Understandably, as businesses begin to invest more marketing/PR dollars into social media, there is great concern over the ROI of these activities. No company, big or small, can afford to spend scarce funds inefficiently, particularly in the current economic environment. So no matter how much "buzz" there is about the promise of social media marketing or how excited you may be about it, if it hasn't already happened, sometime very soon your boss or client is going to start asking you about the ROI of social media marketing.
A fundamental problem with this of course is that all marketing ROI calculations are imprecise, at best. John Wanamaker's observation that "“Half the money I spend on advertising is wasted; the trouble is I don’t know which half” is still (largely) true. Consider, for example, a tactic viewed by many marketers as extremely measurable: Google AdWords. I mean, it's all right there on your campaign management screen: how much you spent, how many conversions (leads) you got, and your cost per lead. Simple, right?
Balderdash. Much has been written about the weaknesses of last click attribution. Measuring only the final click, and giving all of the credit for the lead to your text ad, distorts what's truly happening. An individual may have seen your company at a trade show, read one of your press releases on an online news site, visited your website, read your blog, checked out an analyst's opinion of your offerings, viewed your Facebook page, been exposed to some of your banner advertising and checked out your Twitter feed, all before making that final click on your search ad. You have no way of even accurately identifying all of those points of exposure, much less assigning a value to each one.
Tools like HubSpot do a great job of quantifying social media leads, but still have some last-click bias. The difficulty in precisely measuring the ROI of any specific marketing or PR activity (unless perhaps you have gargantuan budgets for testing and measuring) is why most marketers rely on a portfolio approach to marketing investments (kind of like a mutual fund), where each individual activity supports the others and the performance of the overall mix can be measured much more accurately than any individual element.
By all means, try to find ways to measure the ROI of your social media activities, even if these measures are less than perfect. But in terms of justifying social media efforts, the return-on-not -investing (RONI) is arguably more compelling than any current ROI measure. Here are four examples of social media marketing RONI:
Your company fails to respond to a complaint about your product or service on a social media site. The recent United Airlines breaks guitars incident is one extreme example of this. If your company is actively monitoring social media, and responds to online complaints promptly and positively, such exchanges can actually have a beneficial impact on your brand. But if such complaints are instead allowed to fester and spread, the damage can be serious. RONI: reduced customer satisfaction, damage (possibly severe) to brand.
Your company fails to respond to a direct question posted on a social media site (e.g., "Does anyone have any experience with BrandX thingamabobs?"). If someone actually uses your brand or product name in a Tweet, blog post or elsewhere, and there's only the sound of crickets coming from your corporate HQ, it makes your firm appear out of touch and unresponsive. RONI: damage to brand, possible direct loss of revenue (individual sale).
Your company fails to respond to a general industry question which could have led to a sale. Many questions posted in social media venues aren't product-specific, but rather are the result of someone trying to figure out how to solve a problem. Responding in a helpful, non-salesy way through social media can not only get you a deal you may have otherwise missed but also enhance the image and credibility of your company within the individual prospect's circle of influence. RONI: direct loss of revenue (individual sale), possible loss of referral sales opportunities.
Your company doesn't produce any thought-leadership content. Every company possesses thought leadership content or subject matter expertise, even if it is only locked up in the heads of employees. Publishing this content in a blog, podcast, video or online slideshow and promoting it through Twitter, Facebook, LinkedIn, Digg and other tools enables you to show the world how smart and helpful your people are, rather than trying to convince them through paid (and often ignored) media. RONI: missed opportunity, quite possibly for multiple, ongoing sales.
Measuring social media marketing ROI is a worthy though elusive goal. The costs of not investing, however, are substantial and should be compelling.
*****
Contact Mike Bannan: mike@digitalrdm.com
A fundamental problem with this of course is that all marketing ROI calculations are imprecise, at best. John Wanamaker's observation that "“Half the money I spend on advertising is wasted; the trouble is I don’t know which half” is still (largely) true. Consider, for example, a tactic viewed by many marketers as extremely measurable: Google AdWords. I mean, it's all right there on your campaign management screen: how much you spent, how many conversions (leads) you got, and your cost per lead. Simple, right?
Balderdash. Much has been written about the weaknesses of last click attribution. Measuring only the final click, and giving all of the credit for the lead to your text ad, distorts what's truly happening. An individual may have seen your company at a trade show, read one of your press releases on an online news site, visited your website, read your blog, checked out an analyst's opinion of your offerings, viewed your Facebook page, been exposed to some of your banner advertising and checked out your Twitter feed, all before making that final click on your search ad. You have no way of even accurately identifying all of those points of exposure, much less assigning a value to each one.
Tools like HubSpot do a great job of quantifying social media leads, but still have some last-click bias. The difficulty in precisely measuring the ROI of any specific marketing or PR activity (unless perhaps you have gargantuan budgets for testing and measuring) is why most marketers rely on a portfolio approach to marketing investments (kind of like a mutual fund), where each individual activity supports the others and the performance of the overall mix can be measured much more accurately than any individual element.
By all means, try to find ways to measure the ROI of your social media activities, even if these measures are less than perfect. But in terms of justifying social media efforts, the return-on-not -investing (RONI) is arguably more compelling than any current ROI measure. Here are four examples of social media marketing RONI:
Your company fails to respond to a complaint about your product or service on a social media site. The recent United Airlines breaks guitars incident is one extreme example of this. If your company is actively monitoring social media, and responds to online complaints promptly and positively, such exchanges can actually have a beneficial impact on your brand. But if such complaints are instead allowed to fester and spread, the damage can be serious. RONI: reduced customer satisfaction, damage (possibly severe) to brand.
Your company fails to respond to a direct question posted on a social media site (e.g., "Does anyone have any experience with BrandX thingamabobs?"). If someone actually uses your brand or product name in a Tweet, blog post or elsewhere, and there's only the sound of crickets coming from your corporate HQ, it makes your firm appear out of touch and unresponsive. RONI: damage to brand, possible direct loss of revenue (individual sale).
Your company fails to respond to a general industry question which could have led to a sale. Many questions posted in social media venues aren't product-specific, but rather are the result of someone trying to figure out how to solve a problem. Responding in a helpful, non-salesy way through social media can not only get you a deal you may have otherwise missed but also enhance the image and credibility of your company within the individual prospect's circle of influence. RONI: direct loss of revenue (individual sale), possible loss of referral sales opportunities.
Your company doesn't produce any thought-leadership content. Every company possesses thought leadership content or subject matter expertise, even if it is only locked up in the heads of employees. Publishing this content in a blog, podcast, video or online slideshow and promoting it through Twitter, Facebook, LinkedIn, Digg and other tools enables you to show the world how smart and helpful your people are, rather than trying to convince them through paid (and often ignored) media. RONI: missed opportunity, quite possibly for multiple, ongoing sales.
Measuring social media marketing ROI is a worthy though elusive goal. The costs of not investing, however, are substantial and should be compelling.
*****
Contact Mike Bannan: mike@digitalrdm.com
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