When talking about Social Media I've found that many companies start by asking "What's the ROI?" When you ask an accountant about this, they tell you that marketing is NOT an asset so there is no a ROI. That doesn't change the fact that Company Executives do need to know how to measure success of Social Media. ROI may just be the wrong terminology and asking the the right questions becomes the true key to success: What do you measure?
I've asked many companies over the course of many years about the methods they use to track trade show and advertising leads and further inquired how they tracked profit from a given lead source. I have yet to find one that does it consistently and effectively. Most sales tracking software does not 'play well' with marketing initiatives and Social CRM packages are only now evolving. (Salesforce.com's integration with Radian 6 could be on the road to doing that well, but time will tell)
Social Media "tools" are just that: TOOLS. They bear more of a resemblance to a fax machine, a cell phone, or email. They are a method of communicating more effectively with end-users of a product or service. If the marketing "piece" just blasts out a sales message it can become no better than email spam or 'junk snail mail". At a fundamental level this is how many industrial #B2B companies 'start' using the Social Media "tools". That's perfectly OK. But sooner, rather than later, they need to start using it as a communication tool. Once companies dip their toes in the social media water the person, or team, doing the Social Media work quickly discovers that there needs to be some pretty big changes within the organization to take Social Media Communication to the next level.
If there is no integration of Social Media TOOLS into the various functions of a company (e.g. Sales, marketing, customer service) then the 'tangible" results will vary wildly. I spoke about this in some detail in March 2011: "Who leads the charge in Social Media? Marketing, PR, Sales, Custome..." Would it make sense to limit cell phones to only Executives? What about email? Both cell phones and email are tools. That's a big conceptual hurdle to get past for many people but once you're over it you can move on to some deeper thinking about all of the features of this new tool: If we get more people involved what do we measure?
What to Measure
The key is to determine how your company is going to track profit generated from the Social Media tools. At the present time, I have not yet found a reasonably priced method of doing this short of some custom software. Back in the early 1990's I sat down with some targeted industry magazines to discuss a new product AND brand rollout. I explained that we would be tracking not only lead source (absolute number of leads) but also Gross Sales generated from the lead. We built a custom database that first looked at Average Acquisition Cost (Average Acquisition Cost ($) = Acquisition Spend ($) / number of customers acquired) and set some targeted goals: For example, we expected a min of 2% of attendance at all trade shows for our lead target number. We then tracked Lead-to-sale conversion based upon lead source. They key here was generating volumes of leads was the first step in filling the sales funnel, as, after all, this was a NEW product & brand launch.
In many ways Social Media is similar to a brand launch but with a twist: Again, It's a new tool. Just like at the outset of email or cell phone tools gaining popular usage, getting everyone's LinkedIn, Facebook page and Twitter handle IS the FIRST step. Just like a new brand or product launch you've got to fill up the sales funnel with names and then start to determine what's going to be important to measure. Perhaps, measuring "Average Acquisition Cost" is a good place to start
Quality vs. Quantity
What is the value of a cell phone? That's not a question people often ask any longer. Obviously more important thing to think about is what is the quality of the conversation? As a Social Media program evolves, more concentration is going to be put on what was the quality of the lead acquisition? As your Social Media communications and process evolve, you have filled the funnel, and have something to measure the metrics to measure quality and conversion will also evolve with it. To get to "quality" you've got to start with quantity: Who in your target market is using the new communication tools?
In summary, I think that how the Social Media tools are implemented within an organization is going to have a direct impact on 'tangible" results. HOW and WHAT is tangible is going to be the important question. I think we're the stage of Social Media where the "tools" are new (think fax machine circa 1983) and it has not YET become a 'part of doing business.' but it's moving that way pretty fast.
What's your take on Social Media measurement? How are you measuring success?
By the way, there's a great article entitled "There is No ROI in Social Media Marketing" It's a worthwhile read.