing the rounds this week. It’s worth it for the picture of the ‘Social Media Manager’ alone :)

I love the focus on getting to the real ROI of social media in financial terms (not followers, friends, fans, retweets, comments…) but it left two questions in my mind:

1) In a large organisation, how realistic is it to benchmark financial performance ‘before social media’ and ‘after social media’? If a large publicly listed company posts great quarterly results after starting a social media programme, could you really assert that social media was the cause when there are thousands of other programmes running in the business to try to cut costs and increase revenue.

2) The presentation says we should try to correlate social media measurements with financial indicators. But there’s the old problem of establishing causation: Did sales increase as a result of positive buzz increasing, or was the company doing some other things right that led to increased sales and positive buzz? It reminded me of this study about the Nissan Pathfinder.

I can see this model working in businesses that are relatively easy to measure like online retail but is it too simple to be a panacea for measuring social media ROI across the board? I’d love to know what others think about this.

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  1. I would say that if you try social media and get positive non-financial impacts (as in slide 34) and can’t convert them then there’s something wrong with the overall experience…. Many forms of digital mktg can do the same, drive large volumes/clicks etc and not convert because of the experience both on and offline.

    As you say extablishing causation is the really tricky bit. That said, for years organisations have spent money on branding campaigns which are similarly difficult to establish direct ROI on but show benefits in areas such as brand affinity, overall turnover etc. You just need to be as persuasive as a brand martketer in the mid-80′s (minus the turtle neck sweater) ;-)

    Posted 12th November 2009 at 10:22 am | Permalink
  2. A very good explanation of ROI, yes. And of how to use analysis to a) improve campaigns and b) suggest a link between profitability and Social Media campaigns.

    Two extra things come to mind:

    1) Don’t forget that there is also potentially a strategic benefit to Social Media.

    Everything in that presentation seems to be about tactical benefits – which are essential in getting any new initiative accepted.

    But things like creating better products as a result of better dialogue with customers are more strategic – in the sense that:

    a) it will take a while to show any fruit (new products often don’t show ROI immediately, or even in their first or second year)

    b) gaining better dialogue with customers may result in a repositioning of the company and a shift in brand capital – which again may not be easily discernible (people realise the company is now on the ball; but this may not yet translate to better buying decisions, and not to ROI).

    2) While the logic of giving projects support based on ROI is sound, many projects are justified on a rather different basis – gut instinct and desire. Depending on the scale of the relative spend it is always quite easy to justify a project with a little smoke and mirrors and a lot of enthusiasm, despite what people may say.

    In my experience, if you are working with senior folk in an organisation, often those with proven track records, they may not need to perform detailed cost-justification of projects at the leading edge. If they did, competitive lead would be lost.

    Many senior executives know this and will often allow trusted people to take a punt on good stuff – even when ROI can’t be proven.

    Posted 25th November 2009 at 5:48 pm | Permalink

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