The Riddle of Measuring Social Media’s ROI

Apr 25, 2011
Tom Ryan

The marketing community appears flummoxed over the challenge of
measuring ROI around social media efforts, especially since most exchanges
directly linked to an actual purchase.

Beyond counting tweets and Facebook
fans tied to URL visits, the task involves determining the brand value of each
communication — some highly positive, some highly negative and most somewhere
in-between. Communications are also spreading well-beyond marketing and customer-service
reps. According to an article in The
Wall Street Journal,
"social media brings a host of new problems,
such as how to measure communications and keep employees on message — and
in legal compliance."

But like many other articles on the subject, the Journal’s wound
up touting the value of trying to measure social media campaigns.

"If a company is going to engage in social media, they have to listen
and understand the nature of the conversation, the volume and the topics
being discussed," Susan
Etlinger, at Altimeter Group, told the Journal.

Writing in,
David Berkowitz, senior director of emerging media & innovation for digital
marketing agency 360i, came up with 100
Ways To Measure Social Media
. His first five: 

  1. Volume of consumer-created buzz for a brand based on number of posts;
  2. Amount of buzz based on number of impressions; 
  3. Shift in buzz over time; 
  4. Buzz by time of day/daypart;
  5. Seasonality of buzz.

A study by ForeSee Results also favorably found that 18 percent of website
visitors indicated that social media content — such as a Tweet or a friend’s
comment on Facebook — prompted a visit to a URL, although less than one percent
of website visits came directly from a link on a social media page.

"We ask people,
‘What influenced your visit to this website?’ and then we give them a list
of choices. We ask about primary, secondary, and tertiary influences so we
are able to get a good sense of what kinds of marketing activities have the
most impact. If someone ‘likes’ Best Buy on Facebook and sees
that there is a sale on TVs and then types into their browser
and clicks through a Google ad, Best Buy will register that as an SEO win rather
than a social media win," Larry Freed, CEO of ForeSee, told Information

He adds, "We feel it’s very important to have behavioral data — like
where they came from — in addition to attitudinal data — what influenced
them, what satisfies them, etc."

Dexter Bustarde, senior web analyst at Digitaria,
told that
he sees social media measurement evolving into more distinct practices.

"Depending on who you ask, social media measurement could mean anything
from PR and reputation management to Twitter reports to broad ‘engagement’
measurement to looking at Facebook Insights day to day," said Mr. Bustarde. "In
truth, all of those things should inform a social media measurement program,
but at the same time, if we’re talking standardization, it’s a
lot of work to get it all under one umbrella."

Discussion Questions: How should ROI around social media be measured? How important is measuring ROI for brands or retailer’s social media efforts?

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19 Comments on "The Riddle of Measuring Social Media’s ROI"

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Paula Rosenblum
10 years 13 days ago

This is such an interesting debate. Mass marketing essentially has suffered from the same problem forever.

* How does Pepsi measure the ROI of a Superbowl commercial?
* How does Adidas measure the ROI of sponsoring a tennis tournament?
* How do all those auto parts companies and beer companies measure the ROI of being plastered on race car and drivers’ uniforms?
* How does anyone measure the ROI of a billboard?

Is it not clearly all about brand awareness and “stickiness”? I don’t think even until this day that international and national brands have their arms around the ROI of this kind of marketing. I don’t think it’s reasonable to expect anything more from Social Media. If the ad or communication carries a promotion, then it’s easy enough. But on a day-to-day basis…not so much.

Max Goldberg
10 years 13 days ago

Companies should always be looking for a return on investment from their media expenditures. TV and print are easy; social media is not. As the article points out, success in social media is frequently defined by the agency that is trying to sell their services, rather than by some universal norms.

Social media success should be defined within the overall context of a campaign. Did it move the needle and create sales? How did it perform against similar campaigns run by your company or competitors?

At this point trying to measure social media is more art than science.

Dick Seesel
10 years 13 days ago

It’s feasible to gauge the ROI of social-networking efforts, not necessarily in terms of spending as a percentage of sales but by looking at other measurable attributes. For example, what sort of top-of-mind awareness exists among the “networking” target customer? What sorts of brand associations, and are they positive or negative? And, most importantly, what sort of “conversion rate” among the target audience using social networking, to see whether they move from being part of a community to part of an active customer base? It’s harder to quantify the outcome vs. traditional means of advertising your product or service, but critically important as younger consumers migrate to this type of marketing message.

Paul R. Schottmiller
Paul R. Schottmiller
10 years 13 days ago

The definition of “social media” is still varied and is heavily inter-related with traditional areas/metrics (i.e. marketing, promotions, customer service, associate productivity, etc).

Given the lack of clear definition, coupled with the rapid pace of innovation, it seems wisest to focus on specific use cases/metrics rather than getting caught or slowed down with the macro definitions and measurements.

A social media strategy is important, however, it needs to reflect the need for rapid innovation and position the retailer to lead, match, or follow as desired.

Gordon Arnold
10 years 13 days ago

Demographic information is the key to successful advertising through social media systems. Simply ask yourself if you want this audience to know about your company and the product or services you provide. Observing and mimicking successful communication methods through a specific media is a somewhat safe means that will provide fewer results as the plan of attack gets more and more crowded, to the point of information overload. Working with the media companies to see what new marketing opportunities exist for exploration is the means used by those who have achieved success. These are a few words for a great deal of work. And that is what is needed in any new venture. A lot of hard work from highly trained, open minded professionals.

Gene Hoffman
Gene Hoffman
10 years 13 days ago

I sent my website into a food store
To measure Social Media’s ROI.
It developed so much Berkowitz buzz,
I watched traditional retailers cry.

Social Media may be changing all of us
Making us want to measure everything.
Yet Marketing is flummoxed by its elusiveness
It’s now the mainstream of this spring’s fling.

Dan Frechtling
10 years 13 days ago
Extending Paul’s point a bit, asking about ROI of social media questions the medium itself. While that’s an interesting philosophical debate, most marketers make decisions based on individual campaigns. Rather than asking, “how does print perform?” marketers more often care about how a newspaper coupon, yellow pages program, or magazine PR program performed. Social media tends to fall into a few common categories based on objective, not all of them revenue:– Monitoring buzz content (quality, quantity)– Increasing social engagement (friends, comments, virality)– Improving customer support (cost, speed)– Extending other marketing (TV, search rankings)– Driving revenue (visits, leads, purchases, LTV) What you measure depends on what the objective was. Did campaign A achieve our goals? Did it work better than campaign B? Over time, the performance of campaigns will collectively tell us if a medium is performing better than another. Because social media is new, we invest more time on existential questions. That’s important for resource discussions (should I have 8 people devoted to social media?). But different campaigns with different objectives tell us more valuable… Read more »
Gene Detroyer
10 years 13 days ago

Measuring any kind of media is difficult. There is a pretense however, that traditional media has been measurable.

Well, it has, but on no measure that counts. Advertising is for sales and those who make money on media sales avoid the issue of product sales at all costs.

What is ironic is that new media is held to a higher measurement standard than traditional media.

Ultimately, spending to create sales (advertising) has only one acceptable measure and that is sales. Fortunately, social media, more than any other, because of its data base and connections, has the best chance of doing it. How many people who are touched by a social media message buy the product? After we get finished measuring the “buzz” maybe we will focus on that issue.

Doug Stephens
Doug Stephens
10 years 13 days ago

I teach a session on social media measurement and the answer is frustratingly simple. Social marketing ROI should be measured like any other investment. In dollars. Sales and profit either increase or they don’t. You don’t pay annual bonuses with Twitter follows and there’s no shareholder dividend paid in Facebook “likes.”

The trick is in measuring properly so you can properly identify cause and effect relationships.

Joel Rubinson
10 years 13 days ago

I am building a tool that measures this. Here’s the trick. The media world is starting to differentiate paid, owned, and earned media but I suggest a different way of thinking. Separate “impressions” from “time with brand.” You will find that social media is not so much about engagement when you do this, it is more about quick impressions. Time with brand comes more from owned media. Expressed another way, do not sub-contract your micro-site strategy to Facebook!

Peter Fader
10 years 13 days ago

We are still very far from a reliable ROI measurement tool. Until we can get data on media exposure, social media activities, and purchasing behavior all linked to a specific individual, we should stop lying to ourselves (and our clients) that we can measure ROI. (And even then, the statistical methods will require a lot of polishing to be able to sort out the various factors.)

It would be great if we could agree on a moratorium not to mention those three letters until we’re in a better position to really begin the task.

Cathy Hotka
10 years 13 days ago

There are many investments companies make that don’t carry clear ROI. What’s the ROI on that Coke machine in store break rooms? Carpet in the stores? Another BI package?

A presence in social media is expected now, but it’s probably not productive to try to quantify the results.

Jonathan Marek
10 years 13 days ago

Gene’s point is exactly right: “Advertising is for sales and those who make money on media sales avoid the issue of product sales at all costs. What is ironic is that new media is held to a higher measurement standard than traditional media.”

The problem isn’t the latter, it’s the former. All major marketing spend should be held to the standard of driving incremental sales. It can be done, but not so long as the agency fox is guarding the hen house.

Doug Stephens
Doug Stephens
10 years 13 days ago

Tom… just as a side note. I always find it curious that companies are so obsessed with determining the ROI on social marketing when the vast majority of conventional media is never accurately measured. For example, 14% of television ads are accurately measured for ROI. 42% of email marketers don’t know what their return is. The truth is, we don’t know if most of the marketing we’re doing is really generating an ROI or not.

It’s odd how we feel social marketing should rise to some unique standard.

I actually asked at one point if there was as much discussion about the ROI on the telephone when it was first mainstreamed and one of my Twitter followers sent me some adds from 1910 trying to sell people on the idea that the phone was a good investment.

My guess is that in a few years, our obsession with the ROI on social media will fade, just as we now take our cell phones for granted.

Matthew Keylock
Matthew Keylock
10 years 13 days ago

I agree with the recent comments from Gene D, Doug, Peter and others…(won’t list everyone).

There are lots of movements afoot that are beginning to connect the granualar media exposure data with the granular shopping behavior data to get us closer to revealing the sales impact of media. For instance, we have been working with comScore to look at this for online media in the CPG world for a couple of years now. The momentum is gathering and the ability to do this across other media is improving.

This is an exciting space! Maybe soon we’ll know which half of the advertising dollars work?

Mark Burr
10 years 13 days ago
The question I have is, are the forms of ‘measurement’ of previously existing levels of medium effective? Or, or are we satisfied with their effective failure rate? Is the need or desire to measure the effectiveness of social media being driven by the fact that it is new? Or, is it being driven by the older forms of media trying to keep you from cutting the pie of marketing one slice more to include it in the overall budgeting plan? It seems to me that it’s quite simple. It’s simply a new medium to both market and advertise that has no more or less measurable results than any other. The others simply have effective failure rates and we’re comfortable with them. Social media is another form of noise and another form of delivering it. If it’s seen as a valuable medium for delivering noise about your brand or about your offering, is it possible to use it more or less effectively? So what’s the right noise? What’s the right level of noise before it becomes… Read more »
Ralph Jacobson
10 years 13 days ago

Here’s the good news: Social media is free or very inexpensive, typically, compared to other marketing/advertising vehicles. One of the keys is to assess brand sentiment. That is difficult to do, however there are great tools available now to get a very tangible grip on consumer sentiment about a brand. Sentiment can be measured and the movement of that sentiment can be driven by social media efforts. Have specific sales been triggered by social media leads? Absolutely. Dell and a bunch of other merchants can attest to that. The trick is to convert what the successful media “brands” are doing into something usable for your own organization. It’s simple, but not always easy. Check out the technology available for this stuff. Some of it is free on the web. It’s pretty cool.

David Rich
David Rich
10 years 12 days ago
We should not be afraid to measure the ROI of social media programs. In my opinion, to truly understand the ROI from social media programs, brands can break it down into several measurement points: – Increase in online WOM, reviews and recommendations (90% of consumers will trust a recommendation from a friend – 8/10 consumers say they will try a product which has been recommended to them.) – Purchase/scan data, coupon redemption, shift in purchase intent, tied to loyalty cards – CRM opt-ins to the brand’s database and sweeps/contest opt-ins – Brand engagement, including the shift in sentiment of the conversations, increase in the likes in FB, the twitter followers and comments from readers – Quantity of new users introduced to the brand – measure the lifetime value of the consumer. As with other media, and especially integrated media, ROI comes from a deeper analysis and some additional market research. As always, the measurements of success should be directly tied back to the objectives of the program and until the market stops calling social media… Read more »
Phil Rubin
10 years 9 days ago

Among the bigger challenges marketers having measuring social is analogous to the same challenges of measuring advertising: it’s hard to connect directly to sales. Here’s a different suggestion: measure social in terms of customers as a different way to identify, leverage and engage customers for purposes of connecting them (further) and others to your brand.

The problem here is that most marketers don’t focus on customer measurements as much as the squishier brand metrics (awareness, purchase intent, etc.). Compare customers that are engaged via social with customers that are not. Look at what they do, including their purchase behavior, but do so on a segment or an individual level.


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