Where’s the ROI for social media?

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Discussion
Aug 01, 2014

Through a special arrangement, presented here for discussion is a summary of a current article from Tenser’s Tirades blog and the Shopper Technology Institute.

An Instant Poll that recently appeared on the home page of CPGmatters.com sheds some light on an important part of social media evaluation; namely, ROI.

Every CPG company of consequence has a social media strategy nowadays. So do marketers think social media is a success?

Not really, say nearly nine of ten executives who took part in the poll. Only 12 percent say that social media is a success in CPG. Three of four respondents say concern over ROI is holding back success:

  • There is not enough ROI so far to be a success (19 percent);
  • It is very difficult to measure ROI at this time (56 percent);
  • It’s too early to determine the success of social media in CPG (12 percent).

I concur especially with the largest group of poll respondents (56 percent) who say ROI measurement is the top present challenge for social media marketing programs. Know-how and methodology are simply lacking.

Others may be confusing counting likes and re-tweets with something that can be a reliable proxy for conversions. Sentiment analysis goes to brand reputation, not necessarily to resultant sales. And of course, heavy posters are outliers, heavily involved with the product for a variety of reasons.

Brands make a large commitment to monitor social media content and respond diligently. They may have little choice since silence is poison in this context. Still, fine control is unlikely since many opinions are set before they are posted, and defending too vigorously may appear like consciousness of guilt.

It’s a new era with new consumer expectations, and transparency seems to be highly valued. Brands that try to use social media to mount campaigns to drive measurable sales are likely to be disappointed. It’s too difficult to sort out the influences on any given conversion.

On balance, social media must be regarded today as a marketing and branding cost, not a driver of sales. That’s OK, I think, since marketing costs have long been justifiable based on their ability to generate awareness, communicate brand values, and build brand health. The days when an ad or promotion campaign could be reliably linked to a sales bump may be over. But that’s true more or less in all media, so it’s no disgrace that very new channels like social and mobile are hard to sort out. Better methods will come, and pretty quick, I’ll bet.

How tough is ROI determination for social media? What promising approaches are there? Can conversions be reliably linked to social media promotions?

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14 Comments on "Where’s the ROI for social media?"

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Zel Bianco
BrainTrust

In a famous ad for McGraw-Hill magazines, a rather grumpy businessman sits, hands folded in his lap, squinting at the reader with a defiant expression. The ad copy reads:

I don’t know who you are.
I don’t know your company.
I don’t know your company’s product.
I don’t know what your company stands for.
I don’t know your company’s customers.
I don’t know your company’s record.
I don’t know your company’s reputation.
Now what was it you wanted to sell me?

Social media is the new advertising/PR/marketing landscape and, unfortunately, cannot be ignored. Does social media translate into converting a prospect to a sale? I wish. It is a slow and sometime painful process and does not happen overnight. Just like print used to be, frequency leads to awareness.

You could not expect to run an ad once and gain awareness. You can’t expect social media to do so either. I really wish it was more immediate, but the experts tell me I am being quite unrealistic.

Chris Petersen, PhD.
BrainTrust

I agree with Jame Tensor—measuring social media is extremely difficult!

Our company has been involved in measuring results outcomes in retail for the past three decades. Measuring ROI requires the ability to first measure incremental sales. While it is sometimes a challenge to measure marketing events like ads or promotions, there is usually a way to measure results based upon sales uplift using comparable weeks, and adjusting for seasonality factors.

While social media is a key part of the omni-channel journey, it seems to be much more about informal research and idea gathering, and less about making the actual purchase. If retailers start tying specific discounts and coupons to specific social media, then sale results and ROI could become much more measurable as in traditional print media.

Social media is not unlike creating brand and product awareness by advertising in journals and magazines, which are also very difficult to measure in terms of ROI. As Tensor so aptly summarizes: “it’s no disgrace that very new channels [of media] like social and mobile are hard to sort out.”

Social media is just that; another medium for brand communication and connection, and not necessarily the new salvation for sales conversion.

Max Goldberg
BrainTrust

Social media encompasses many areas. It can be in-bound or out-bound. It can include paid placements and dialogues. If Mr. Tenser and the CPG Matters study are referring to consumer comments, they are right: ROI probably cannot be measured.

On the other hand, social promotions (those done through social media outlets, like Facebook and Twitter) can easily be measured, using traditional techniques.

Social media participation is a cost of doing business these days. Retailers and manufacturers avoid participating at their own peril. Consumers expect that their posts and comments will generate prompt feedback. This is all part of consumer dialogue. And as with any dialogue, there can be positive and negative results. It’s far better to err on the side of having a dialogue, rather than choosing not to participate.

Ian Percy
BrainTrust
This is one of those articles where I find myself saying to the screen, “Please, go on!” James, a follow-up based on what you read in these comments please. As one who is currently fashioning a marketing strategy for a technology product no one has heard of and a few doubt is even possible, I find working an ROI into the equation is quite the challenge. Especially where it relates to the social media part. Many of my speaker colleagues brag about their “likes,” “friends” and “re-tweets” but if no one is actually dancing with you you’re as alone as the 11 people in the world who aren’t even on Facebook. Bragging about the length of your blog list isn’t much better. Out of over 25 blogs I get—because I’m too cowardly to unsubscribe—I glance at maybe two of them. James says to chalk it all up as a marketing and branding cost. But why do it at all, other than that it’s “the thing everyone else is doing?” So of the three questions given to us, I can answer only the first about how tough it is to measure ROI; it’s really tough. Those who can answer the other… Read more »
Ed Dunn
Guest
Ed Dunn
1 year 11 months ago

At the end of the day, social media owns the user and the user experience. External marketers are nothing more than table vendors in a social media network. I believe there needs to be another way for marketers/external firms to own the experience in social media, even if it includes building standalone social media.

Naomi K. Shapiro
Guest
Naomi K. Shapiro
1 year 11 months ago

I think the poll results are very telling. The question was: “What dimension of social media should be most diligently evaluated by brands today?” Answer choices were: visits, likes, consumer sentiment, conversions linked to promos. When I voted, all of the answers so far (including mine), were 100 percent “not sure/no opinion.” How-oh-how are we going to measure this? When I was a PR practitioner, we were always asked how we measured ROI, and we were never sure. Another marketing tool we’d use when someone contacted us was to ask: “Where did you learn about us?” Even then, people weren’t sure, and today, with the multiple channels of communication and response, they know even less about how and where they heard of the product and why they acted on it. Finally, there was the old saw: “I know that half of my advertising is working, I just don’t know which half.” P.S. I like what my colleagues wrote above.

Bill Bittner
Guest
Bill Bittner
1 year 11 months ago
Managing social media is similar to fighting terrorism. It only takes one “viral” misstatement or bombshell to undo months or years of preparation. The fundamental point is that it cannot be managed and that instead of trying, companies should adopt a “This is who we are campaign” then perform “drone strikes” when necessary. We used to see a lot more strategic advertising invested to support brand images. The old DuPont “Better Living Through Chemistry” is the one that always pops into my head. This is one role for social media in the sense that a company sponsored social network gives customers a single source for the company’s perspective and a way to provide feedback when necessary. A well-run brand network will reach consumers with a strategic objective and reinforce their decisions to use the products. When the unexpected happens, it allows the brand message to be fairly presented. On the other hand, there is the tactical issue of the Facebook and Twitter “Improvised Explosive Devices” that get lobbed into the public arena. When these IEDs go viral they can undermine all the good work that has been done to win the hearts and minds of the consumer. When you think… Read more »
Ralph Jacobson
BrainTrust

I would challenge the statement, “Every CPG company of consequence has a social media strategy,” since I was told by the global CIO of a well-known multinational CPG brand that they “have no social strategy” even though their social channel presence is virtually unmatched except by the most prominent celebrities. So, the first step is to define what your social strategy is. That is no small task in itself and should not be assumed to exist already.

After defining the strategy, the next step that is most often ignored is the effective execution of that strategy. Once the execution is consistent and staffed properly commensurate to the social activity level, then the organization can leverage several great technologies available today in the marketplace that make social business ROI very tangible. Social Media Analytics, for example is a capability that can identify the efforts that are paying off for your strategy. That is just one tool of several.

Can social campaigns be linked to revenue increases? Yes! However, this needs to be done with sophisticated tools and consistent prioritization in the organization.

Lee Kent
BrainTrust

Social media is simply “the conversation” and who measures ROI in a conversation? Thank goodness the cost to play is low, but it is invaluable to be in “the conversation.”

More often than not, unless you are running promotions in “the conversation,” retailers are buying currency from consumers. Like, being there when the consumer has a question. Currency? Their loyalty maybe. Showing your product in use. Currency? Their attention. Crowd sourcing ideas. Currency? Their interaction. Get the picture?

For those retailers running regular marketing campaigns in “the conversation,” there are measures, but I suggest that those retailers who think this is what social media is all about aren’t listening!

And that’s my 2 cents! Happy Friday!

James Tenser
BrainTrust

Very thoughtful feedback here, as I have come to expect from my BrainTrust colleagues.

Monitoring social media activity seems like an unavoidable necessity for any brand. Sorting out its impact from the growing spectrum of influences upon the path to purchase is a challenge that only intensifies as complexity mounts. Putting dollar figures on the results remains an elusive goal.

I imagine we’ll soon see some type of syndicated data or third-party indices emerging for sentiment analysis and social frequency. And must concur with Max regarding our ability to measure promotional lift regardless of where the offers are communicated.

With many alternatives available, some pretty fundamental questions remain open. Comparing costs and benefits is one of the toughest.

Shep Hyken
BrainTrust

ROI on social media is said to be tough to measure. However, there are certain analytics that are easier to track. Old style tracking of coupon codes can be updated by pushing customers to certain landing pages and then tracking conversion. You can also track spikes in sales when you post certain blogs. You can track click-throughs.

We all hear about how companies exploited social media and are successful. They are our role models, so find them, learn from them and implement what works for you.

douglas haase
Guest
douglas haase
1 year 11 months ago

When marketers start to build integrated programs that build success across sales, logistics, building customer partnerships, and strengthening all touch points of people, then ROI can be measured. No one wants to build or work a promotion or plan through. Programs aren’t build to grow total share of Universe, but to cut and slice a pie that is in denial of share growth. I call those who feel overwhelmed and make excuses for not building these kinds of plans “Dr. No.” Bond’s first villain is now the very villain that has killed work ethic at retail, and pushed marketing into an awards club vs victory/excellence at retail.

Herb Sorensen
BrainTrust
The bottom line is that TV is STILL probably the best media buy, for several reasons. First, no true media company sells a delivery of sales. Media companies deliver YOUR advertising to an audience, of a measurable size and exposure time. It’s insane for a media company to talk about delivering sales, since they don’t control the advertising you put on their media. However, it sounds good to rube buyers that such-and-such media is delivering sales! OK, if you have an audience of a billion, whatever advertising you put up MUST be effective? Not at all, but the tech companies that are selling can talk a good story. The reason this works for the tech companies—and buyers are certainly not all rubes (my apologies!)—is that there are literally hundreds of billions of dollars parked in corporate cash accounts, most of such corporations hoping to use at least some of that cash to grow. The two ways to do that are typically to invest in R&D and the other in marketing and sales. All of these are fraught enterprises. As the department store magnate, John Wanamaker, famously said, “Half of my advertising money is wasted. Unfortunately, I don’t know which half!”… Read more »
Dan Frechtling
BrainTrust

To peg a return on social media you need to separate the “media” from “social.”

Social media management in the classic sense is squishy. Maintaining profiles, posting comments, and responding to reviews are difficult to measure because both cost allocations and sales response are elusive.

On the other hand, media advertising on social networks is much more straightforward. The audience size and targeting capabilities on Facebook, for example, make display ads a measurable proposition.

A study of 100 retailers by Nanigans found their ads averaged 152% ROI. News feed placements had 28X higher CTR versus ads on the right side. Yet ROI was a surprising 15 percent lower. See more here.

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