March 2010 – Online Insights: Social Media

The ROI of Social Media

Retailers of all sizes are racing to put up their own Facebook pages, open Twitter accounts, invite customer feedback on their sites, and generally do more online to connect with their customers using social media sites and tools. But in the race to do “all things social,” retail marketers may be putting the cart before the horse; in other words, they may be investing valuable resources in programs without also investing in program measurement.

Social media marketing–the process of engaging with customers in online communities about your brand or products–is undoubtedly one of the most talked-about marketing methods today. And for good reason: participatory social media continues to grow in popularity among consumers–Facebook alone has more than 400 million users–and it presents numerous new, direct opportunities for businesses to learn from their customers and provide both better service and targeted promotions.

However, because social media is relatively new, most marketers are not only still struggling with how to reach this audience, but also with what to say to them–and when. Measurement of social media marketing programs today is usually an afterthought. A 2009 study by Mzinga and Babson Executive Education found that 84 percent of marketing professionals do not even attempt to measure the ROI of their social media marketing programs.

CMOs Want Answers
Blind faith that social media marketing will deliver a positive boost to brand awareness and product sales is increasingly becoming a risky approach. Some 72 percent of CMOs who did not measure the revenue impact of social media initiatives in 2009 will do so in 2010, according to a December 2009 study from Bazaarvoice and the CMO Club. The CMOs surveyed planned a 333-percent increase in tracking revenue, a 174-percent increase in tracking conversion and a 150-percent increase in tracking average order value from their social media programs in 2010.

The good news is social media marketing programs can be measured, analyzed and optimized with similar rigor and insight as display ads, paid search and video ads. In order to do so, however, you will first need to establish the right social media measurement program, strategy, metrics and tools.

What Marketers are Doing Now–and What They Need to Do
For those retail marketers measuring social media effectiveness today, most are focusing on analyzing website traffic; few, however, take the next step to measure whether this socially driven traffic actually impacts conversion, according to eMarketer. Site traffic is a good indicator of whether your social programs are driving engagement, but to get a true ROI number, marketers–and retailers in particular–have to measure whether this traffic actually converts.

In 2010, social media marketers need to implement tools that allow them to measure and track the actual impact of social media programs on all of the following to get an accurate reading on ROI: traffic volumes, engagement, brand notoriety and conversion. While conversion tells you whether your social programs are actually resulting in sales, it’s important to measure both hard metrics (clicks and conversion) and soft metrics (brand recognition, engagement, customer service feedback, etc.). You can assign a dollar value to these soft metrics so they become part of your overall ROI calculation.

Here are some practical steps to putting a measurable social media marketing strategy in place:

Always start by defining overall marketing goals and then connect them to social media programs, not the other way around. Do you want to drive 10 percent of sales through social media? Fifteen? Do you want your brand loyalty to rise 10 percent–or 20?

The next step is defining exactly which metrics to measure. Here are the three main social media Key Performance Indicators (KPIs) all marketers should be measuring:

Volume – Total overall conversation volume by media type (number of blog posts, social network posts, customer feedback, reviews, etc.);

Engagement - Community activity ratios (comments per post or replies per post); and

Sentiment - Online social media brand perception (ratio of positive, negative and neutral feedback trended over time).

Next, you need to select and configure the appropriate set of social media analytics tools to enable the necessary speed, accuracy and automation of data collection that will allow you to produce the KPI metrics most relevant to your social media channel programs. There are many great free or free-to-try tools available on the market, including Alterian Techrigy SM2, trackur and filterbox. Make sure the tool you choose allows you to measure conversion from social media campaigns, as well as the cross-campaign impact between paid media and social media programs.

For more advanced users who are ready to migrate from free measurement tools to more advanced stages of both brand monitoring and social media marketing campaign management, paid tools like Nielsen BuzzMetrics, Meteor Solutions, Visible Technologies and Radian6 all offer specific and detailed configurable dashboards and reporting interfaces that will enable marketing managers to optimize their social media programs on an ongoing basis.

Once you have defined your social media measurement methodology and program, including selecting a short list of KPIs, it’s time to start measuring how your brand is doing online with your target audiences–and whether your social media initiatives are helping. Here are a few key considerations and tips to focus your initial efforts:

Use your social media analytics tools to find out how many visitors arrive at your site via social content versus how many arrive via paid media ads. You may be surprised at the power of social content; several studies show that upward of 20 percent of traffic to brand websites today comes from a shared link, a Twitter update, Facebook post or some other social media initiative.

Second, find out if the people arriving via social content convert at a higher rate than those arriving via a paid ad.

Next, measure which social initiatives are working the best to drive traffic and conversion. Is your Facebook page driving the most visits? Or is it your YouTube video channel, your blog, a recent social contest or your Twitter feed? Which social program is driving the greatest conversion? Analyze traffic and conversion patterns by timeframe and demographic, before and after the launch of a paid media campaign.

Find out exactly where your social content–both the content you create and UGC–is being viewed and shared, and how this sharing is driving traffic and conversion. Is YouTube driving more pass-along of your videos than your outbound e-mail campaigns with embedded links to your videos? Are discussions about your brand’s recent TV commercial on third-party blogs responsible for a surge in site traffic? Analyze traffic patterns across both social media and paid media programs, and figure out how they impact one another.

Armed with consistent metrics, as well as a baseline of your brand’s previous performance, you will be able to optimize all of your social media program activities over time for better return on investment. And that, as savvy marketers know, is almost always the name of the game.

Clay McDaniel is founder and principal of Seattle-based social media marketing agency Spring Creek Group. He can be reached at clay@springcreekgroup.com.