The question of measuring Return On Investment (ROI) in the realm of social media has been a thorny and imprecise one for the past few years. Many of the self-styled “gurus” and “mavens” have dismissed it on their Twitter feeds and blogs, while marketing pros have scratched their heads in puzzlement on how to harvest usable metrics from these sort of campaigns.
Bazaarvoice and the CMO Club have just released a new study that has some projections for 2011 on exactly this subject. Erica Swallow, in an article for Mashable (found via Yahoo News), pulls out the finding that is creating the most stir within the industry:
According to the report from Bazaarvoice, 74% of CMOs predict they will finally tie social efforts to hard ROI this year. The survey polled 175 CMOs from The CMO Club, including those from B2C and B2B companies in various industries.
For many in the business world, hard ROI is the Holy Grail, the seal of respectability and proof that social media is a valid business tool. Massive, newsworthy successes in using social media for PR are one thing, plain numbers on paper are another. It is the latter that most corporate execs tend to prefer.
It’s hard to develop standards for something as protean as social media. The field of play mutates at an incredibly rapid rate. Even so, it is a vital part of any campaign, on or offline, to be able to track successes and failures. Up until now, many of the measurements used have been imprecise, not pertinent, or too loosely defined. Now that businesses have had a few years to get their feet wet, that is about to change. How effectively — is something that only time will tell.
Another significant business effect revealed by the Bazaarvoice study is that of companies using social media for more than just customer service and self-promotion:
The survey shows that social media had become an essential component of executive marketing strategies by the end of 2010, with 90% of CMOs participating in three or more social media activities. CMOs still focus on measurability and ROI but are recognizing there’s even more business impact to uncover. Nearly all (96%) are beginning to look beyond sales goals and web metrics to focus on how social media can deliver strong insights that fuel improvements across the business. This is consistent with Forrester Research’s recent finding that more than 45% of all companies now use social media assets for product development in addition to customer engagement (83%), and indicates a sea change in the strategic value that CMOs place on social today.
The first step in a social media campaign is “listening,” to see where pertinent conversations are happening online. More and more companies now realize that they can meet consumer needs more effectively by integrating user input. The fact that this input is now being used to improve products based on consumer needs is a step forward for all of us. In my opinion, this approach creates a more agile and responsive business ecosystem. It’s basic market research on steroids.
This study denotes a major departure from the findings of its predecessor in 2009. The Drum reports how great that change is since that prior survey:
This shows a marked turnaround from 2009 when 84% of companies admitted they did not measure a return on social media investment, choosing instead to ephemeral statistics such as the number of ‘likes’ or followers a brand had accrued.
One of the subjects covered in the report is which platforms businesses feel they are getting the best and most tangible ROI from. The number-one answer is hardly shocking, as Equimedia points out:
Unsurprisingly, Facebook was highlighted as the platform with the most money-making potential, with 15.4 per cent of respondents saying it offered ‘significant’ ROI.
Coming in at number two were ratings and review websites. It seems that my personal observations are proven correct on that one. Every time I see my wife or friends hop online to do some shopping, the “official” product descriptions and reviews get barely a look. It’s straight to the purchaser reviews and ratings for a crowdsourced opinion.
In my own work, I have never found it hard to present ROI to my clients, but, then again, I tell them that concise goals are needed before it can be measured. That is the big mistake made by many attempting to gain momentum from social media — a lack of clear objectives. Once you know the goals, you can determine which metrics need to be measured in order to track success. The needle can be moved, but you need to know which needle you are moving first.
Social media is like a telephone. You would be hard-pressed to measure the ROI on your office line or mobile phone, but you can measure ROI on outreach done using that phone. Social media is the same way. It is a communications channel, not an end unto itself.
It will be interesting to watch this trend develop and what new measurements come out of it, but I can’t help wondering if we stand a chance of ending up with a cookie-cutter solution rather than a more agile one. What do you think? Leave us a comment and join the discussion. We would love to hear your thoughts!
[Additional note: Interestingly, almost the same time as the Bazaarvoice study was made public, Terametric announced a new, free e-book on the subject, Effective Twitter Marketing Through ROI Measurement.]
Source: “Bazaarvoice and CMO Club Survey: CMO’s Focussed on Strong Insight, Strategic Use of Social for 2011,” Bazaarvoice, 01/27/11
Source: “CMOs predict strong ROI from social media,” Equimedia, 02/09/11
Source: “Marketers predict 2011 will be a landmark year in social media ROI,” The Drum, 02/09/11
Source: “Terametric Launches Twitter Marketing ROI eBook for Social Media Marketers and Twitter Analytics,” PR Web, 02/09/11
Source: “Marketers Optimistic About Finding Social Media ROI [STUDY],” Mashable via Yahoo News, 02/08/11
Image by Cambodia4Kids.org (Beth Kanter), used under its Creative Commons license.