Social Media ROI Revisited: 4 Ways to Measure
Through all those conversations and measurement plans, we tend to employ a mix of four distinct models for measuring social media ROI: Direct, Correlated, Relative, and Proxy ROI. If you look hard enough, you’ll find both avid fans and harsh critics for each model, along with a large group of people claiming only “real” ROI (the “Direct” model outlined below) is valid. The truth is, it’s just not that simple, particularly when you’re trying to measure social media efforts that are a single piece of a much larger integrated marketing or communications plan. Each model of social media ROI listed below might or might not be useful for any given campaign or situation. As a wise knight once said “Choose wisely.” What follows is an introduction to each of the four models. Over the coming weeks we’ll examine each model in more detail and explore examples, while touching on several related topics in measuring social media ROI. Bookmark this post, and be sure to check back for linked updates.
Direct ROISee the expanded post: A Closer Look at Direct ROI Consider this the ideal model, “real ROI” is the purest form. Direct ROI is where you can directly track the impact your social media activities have on increasing revenue, reducing costs, or both. On the revenue side, direct ROI can be used for social media initiatives that directly drive customers to purchase a product or service, often while passing through tracking links. Examples include pushing coupons or discount codes through channels such as Twitter or Facebook, driving early-bird event registration via an exclusive offer through a blogger outreach effort, and so on. Dell’s @DellOutlet program is a well-known if slightly aged case study where social media clearly and directly resulted in millions of dollars in additional revenue. As far as reducing costs, direct ROI for social media is often trackable for customer support and service organizations, where they can specifically measure how many fewer support calls they fielded thanks to addressing customer issues via online communities, influencer programs, and social networks. Microsoft’s Most Valuable Professional (MVP) program, combined with their extensive use of support forums, blogs, and social channels, is an excellent example of a social media effort directly reducing costs for an organization.
Correlated ROISee the expanded post on this: A Look at Correlation When a directly trackable benefit can’t be measured, correlation might be an option. Correlated ROI is a function of tracking measurable social media activities over a given time – a focused blogging effort, launch of a new community site, a Facebook campaign, etc. – and comparing it to the performance of key business or marketing metrics, such as sales volume or customer service calls, over the same period. You’re looking for statistically significant correlation between the two data sets, with an ideal of being to identify that for a given investment in social media efforts, or a given level of activity, you’ll get a corresponding impact on a key business metric like sales. Just keep the dictum of “correlation does not imply causation” in mind to avoid drawing false conclusions. A potential pitfall to this approach is how difficult it might be to draw real conclusions when your social media activity is being run as part of, or at least in parallel to, a much broader integrated marketing campaign. That spike in sales that appears to be nicely correlated to a sudden rise in Facebook activity might in fact have been caused by a strong coupon code offered through a related email marketing campaign, and a bunch of excited people just happened to pile on to your Facebook page to talk about it. With those cautions in mind, correlation can be a powerful measure of social media ROI, as noted on a recent panel at SXSW by David Witt, Global Head of Social Engagement and Brand Public Relations at Hershey’s, speaking of his time in a similar role at General Mills:
Witt noted that he has repeatedly charted online conversations and actual sales and the lines move in virtually perfect symmetry. The only stronger correlation was being on shelf. In essence, Witt said, we’re now showing strong correlations more than definitive ROI, but the numbers are very impressive. Eventually we’ll have to show hard numbers, he said, but today it’s a bit difficult to do so definitively.