Calculating ROI from Social Media - Problems, Pitfalls & Breaking all the things...

As an industry we’re quite rightly under pressure to report and measure the impact of our activity in order to justify our existence.

How to calculate return on investment (ROI) on social media activity is something which I’m asked a lot - I guess because ROI is a metric that the C-Suite are both familiar with and very interested in.

However, ROI is a woefully poor measure of the success or failure of social media activity.

these-are-not-the-droids-we-are-looking-for

To be clear, I’m not saying ROI is a bad metric. But it’s misunderstood and often misappropriated.

But I’m leaping ahead of myself. First let’s explore the metric.

 

How to calculate Return on Investment (ROI)

If you want to calculate ROI you’ll need to understand both the value of what you’ve invested (in money) and also the the value of what you’ve got back (in money).

Here’s how you calculate ROI:

(gained from investment - cost of investment) / cost of investment

Let’s do a quick worked example:

(gained from investment - cost of investment) / cost of investment

(£1000 - £100) / £100 = ROI of 9

NB sometimes ROI is expressed as a percentage - should you wish to express is as such simply multiply by 100 - in this instance the above example would yield a ROI of 900%.

 

So what are the problems with ROI as a metric?

ROI as a metric is only useful (and indeed should only be used) when looking to understand how cost-effectively various tactics have performed historically.

I strongly dislike talking in the abstract so I’m using an example:

Tactic ROI
PPC 6
SEO 5
Email 50
Social Media 2
 

 

 

 

 

Taking the example above you can see that email is clearly the most cost-effective tactic, generating £50 for every £1 spent.

However, it often doesn’t stop there. Rather than simply looking to see which tactics are most cost-effective there’s often a temptation to use ROI to determine where to invest marketing budget in the future.

That’s where it can get messy.

As soon as you use ROI to determine where to invest you might be in danger of making the assumption that costs scale with success.

In almost all cases this simply isn’t true.

Using the example above let’s imagine that the company invested £10k in email marketing to generate £500k. Lovely.

But does it follow that if they invest £20k next year, they’ll make £1m?

Actually, no - it doesn’t. If you up-scale email activity without due care and attention you might find that instead of making lots more lovely money, you instead annoy your subscribers (perhaps to the extent that they simply unsubscribe). It’s a delicate balancing act.

You’ll find similar issues with other tactics too. Upscaling PPC budgets might not automatically scale either. If you have a very small PPC budget it’s likely that you’re focusing on a core set of very relevant terms, hitting the long tail hard because the clicks are cheaper etc. But that is a limited universe. At some point you’ll have covered all of the cheapest CPC terms and in order to spend more budget at some point you’ll need to go after the more expensive CPC terms. At that point you’ll typically see ROI drop.

The truth is that the vast majority of activities simply do not scale up and retain the same ROI.

 

Furthermore, ROI neatly masks the bigger picture - actual gains. In the example above, email looks like an amazing profit driver. But is that actually the truth? You don’t know. You can’t see that from this metric. All you can see is how cost-effective each tactic is - not how much actual money you’re making.

Of course businesses want to use cost effective marketing tactics, but ultimately they really need to hit their financial targets - i.e. make money.

 

ROI as a metric masks how much actual money has been made

As a business would you rather spend £10 and make £1k (ROI of 100), or spend £100k and make £1m (ROI of 10)?

Sure, spending just £10 and making £1k sounds really great, but if your business makes a total of £1k per year frankly it’s not really a business it’s a hobby - it can’t even keep a roof over your head. At some point (in order to grow from a hobby to an actual business) you’re going to need to accept lower ROI activity.

 

OK so I’ve explored some of the problems with ROI as a metric. Let’s assume you accept the limitations of the metric but nevertheless want (or need) to calculate ROI.

You’ll need to understand both the value of what you’ve invested (in money) and also the the value of what you’ve got back (in money).

 

Calculating this stuff is hard.

Celeste Behind the Abacus

In many directions. First off it might be difficult to determine what you’ve spent on social media... What has it cost you?

Lots of (wo)man hours, perhaps you’re paying an agency, perhaps you’re paying for social seeding - also what about your content? How much does that cost? More (wo)man hours? Another agency? Is it just for social media? Or are there other channels that benefit from the content? How do you split the cost of that content out?

But that’s a cake walk compared to determining what you’ve gained from your investment.

 

Strictly speaking you should only include the monetary value of what this activity has yielded. So perhaps you’ll look at conversions generated directly from social media, or perhaps you’ll look at assisted conversions, or multi-touch attribution.

 

Trouble is, those stats don’t look great

Social media isn’t the best way of increasing revenue; at least not directly. If your primary objective for your social media activity is revenue driven I’d suggest that you’re likely to fail. It’s not that social media can’t lead to revenue. It’s just not the best tool to generate direct revenue.

If it’s direct sales that you want, something like PPC is likely to yield a better ROI.

Why? Well (assuming you’ve set up your PPC campaigns properly) you’re popping your sales messages right in front of consumers who are actively seeking your product or service. Those consumers are in a researching or even buying mindset.

Are those consumers on Twitter, Facebook et al also in a researching or buying mindset? Not so much. I can’t remember the last time I thought to myself - I really need to renew my home insurance - better head on over to Facebook and do that.

And there’s the rub. You are not comparing eggs with eggs. You are comparing consumers in vastly different stages of the purchase funnel. Social Media doesn’t deliver very impressive stats if you’re just looking at these revenue metrics.

We need Social Media to show a more impressive ROI, so what do we do? We start trying to put £ values on some of the other metrics which we’re measuring.

 

And so it all goes to hell...

What is a twitter follower worth? Or a RT? Someone ‘encircling’ you (still sounds creepy) on G+? What about a Facebook like? How do you go about sticking a £ value on that?

 

Mis-calculating what a ‘like’ is worth

Every time some lazy journalist posts nonsense about a Facebook ‘like’ being worth $174.17 I die, a little.

OK, clearly I’m dramatising - but seriously?

The problem is we’re conflating things here.

 

It doesn’t surprise me that consumers who like a brand enough to ‘like’ a brand’s Facebook page would spend more money with said brand. It’s likely they liked the page because they like the brand.

No, I mean really actually like the brand. Not just Facebook ‘liked’ the brand. Aaaarrggghhh this is getting confusing...

 

Let’s try with an example:

Phil really likes cables. Audio cables. Stuff like that. So much so he ‘likes’ the page of his favourite audio cable supplier - Ron’s Really Rather Lovely Audio Cable Shack.

I on the other hand do not like cables. I have never purchased a cable. All the stuff I buy already comes with cables. Why would I want to buy cables? As such, despite seeing that Phil has liked Ron’s Really Rather Lovely Audio Cable Shack I still elect not to ‘like’ said page.

At the end of the year Phil has spent many hundreds of dollars with Ron’s Really Rather Lovely Audio Cable Shack. I have not.

However that’s got nothing to do with Facebook likes - that’s got to do with real world likes.

 

It’s very difficult to place a reliable revenue value on any of these sorts of metrics. Are your Facebook fans spending more with you than non-Facebook fans just because they love you? Or is their engagement on Facebook actually driving more purchases?

Even if you manage to figure this stuff out are you double-counting this stuff? If a Facebook fan buys as a result of a Google organic click are you attributing that sale to Facebook *and* SEO?

 

 

We are in danger of breaking things

breaking-things

Social media is not a sales channel in the traditional sense. You can’t just broadcast your messages and expect to yield sales in return. That’s just not what it’s good for. 

Analysing the efficacy of our activities on social media by looking at metrics like ROI might well push us towards the wrong sorts of activity - i.e. in a bid to increase ROI from the channel you may be tempted to release a relentless swathe of sales messages. But this is likely to turn your audience off and than rather than driving sales up you may find that you’re driving your audience away.

 

So what is Social Media good for?

I think good uses of social media include:
  • Getting people talking about you (and indeed to you) and/or shifting consumer perceptions of your brand
  • Customer service / reputation management
These two very distinct uses of social media require two distinct sets of metrics to analyse success.

 

Getting people talking about you

If you’re engaging in social media because you want to get people talking about you and/or to shift consumer opinion, your ultimate goal ought to be to grow an engaged and relevant following.

As such you should be measuring things which will help you to understand to what degree you’ve succeeded.

’Good’ metrics:

  • Engagement / Advocacy
    • Fans and followers should be tracked over time, but this is a potentially deceptive metric. If people follow you but then never interact with you again then you’ve not built an engaged following.
    • Focus on interactions - retweets / @ mentions / posts / comments. See which content yields the most interactions (and the least) and do more of what works best for your audience.
  • Brand Awareness / Brand Perception
    • If you’re seeking to change brand perception or increase brand awareness you’re going to need to measure it frequently (e.g. once per quarter) to understand if things are moving in the right direction. I’d recommend using a market research agency to do so. However, if this is outside of your budget and you elect to conduct this research in-house then take the time to understand how to properly conduct sound brand awareness / brand perception research - i.e. don’t just poll your Facebook fans to see what they think - you’re in danger of getting a biased picture.
    • You could also benchmark (and then measure) branded traffic (might be tricky thanks to not provided) and direct traffic to your site. However, be careful here. Whilst your activity via social media may well have increased brand awareness and/or improved brand perception so that people are now coming direct to your site, can this solely be attributed to your activity? Or was other activity also being undertaken during this time? If you’re not 100% sure that the change is down to your activity don’t claim 100% of the uplift.
  • PR Value
    • Has your social media activity attracted coverage outside of the social media space? Or has your activity led to other opportunities? E.G. - have you been invited to speak at a conference, contribute to a study, be interviewed, comment on a new story etc? If so you might elect to use a ‘advertising value equivalency’ to try to put a value on the coverage. (NB there are pitfalls here too - but if your organisation understands this metric go ahead and speak their language). Alternatively you could simply record / monitor the coverage.
For what it’s worth I would still also measure both raw visits from social media, plus conversions and assisted conversions. However they should not be the only thing you report on.

 

Customer Service / Reputation Management

If you’re using social media as a customer service channel then I’d argue that ROI is potentially a pretty redundant metric. I think it’s fair to say that most Customer Service departments don’t report on the ROI of their activity.

Instead I would advocate the use of traditional customer service metrics like:

  • Number of queries dealt with
  • Number of queries dealt with without escalation
  • Time to resolution
 

If you also have traditional customer service departments you might elect to use the following formula (this is what the team at Xbox use):

Number of unique customers engaged with Xbox via twitter

(multiplied by)

% of people who say they would have called instead of tweeting

(multiplied by)

Average cost per call

= Money saved in call centre costs

 

Again here, for what it’s worth I’m not sure quite how much I like this metric as I think it still has the potential to be misleading, however if the C-Suite are signed up to it, then by all means use it.

 

I also wanted to make mention of reputation management here. Again, like customer service I don’t think you can accurately hope to measure the ROI of reputation management.

How much might averting a PR disaster be worth to your company? That is very hard to put a figure on. Nevertheless it is important. As such I would monitor and report on all reputation management activity which is undertaken via social media.

 

Let’s round this thing up...

To conclude, when it comes to calculating ROI from Social Media I’m concerned on a couple of counts:
  • ROI as a metric is problematic - whilst is does a good job of telling you 
  • how cost effective one particular tactic is versus another:
    • It masks how much revenue has actually been made
    • There may be a tendency to assume that you can scale up activity and retain the same ROI - but this often isn’t the case
  • Social media doesn’t typically generate fantastic ROI versus other channels.
    • Direct and assisted conversions via social media are typically lower. This is at least in part down to consumers on social networks not necessarily being in the same stage of the purchase funnel as those who are clicking through PPC ads / clicking through organic listings.
  • In an attempt to increase perceived ROI (and justify our existence) we try to put monetary values on things like Twitter followers / Facebook likes etc
    • But our methods for doing so are often flawed and our data is not trustworthy.
 

If you accept that social media is about conversation not broadcast, and also accept that ‘good’ uses of social media look like this:

  • Getting people talking about you (and indeed to you) and/or shifting consumer perceptions of your brand
  • Customer service / reputation management
... Then surely you must also accept that ROI is a woefully poor metric to measure either.

 

Rather than coming up with more fancy ways to calculate the incalculable I think we need to accept that social media just doesn’t deliver great ROI directly.

But that’s OK.

We need to acknowledge that ROI simply isn’t the right metric to use and instead measure things which accurately reflect what we’re actually looking to achieve via social media.

Just because an activity doesn’t have tangible ROI, doesn’t mean that it’s not valuable or useful.

 

And so dear reader, over to you - agree? Disagree? I’d love to hear your thoughts via the comments.

 

Image credits:

Droids, Abacus, Breaking Things

 

Hannah Smith

Hannah Smith

Hannah joined Distilled in September 2010 as a Consultant and is now on the Content Strategy team. Prior to this she spent over 7 years in offline marketing (point of sale, press advertising, direct mail & sponsorship), until her fairy godmother...   read more

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25 Comments

  1. Well I am glad that a consultant has put themselves on the line and actually said, you know what, you might not like it, but measuring social media ROI really isn't that easy after all. Business owners are too used to looking at figures on a spreadsheet and multiplying one number by another and doing some divisions to find ROI - unfortunately social just doesn't work like that. And those home truths are something that I see very few people admitting to clients or to business owners they represent. Its almost like they think they have to justify something that the client will understand, but as they always say, honesty is always the best policy.

    Hannah you talk a lot about engagement/awareness and so forth, so presumably a lot of your reporting to clients is a bit like conventional PR reporting - in that, you're advising the client what dialogue has gone out, which bits got bit, and what impact that had on what we might call 'real-world' business. Are clients typically understanding this or is it still a frustration and hence this blog post which reads a bit like as you put it 'you die a bit inside when someone talks about ROI of social media incorrectly'.

    Fantastic thought provoking piece!

    Best,
    Anthony

    reply >
    • Hannah

      Hey Anthony,

      Thanks for your comment!

      We don’t actually run social media accounts for clients – I feel strongly that they should be run in-house or not tampered with at all.

      However, we advise a on social media strategy for lots of clients and much of the content we create is measured in terms of social traction (shares, engagement etc) in addition to quality and quantity of links built.

      In terms of what I typically report for clients – you’re spot on.

      If I’m reporting on content we’ve created, I’ll report on the metrics I mentioned above and if we’re just creating the strategy I’ll show the client how to report on the metrics mentioned above.

      In terms of where does my frustration come from – well I think it’s fair to say that our clients are on board with what we’re doing and why :)

      My frustration comes because many companies are still trying to figure out what social media is good for, how they can use it to their company’s advantage and how to measure it.

      I think the sort of ‘research’ and indeed the propensity to blindly report on such ‘research’ causes a lot of confusion – that’s what makes me “die, a little”.

      Carelessly putting £ or $ figures on Facebook ‘likes’ is both dangerous and dishonest in my opinion. It’s not actual ROI – it’s just a way to try and justify your existence.

      Plus of course it all stems from the fact that social media just doesn’t deliver great ROI – that’s why people started trying to put £ or $ sums on Facebook ‘likes’ in the first place.

      I guess I’m of the view that honesty is the best policy :)

  2. I have to agree if ROI is the only metric you are looking at (especially for the reinvestment of marketing budget) that it should not be used in isolation. That said I can't say I've ever seen ROI reported in a table without revenue figures alongside it... ;)

    ROI is a much better, grown up metric than most agencies/brands are using to measure their Social Media activity though. I mean the cost-saving of using Social Media in R&D, Customer Service, Recruitment or Biz Intelligence is potentially HUGE, in which case ROI is worth reporting on, no?

    Of course for most brands it is still important to measure non-financial outcomes like web-traffic or email subscribes which then add people in the top of the funnel, hopefully adding to the overall ROI later. But these projections can be predicted based on current behaviours.

    Guess the problem is not that ROI is a bad metric (presuming you are allowing more than 1 metric), it's that most companies still set bad goals for SM and companies should use SM in the way which will add value to their business (and hopefully their customers or prospective candidates etc).

    reply >
    • Hannah

      Hey Charlie,

      I totally take your point re reporting on the potential cost savings companies can make outside of customer service via social media and would concur that those should definitely be reported on :)

      My main issue with ROI as a metric is that most companies set unrealistic goals for actual revenue generated via social media - when really it's just not what the channel exists for.

      Thanks for commenting,

      Hannah

  3. Simon Cooper

    Interesting and well written article.

    I notice you stayed clear (intentionally or otherwise) on the topic of attribution here. I know it can warrant an article all to itself, but these things do not operate in a silo. When looking at what channels to invest in next year, ROI is actually a pretty decent yardstick, if you feel it then falls down when coming to social media, is that because you're not attributing conversions properly? Of course social media will never perform like a full DR channel and if measured by ROI on it's own, it will look awful, hence the need to shift over to a different metric to justify further activity. But, if you add social media into your attribution model, you will undoubtedly see that is plays a much bigger role in the conversion cycle than people realise.

    Like you say, simply pumping in more funds into a channel because it has a good ROI today is very unlikely going to give you the same return for further investment, so add to this the ability to then forecast Marginal ROI per channel, and you should have a pretty informed picture of where to place your bets.

    reply >
    • Hannah

      Hey Simon,

      Like you say - attribution modelling is definitely worthy of it's own post. For what it's worth I am a believer in making sure you're attributing all channels appropriately, however even if you have (in my experience at least) whilst Social undoubtedly contributes it still doesn't stack up well in terms of ROI versus other channels :)

      Thanks for your comment!
      Hannah

    • Dean Rowe

      Great article, and great point Simon.

      I understand the point of the article and agree for the most part, but it feels like we're revisiting a similar situation to one we had 10 years ago... companies used to plough money into websites and accepted they lost money (but felt they needed to have a website). Over time company's expectations gradually shifted, websites were expected to show value, then break even, and now they are expected to make a profit. I think Social is at the beginning of this journey, but undoubtedly the outcome will be the same.

      If Social is undertaken for Customer Service reasons then that's an easy measure of value in itself (customer satisfaction surveys etc). Excluding this, if any business activity, Social or otherwise, isn't going to make a profit then why do it at all? Showing how Social contributes value is difficult, but its not impossible and HAS to happen eventually. Not many companies will put money into something blindly and continue to do it forever. It's a great article Hannah, but I don't think Social ROI is going to go away anytime soon - Social teams need to improve their analytics systems and prove their ROI.

      Attribution Modelling is definitely going to be a key tool for Social - if you're able to layer in impressions as well as visits (to show potential Social impacts on branded search & direct traffic) then that's even better. Media teams running Display Banner activity (high impressions, low clicks) are in the same boat, e.g. if we run Banner Ads that have 30m impressions in April, what impact does this have on direct & branded search traffic.

      Thanks

      D

    • Hannah

      Hi Dean,

      I think there's a fundamental difference between what I'm talking about here and the whether or not to have a website debate that businesses were having when the when the web was in it's infancy.

      That debate was about whether or not people would actually spend money online.

      But this is very different. Of course people spend money online. However, consumers are in vastly different mindsets when they're on social media sites. Fundamentally they don't go to these sites to spend money. They go to these sites to interact with their friends, share stuff etc.

      I don't believe that the way in which people use social media sites is likely to change to the extent that their mindset changes. As such, ROI from social will never stack up very well versus direct response channels.

      I'm arguing for stepping away from ROI because it's a poor metric.

      However I'm in no way suggesting that social doesn't deliver 'value'. I've suggested several metrics which I think more accurately reflect what we’re actually looking to achieve via social media.

      You ask if social doesn't deliver profit then why do it?

      Plenty of businesses do plenty of things which don't deliver direct profit.

      Customer services departments do not deliver direct profit, but are nevertheless valuable.

      PR activity doesn't typically deliver direct profit but is valuable.

      Why do social media departments 'need' to prove their ROI, when customer service departments don't?

      For what it's worth I do advocate attribution modelling. But it should be done honestly. You talk about Media teams running Display Ads needing to prove their worth - that's what view-through-conversions is all about, right?

      From Google:
      "Measure the success of your display ad campaigns by using the View-through Conversions feature on AdWords. View-through Conversions are what happens when a customer sees an ad, and then later completes a conversion on your site. Google allows you to track View-through Conversions, providing insight into the holistic value of your display campaigns."

      For my money this is the most dishonest metric I've ever clapped eyes on.

      An 'impression' is not the same thing as a consumer actually 'seeing' an ad. It just means they were on the page that an ad was displayed on. Banner blindness anyone?

      That metric exists purely to make Display advertising look more effective than it actually is. It's dishonest and it's unreliable data.

    • Dean Rowe

      Thanks for the reply Hannah. Irrespective of whether I agree with your opinion, I appreciate you taking the time to reply. Replying to all the comments as you have done is certainly very classy :)
      I think there's some confusion, I've never said that ROI should be determined on a Direct response basis. I agree this isn't suitable to Social for all the reasons you've stated. My point is that a measure of ROI should still be a goal.

      99% businesses aim to make money, no business will undertake activity if they don't think it will somehow benefit the bottom line. I've seen enough of your SearchLove/LinkLove presentations to understand that you don't create content on subjects that aren't interesting or current. The fact that you've even written this article shows that business owners are asking Social teams for ROI data and this is a common problem. I was trying to say that business owners have been writing cheques based on faith but they might be getting itchy for some hard proof in a similar way to companies 10 years ago when they wanted to see their websites perform (not all websites 10yrs ago had to demonstrate a ROI). Websites 10yrs ago was probably a bad example, but the point was that I think Social needs to find a way of proving ROI (in some empirical shape or form) rather than avoiding it because its difficult (its not impossible). If the message of the post was "don't judge social on last click ROI" I'd agree with you 100%.

      On customer services - 10yrs ago Tesco analysed their data and found that a shopper who performed their monthly shop and had zero problems were 93% likely to come back again next month. If a customer had a problem and it was resolved by customer services they were 98% likely to come back again. They learned that by investing more money into customer services training they'd increase the % of resolved problems, increasing loyalty, return visits and revenue. They could even estimate ROI in advance. They did increase money in Customer Services and their data showed a calculable ROI.

      On impressions, the same applies to Social Reach - just because something was shown in a user feed, it doesn't mean it was seen. Interactions are more solid and preferable but I wouldn't discount impressions (but it does need caveating).

      Knowing that social costs are increasing (FB have shareholders they are accountable to now) I'd be nervous about taking a position of "don't judge social on ROI" and would spend time trying to find a way. Where Social differs to PR, TV campaigns, Print Ads is that if there are any cross-over data points in digital (user emails given at checkout vs social media user data) then there's normally methods of determining value and a form of ROI, direct, linear, first or otherwise. Again, I agree with the majority of a well written article, I just wanted to add that "I think" businesses will eventually become more and more vocal and expect to see a form of ROI.

      Than... [continued below]

    • Dean Rowe

      [continued from above] ...ks again for taking the time to reply Hannah

    • Hannah

      Hey Dean,

      I think I misunderstood what you were saying earlier.

      I'd agree that some form of ROI measurement (albeit one not wholly focused on direct response) is totally necessary.

      It occurs to me we're potentially arguing about semantics here :)

      Thanks again for coming back to comment,

      Hannah

  4. Amen and couldn't agree more - great post taking a balanced and objective view over what many of us must have long felt in our gut, that to attempt to measure the ROI of social media is, in most instances, to entirely miss the point.

    I work in B2B marketing where social media is viewed with a good deal of suspicion. I always push the point that, like all marketing, it's about having very clear strategic objectives first, and then setting appropriate tactics which may or may not be best served by using social media channels.

    Simply shoving a load of content out through Twitter and hoping that it will magically generate sales is pretty naive, but sadly a lot of businesses seem to still be stuck in that mindset.

    reply >
  5. Hi Hannah,

    Thanks for the reply.

    Not sure I agree on the point about SM accounts being managed exclusively in-house or left alone, I mean that probably works for big corporates, but when you are one person or just a very small team and SM isn't a massive part of your funnel, time can be a tie. I suppose you could argue why bother doing it if you can't dedicate time to it and that's fair to say, but I think for many they see the value but just aren't sure how to extract it, hence lots of articles like the one you've written here.

    Interesting insights from your agency side, thanks for sharing those, and yes, I agree on the points around why people (and continue to) throw advertising £$ toward simple things they can measure such as likes and shares yet lack the fundamental understanding of what these actually mean to them as a business. I like the analogy of proving ones existence, I may steal that one :)

    Thanks
    Anthony

    reply >
  6. I think a lot of social media goals are either "Get more followers" or "Get x% of revenue from social". People usually jump from one to the other with no real clue about how they are going to get there. I agree, I think if your goal for social media is to generate amazing direct ROI (measured as you've described above), it's never going to look like an attractive solution.

    I'm always interested in how social media can influence your funnel to become more successful. You've said it above, social can influence the success your content will have in terms of both attracting people towards your content and helping to create engagement around your brand. If your social reach is growing over time and you're able to attract more people towards your content, it's a good indicator your funnel is going to be more profitable over time.

    Social can also improve conversion metrics across the different stages in your funnel e.g. adding positive tweets beside call to actions, adding tweets to key landing pages where you want people to take the next step. In this way social can influence your conversion rates, again, a good indicator of long term success.

    I think people should look out how social can influence their funnel in positive ways rather than measuring social via direct ROI. If you think about it, the two core goals of most marketing functions (content, social, CRO) are to increase sales or reduce business costs. We can do a lot of things that help influence these long term goals. It's often worth trying to figure out those indicators which show we are moving in the right direction. This can be a lot better than measuring everything by direct ROI.

    In the end, a lot of this comes down to being able to set the right goals. All goals don't need to be measured by £, they can instead be measured using metrics that show we are moving towards those longer term goals we have (more sales)

    Thanks for the post Hannah

    reply >
    • Hannah

      Totally agree with you re social being a positive influence on the sales funnel rather than necessarily driving ROI directly :)

      Thanks for your comment Kieran!

  7. Interesting article. It also says a lot about how you should use social media. Twitter's ROI is difficult to track because it has so many functions and should be used as such. Social media is useful in building a community for your target market - not for straight sales. That's why something like 1 in every 4 tweets should be direct advertisements. That's only 25% of your content. If you're expecting a giant increase in sales with that, you won't be happy with the result.

    That said, its interesting to look at what you do use social media for and create more relevant metrics based off that. Sure, ROI can be one of them - but you should also include engagement metrics and customer service metrics.

    reply >
    • Hannah

      Hey Michael,

      For what it's worth I think that 1 in 4 messages being direct advertisements sounds really high - that's not based on anything other than gut feel. I would be worried about losing my audience if I was pushing sales messages towards them that frequently.

      I'm guessing you've tested this and have seen good results? I'd love to hear more :)

      Thanks,
      Hannah

  8. Ezra Fishman

    Fantastic article Hannah. I've shared it with everyone here at Wistia. You bring up a great question that doesn't get asked enough - why are we using Social Media in the first place? I'd love to hear even more of your thoughts on strategies that have worked -- especially with examples if you've got them. Great post!

    reply >
  9. Hello Hannah,

    The only word that comes to mind right now is: AMEN!

    How many times have I argued with self-proclaimed social media gurus who kept telling me that I did not understand anything about social media!

    I understand the need to measure results, but at the end of the day, if all you do is put a dollar sign on your audience, you will go nowhere.

    I'm going to share this article widely. Thank you!

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  10. Great article Hannah, excellent work. I read an interesting eBook today titled "6 metrics your boss actually cares about" by HubSpot. While it doesn't provide metrics specifically for social media, it does provide useful measurements for marketing spend (which can include social media costs). I thought some people on this thread may find value in it.

    P.S. I don't work for HubSpot, just wanted to share some related info. Keep up the good work!

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  11. Thanks for this article Hannah. IMO, SEO and SEM have the best ROI when you compare it to SM... which probably ruffles the feathers of those pro-social media. Social media is great for customer service and customer engagement and can be used a strategy for retention mainly... although of course it does has its use in customer acquisition.

    I was actually talking with a business friend who isn't in the marketing field what social media is actually good for so it was apt that I found this article in my RSS feed! I will probably send it to him later, but I digress. Apparently the reason why he had asked is because he attends a networking group and one of the attendees owns a large online marketing company in my city. He was saying that the average calculation of ROI for social media is quite low and gave a rather low figure for it, so my friend was wondering why people keep talking about it. I said that it's probably because it's way easier to understand compared to talking about links, content marketing, ads, etc. It's sexy because everyone knows how to use Facebook etc.

    In terms of allowing businesses to maintain their own social media accounts, I think it actually depends. According to my friend who owns a social media agency, a lot of businesses let their admin staff handle Facebook and it's really obvious when they are because e.g. the vanity URL isn't claimed. Also many small businesses have been burned by their staff members when they leave and they don't have access to it any more, so her main selling point is that if her agency looks after it, they don't have to worry about staff members stuffing up their social media campaigns and so forth.

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  12. An amen from me also. Perhaps some organisations could help their justifications, procrastinations by calculating the cost of NOT applying Social Media. Social Media is a game changing scenario - the rules for engagement and marketing have changed - FOREVER. Marketing companies need to generate new models for responding to the PULL request for info and nor just rely on their historic PUSH message. And companies will need to re-shape their corporate culture to manage their 'communities' better to improve business peformance.

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