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Whitepaper: 6 Models for Measuring the ROI of Social Media Marketing

Jim Tobin.
By: Jim Tobin  |   October 4, 2012  |   View Comments

ROI

Social media marketing and ROI have an interesting history with some famous sorts saying the proper answer should be, "What's the ROI of your mother, because she made you what you are today?"

I have to think they never won a budget argument with that kind of nonsense. Social media marketing works.

The fact of the matter is that we can generate specific actions via social media marketing and, in many cases, we can put a value on those actions. In the past, we gave you 4 general frameworks for social media ROI in your organization. Today, we're going further than frameworks with this new Whitepaper, "Six Ways to Measure the ROI of Social Media."

To get you inspired, we created this video on social media ROI:

Be Fair with ROI

Before we get into the models, I should say: "Let's treat social media marketing the same way we treat other marketing when we ask for ROI."

This is an intentionally double-sided statement:

  1. On the one hand, we should expect ROI from social media marketing the way we expect ROI from every other marketing spend.
  2. Given that, we should measure social media marketing the way we measure our expenditures in advertising, public relations, event marketing, CRM, SEO and more.

Clients who say, "What is the ROI of social media marketing?" should be able to provide their models for measuring the ROI of their other marketing. If they can, the social media marketer will find valuable data points (actual and/or assumptions) in those models that make building the social ROI model better. If they cannot, it begs the question as to why one form of marketing is being held to a different standard than the others.

Be Careful What you Count

The old expression is, "Not everything that can be measured counts, and not everything that counts can be measured." True.

But in building a social media marketing ROI model, you need to have a detailed understanding of not only what you count, but how that is counted. One example is last touch attribution.

Using last touch attribution, web analytics programs "credit" the last touch with the sale. In other words, we know that someone clicked on a search term and then bought a product (or reached a goal page). In that scenario, what we don't know is what led that person to search for the term in the first place. Was it a television spot? An event? Seeing the product in a friend's Facebook news feed? In systems that use multi-touch attribution, we get a much clearer sense of the path that led to that conversion.

People who use last touch attribution often give too much credit to search (paid and organic) and too little credit to social media, television and other forms of marketing.

The Six Models

Let me start by saying that if you sell through e-commerce, direct ROI models are significantly easier to create. But for these models, we assumed that you do not have that luxury.

The six models of social media marketing ROI that we've outlined here can be customized with whatever data your company has on hand. They are as follows:

  1. The Amplification Model: how much would it cost to buy these impressions/social actions through paid media?
  2. Value of Social Traffic versus Display: how much does it cost to get a visitor to your site via social promotions versus display advertising?
  3. Quality of Visitors from Social Media: how well do the visitors being driven to a site via social media perform?
  4. Revenue from Facebook Fans Model: how much incremental revenue do Facebook fans generate?
  5. Revenue from Social Media Marketing: how many sales can be attributed to your social media marketing programs?
  6. Social Promotions Sales ROI: how many sales can be attributed to a special social media marketing promotion?

Importantly, none of these models are perfect. But they are significantly better than saying that social media ROI is not measurable. We also state quite clearly that all of these models are in their early stages. We're eager to generate conversation on how to improve them. We also recognize that none of these models captures the total value of social media marketing from all dimensions. But they do demonstrate the dollar value of equivalent ad spend, the relative value of traffic to display advertising, whether or not these visitors are valuable and much more.

These are the conversations we should be having with our clients. These models are the starting point for doing those conversations.

Download the Whitepaper on Social Media Marketing ROI

Please feel free to download the whitepaper here. It's a straight download link, we're not even asking you to fill out a form so we can stalk you later. Not our style.

We would ask that you leave a comment below as you're reading with anything that struck you as brilliant, nonsensical, or somewhere in between.

If you're interested in Ignite Social Media or how we can help your brand with social media marketing and generating ROI, please let us know.


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Comments

14 thoughts on “Whitepaper: 6 Models for Measuring the ROI of Social Media Marketing

  1. Renée Wallen

    Excellent post! The white paper is clearly presented and provides a useful starting point for people to learn how to measure their ROI, and the video provides an engaging snapshot of success stories. Thanks !! :)

  2. Renée Wallen

    Excellent post! The white paper is clearly presented and provides a useful starting point for people to learn how to measure their ROI, and the video provides an engaging snapshot of success stories. Thanks !! :)

  3. seaadams

    Thank you for providing a model for calculating the financial ROI of social media in a very easy to understand andstep-by-step process which any layman can understand. I can see from your model that calculating the financial ROI of social media requires discipline, strategies, standard practices and a marketing management system to track and capture the required cost and benefit information. I hope you don't mind if I utilize your model in my consulting practice and blog. Thank you again.sir
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