Posted May 10, 2011 6:41 pm by with 12 comments

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Social Media and ROI. Should I just stop there? This past weekend, Joe wrote a decisive piece about how the two concepts shouldn’t be used in the same sentence. If you scan even further back, you’ll find me making the same point — though with a thinner blade. That’s why I was very interested to see what was behind this piece from MarketingSherpa: Marketing Research Chart: CMO confidence in social media’s ability to produce ROI

Surely, this would show that most CMO’s agree that social media ROI is like using a pedometer to find out how far I walked in my dreams.

Let’s take a look:

Which statement best describes how you perceive social marketing’s ability to produce a return on investment (ROI) at budget time?

From this, it would appear that the majority of CMO’s believe there’s a return on investment, but once again, I say it’s all in how you phrase it. There really needs to be a fifth option.

Social marketing isn’t measurable, but since everyone is doing it we’ll look foolish if we don’t do it, too.

That’s the truth for a large majority of companies, don’t you the think?

I do believe that in the future, we’ll have a better handle on social media marketing. We’ll have standardized tools and benchmarks and a better understanding of when, what and how we use it. But until then, let’s face it, the majority of social media marketers are just throwing spaghetti at the wall and hoping some will stick.

Which of the “five” choices would you say best describes your attitude toward social media marketing?

  • It’s confusing indeed. I don’t know what answer I would pick but I definitely agree with the fact that many companies do it because it’s what everybody does right now and they want to have a facebook page otherwise they’re afraid they might be left behind. But that’s kind of an abstract notion of the potential of social marketing without numbers to back it up. Still blurry…

  • ROIs are driven by the finance side of our businesses. Every ROI I have generated had to meet the skeptic eye of our CFO. When I read the above chart I come away with that 20% of the companies CFOs are satisfied with the way Marketing is collecting the ROI for social media. Another 62% feel ROI is satisfactorily capable of collecting ROI data even though a positive ROI has not been gained. Yet.

    ROI is a fact of life that all departments must provide. The Marketing Department has been one of the last departments required in providing an ROI. I do not see CFOs giving up on requiring this from marketers.

    Therefore, it is best to accept this. As marketers we need to work with the finance side. What I suggest is marketers use metrics such as improvement of client retention as an ROI metric. As social media is about building / strengthening relationships then retaining clients is the ultimate goal. Right?

    Client retention can be accurately measured therefore an ROI can be generated. As marketers we cannot bury our heads in the sand and hope CFOs stop demanding ROIs for the money we spend. The business environment will not allow it, so we need to find a way to make everybody happy.


  • I commented on Joe’s post over the weekend. I think he and others writing in this area are right — measuring ROI in social media is not only difficult, its senseless because it seeks to put a $ value on social aspects of a relationship. Certainly, as Terry suggests you can use measures that “likely” lead to increased ROI and if this keeps the pencil pushers happy, so be it. In my experience, pencil pushers want to see real, measurable $$$$, not some ### that might lead to $$$$.

    The problem is really a fundamental lack of respect for long-term strategy and this focus needs to change if firms wish to survive in the long-term.

    Angela Hausman, PhD

  • an interesting problem. one of social media’s strength is peer-to-peer cred. it’s a difficult environment for companies to play in in terms of concrete rev gen. Of course, I’ve seen some wonderful examples of customer hand-holding and individual support. One company I read about even sent someone flowers in response to a tweet about a personal disappointment. Great word-of-mouth. Great brand-building. But at what point do other customers say, “What about me? Where are my flowers?” And then the CFO walks into the room: “Don’t be thinking about sending flowers to every customer.”

    But here’s another interesting angle on this discussion. It’s not always easy to show ROI on mass media marketing either. Maybe the elegant formula involved in any concrete ROI calculation is just too simple for a complex marketing world.

  • The ROI discussion has now been going on for months and it’s hard to get any clear answers. Let me just ask the CFO minds what the ROI of better customer service and a high quality product or service is. Social web engagement is a way of improving both while gaining key insights into what your customers are thinking and more importantly saying about you using social networks and social media tools. Sometimes this debate reminds me of the recent cartoon in The New Yorker, where and executive walks into accounting and tells the bean counters: Sorry, you’re out of a job because we don’t have any beans left to count!

  • This is a great discussion and one we have been having with our clients for months. A goal of ours is to prove the ROI of daily deals. We are expanding our platform to offer ROI of social media = promote a tweet with code and track the performance at the brick & mortar with our application. We understand it is hard to factor in things like customer service and touch points from social media into the ultimate roi number, but our attitude is it doesn’t hurt to create a baseline.

  • I can only speak from my experiences, but the CFOs I have worked with never asked for a concrete formula. The good ones understand the formulation of a good marketing ROI is still in development. They just want marketing to help move in that direction.

    If you think social media ROI is a maddening argument then you should have been around for the early ROI battles for marketing campaigns in general. Back then I stood firmly and said there is no way to calculate an ROI for marketing.

    Yet, today some people a whole lot smarter than me have created ROIs that are satisfying the financial side of business. The dashboards today are extremely sophisticated. Marketing departments are providing positive ROIs, so I do not see the CFOs backing down from requiring social media to have an ROI.

    I look at it as there are two tasks marketers must perform. One is the ROI to satisfy the financials. The other task is to satisfy our marketing needs. i.e. branding, name recognition, relationship building, lead generation, etc…

    Fail at either one of those tasks and the marketing department will be on the short end of the stick when budget cuts take place. Great discussion!

  • Among the general population, the main reason cited for connecting with brands on social networks was to receive deals and discounts. This result from the Affluence Collaborative survey backs up earlier research from several sources on why consumers follow brands on social sites. What this means is that for companies that have an eCommerce agenda, it will eventually pay off.

  • Joel Cole

    Let’s face the facts…Facebook doesn’t work for business. People come to Facebook to chat and trade pictures with people they barely knew in high school. They don’t do Facebook to buy anything. If you want to sell to people on the Internet, there are many routes you can take…Google Places or just plain websites. But Facebook isn’t the place to be if you want to do business on the Web.

  • Social marketing through Facebook, Twitter, etc will only be as effective as the message. If you don’t have the right message for an audience, it doesn’t matter whether you use Facebook, YouTube, TV or a fax machine. Marketing seems to be continuing its pursuit of the latest “it” instead of rolling up the sleeves to understand the target market, then creating an irresistible message/offer followed by a clear and direct call to action. With that formula you can measure any media. Can it be done in 140 characters or less? Absolutely.

  • Andrew Levy

    Social media marketing and PR is becoming an immovable object. The discussion of ROI has been going on for years, not months. As long as I have been in this business (and it has not been years and years) that discussion has been paramount. However, the immeasurable variable with SM marketing and PR is getting to know your customer and showing them you care. That is immeasurable. A brand asking customers what you think and why is an intimate task that cements relationships and are invaluable. In addition, just mentions of a brand over and over is like seeing a billboard on a highway, or an ad in a magazine many times. That repitition in and of itself is valuable in the purchase decision (and is very hard to calculate).

    The conclusion still… SM is here to stay. Harness it.

  • Like the fuzzy impression equations your PR people will give you for a positive news story, I think it will always be difficult to hit the nail on the head of the impact of a successful social media program. But I think that David Wachtendonk’s plan and others like it are a great start. Just like with any other outreach, find ways to track the impact of it with market research that can tell you why your customers are your customers. Obviously, the structure of that research and feasibility of it varies from business to business. But I think that there can be creative ways to get to answers about the ROI for social media.