Return On Investment Concerns

Running Head: RETURN ON INVESTMENT CONCERNS IN SOCIAL MEDIA 1
RETURN ON INVESTMENT CONCERNS IN SOCIAL MEDIA MARKETING:

AN EXAMINATION OF RECENT CASES
by
Luke Benjamin Wendlandt
Project Committee:
Name of Capstone Sponsor: Frank Plachecki, Ph.D.
Name of Second Reader: Erik Burns, M.A., MBA.
Approved: September 17th, 2012
Submitted in partial fulfillment of the requirements for the degrees of the Master’s of Business
Administration and the Master’s of Arts in Management, The College of St. Scholastica, Duluth,
MN.
UMI Number: 1529281
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and there are missing pages, these will be noted. Also, if material had to be removed,
a note will indicate the deletion.
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Published by ProQuest LLC (2012). Copyright in the Dissertation held by the Author.
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Acknowledgements
This research study would not have been possible without the help and support of many
individuals. I would like to thank my wonderful girlfriend, Emily Jackola, who has offered love
and encouragement during my pursuit of my Master’s of Business Administration and Master’s
of Management degrees. She is the rock that I lean on for support and I am so thankful to have
her as my sounding board. My parents, brother, and friends have given me their unequivocal
support throughout, as always, for which my mere expression of thanks likewise does not
suffice. I would also like to send my appreciation to all my colleagues at Thomson Reuters for
their patience, generosity, and commitment to my craft and continuing education. Amongst my
fellow graduate students in the Master’s of Business Administration and Master’s of
Management programs at the College of St. Scholastica, the effort made by all to promote a
stimulating and welcoming academic and social environment will stand as an example to those
we succeed. Last but not least, I would like to thank my sponsor, Frank Plachecki, Ph.D. I have
an incredible sense of gratitude for his ability to enrich my studies through this capstone project
while relating real-life situations for my career and life. For any errors or inadequacies that
remain in this work, of course, the responsibility is entirely my own.

Abstract
Social media marketing continues to be the dominant force in recent online advertising and
marketing campaigns. With the increased number of retailers participating and engaging in
social media networks (Facebook, Twitter, etc.), it is appropriate and necessary to examine the
effectiveness of this marketing medium by considering recent cases. Social media has changed
the way the world communicates, both in the social online communities as well as retail
marketing strategies of all shapes and sizes. This evolution raises questions and concerns in
regards to the return on investment (ROI) with these marketing practices. This paper aims to
present the insights and findings from recent cases, articles, journals, and social media experts to
determine if the ROI with social media marketing constitutes a viable and profitable option for
retailers. Several ways that retailers are able to best calculate ROI for their social media
marketing campaigns will also be examined. Finally, the research will indicate the accuracy for
calculating ROI for social media marketing with the appropriate correlating numbers and
analytics further discussed in this study.

Table of Contents
Introduction…………………………………………………………………………………5
Literature Review…………………………………………………………………….........12
Background Content…...…………………………………………………….........13
Return on Investment……….……………………………………………………………..16
Analytics…………………………………………………………………………..17
ROI Measurement…………………………………………………………………19
Management and Leadership……………………………………………………...21
ROI at Maturity…………………………………………………………………...22
Hausman’s 5 Steps………………………………………………………………..22
ROI Contradictions……………………………………………………………….23
Engagement……………………………………………………………………….25
Analysis…………………………………………………………………………………...28
Marketing………………………………………………………………………....28
Social Media Marketing Advocates………………………………………………31
Social Media Marketing Opponents…….………………………………………...32
Automotive Social Media Statistics………………………………………………34
Sales…………………………………….………………………………………...36
Conclusions/Prescriptions………………………………………………………………...40
References………………………………………………………………………………..43
Introduction
Social media has changed the way people communicate, and how businesses operate in
the global environment. Social Media marketing has spread throughout the world and the
calculated growth is unprecedented. Facebook and Twitter are the two most popular social
media sites. Because of these mediums, businesses are taking aim at how they can reach current
and potential customers. Since these sites are set-up for interactivity, it is no surprise that
businesses have validated their need to be equally as accessible to their customers online as
through conventional means. Once organizations reach these customers, achieving brand
awareness and identification on each of the social media marketing websites is the next
marketing initiative.
Online communities are designed to provide a web presence and marketing tool for any
business. This process can otherwise be difficult to achieve through standard, more systematic
and conventional means. As the number of users grows via Facebook and Twitter it is no
surprise that the vast array of companies joining the social media front have grown exponentially
as well. Access to free sites with millions of users as a promotional means for organizations has
marketing and advertising managers ready to promote their clients respective products with
otherwise untapped exposure. Setting up a company page can be relatively easy, as this analysis
will represent, but managing the ROI can be rather complex and undoubtedly difficult.
With the continued growth of Twitter and Facebook users, some companies have been
successful reaching otherwise unidentified consumers. However, many organizations are still
focused on determining which method is exactly the most effective way to manage their online
marketing presence. After the online presence is realized via Facebook or Twitter, the next step
is to determine if their marketing funds allocated to such social media marketing are deemed
successful. Managers are becoming more comfortable including blogs and social networks in
their marketing communications, so they have now naturally turned to the ROI for these social
media directives in terms of success or failure. Traditional marketing mediums seem obsolete in
the dynamic and increasingly complex media environment available today. The more complex
media environment has proved to be equally as complex when trying to calculate the ROI that
marketing managers and chief financial officers are demanding.
When creating a return on investment strategy, marketers have not necessarily taken all
the right equations into the ROI mix. Individuals that are calculating their organization’s ROI
need to use the correct social media objectives that drive the social media metrics. There are also
paths that successful online retailers have proved effective in their social media strategies. These
strategies and objectives will be discussed in greater detail within the literature review. Finally,
all the relevant metrics must be fully calculated, both current and future, for the ROI to have any
validity and accuracy. This research study will deliver marketers the means to have a useful
starting point for measuring effectiveness of their social media marketing strategy and how
return on investment can be calculated for their organization, regardless of the size. This study
will also detail the case studies in which leaders in the social media marketing realm either
support or denounce ROI indicators. The ability or inability to represent accurate and systematic
ROI testing will be challenged and researched.
Finally, social media marketing strategies will be examined in regards to their ROI.
Recent cases will be researched and analyzed to determine if the profits underlying the need for a
social media presence is justifiable. ROI will be calculated in a variety of ways, and will be
analyzed to determine which method is best suited to provide the most accurate and confident
assessment. ROI will be unique to every brand because of the very nature of the interaction and
the consumer engagement is personalized and unique. The key then for any organization is to
know who their “likes” are from, and everything else is virtually exploration. As Philips
explains, “likes” are simply a social media metric that is somewhat of an analytical anomaly for
providing ROI as it is difficult to decipher their buying decisions versus individualistic online
objectives.
Statement of the Problem
Millions of organizations use Facebook, Twitter, and others to try to provide added value
as a marketing tool. As social media marketing has evolved from the initiation phase to a
functional mature marketing online tool, more value is being placed on ROI dollars rather than
just “likes” or fan engagement and/or involvement. A greater pressure is being placed on
managers to turn their attention to questions regarding the ROI of social media. Clearly, there is
no shortage of interest in the problem. Upper management is virtually demanding evidence that
social media marketing dollars are proven as potential means of ROI for their respective
organizations then simply a social media website.
Purpose of the Study

The purpose of this study is to identify ways to measure the success or lack of success of
social media marketing campaigns through examining recent cases and research. Success will be
defined by the ROI of various campaigns researched and authoritative cases. This study should
provide clarity to a retailer questioning their own social media marketing ROI. The research will
examine several types of organizations and different methods and means for which ROI is
calculated and determine if it is ultimately profitable for organizations to spend in this arena,
present or future.
Statement of Research Question

What are the most effective strategies for measuring the Return on Investment of an
organization’s social media marketing campaign?
Definition of Terms
In this research analysis, a variety of terms will be used that have specific meaning. The
definitions are provided below.
Applications: “Social networks provide tools and additional functionality through the use of
application programming interfaces. Examples of this include: online analytics and templates”
(Zarella, 2010, p. 65).
Awareness: “The concept that enables marketers to quantify level and trends in consumer
knowledge and awareness of a brand’s existence. At the aggregate level, it refers to the
proportion of consumers who know of the brand” (Hausman, 2012).
Blogs: A website in which an individual or group of users record opinions, information, etc., on
a regular basis (Lithium, 2012). “Type of content management system (CMS) that makes it easy
for anyone to publish short articles called posts” (Zarella, 2010, p. 9).
Brand engagement: “they can convert that fan interaction and interconnectivity into a business
outcome for marketers” (Raice, Terlep, & Vranica, 2012, p. 4).
Facebook: “Is a dominant social networking site in which friends, acquaintances, and strangers
can connect with each other and brands/organizations of their choosing” (Zarella, 2010, p. 67).
Fan Page: A fan page is a public profile which allows you to share business and products with
Facebook users and the general public (Lithium, 2012).

Likes: “A social media metric that is somewhat of an analytical anomaly for providing ROI”
(Philip, 2012, p. 17).
Marketing Objectives: “companies start thinking what a blog might satisfy, why its customers
would visit the blog and what behaviors that they might engage in once they got there” (Fodor &
Hoffman, 2010, p. 2).
Marketing Investments: “Marketers look to strengthen their brands, generate sales, and acquire
contacts that directly tie to their media presence and messages being delivered” (Ghali, 2011).
Social Media Metrics: “when social media marketers can effectively track the success of their
programs through cross-channel integration using figures that resonate with their company’s
online investment programs” (Keim, 2012).
Social Network: “A website where people connect with friends and acquaintances, both those
they know offline and those who are online-only friends” (Zarella, 2010, p. 53).
Return on Investment: “the demand for marketers to validate and measure the benefits delivered
by increasing their investment in an offering. The benefits are in the short term and in the long
term and in both ways, qualitative and quantitative” (Ray, 2010).
ROI social media: “There are many ways to measure the impact of social media, but it all
depends on your business goals. In fact social media can have a direct financial impact on every
aspect of your business” (Social Media Headquarters, 2010).
Traffic: “The number of visitors and page views on a website” (Fleischner, 2009, p. 104).
Delimitations and Limitations
This research analysis has both limitations and delimitations. The difficulty in measuring
social media marketing ROI is determining if social media resulted in a sale or just contributed to
it. This then creates the cause and correlation effect. Did social marketing drive and contribute
to the sale or just influence the end-user to purchase a product? Unless an offer is retrieved
online and used in a manner that can be recorded and tracked, it is difficult to calculate the
revenue in a traditional sense, revenue less cost, divided by cost.
Some of the research indicates that there is no single right way to of engaging in social
media marketing. The only guarantee when setting up a “fan page” for an organizational entity
is that it can be viewed online via Facebook or Twitter. How businesses drive profits and deliver
brand awareness is not a perfect science, which has hampered the ability to calculate ROI. There
is also a limited amount of studies and/or cases available for research, but this study will use the
most current and updated information available.
The delimitations of the study are geared towards the social media marketing mediums.
Both Facebook and Twitter can be accessed at any time of the day. Their 24/7 accessibility
results in the ever-changing data geared towards calculating ROI. First-hand analysis and
observation for the some of the research examples should be able to provide a greater clarity and
validate some the findings.
Significance of the Study
The current model for which the return on investment is calculated in the social media
marketing medium has its limitations. The initial cost and investment ranges from the minimal
asset of time for a smaller company versus millions allotted from larger organizations. There is
no question that a ROI model made available and readily accessible for organizational use will
benefit both aforementioned organizations. Many marketers feel that ROI is actually
incalculable, while others have methodology behind their forecasted numbers.
As organizations look to cut overhead costs, social media marketing tactics need to be
examined to make sure ROI is deemed profitable for retailers. Some of the recent cases have
indicated that marketing campaigns in the social media realm are ruled unfavorable, such as
General Motors announcement to pull their social media ads for 2012. CitiBank on the other
hand, despite ROI concerns, pooled together their largest online marketing filtration in the
company’s history. So again, retailers around the globe need to be able to guesstimate their ROI
before a social media marketing campaign, and this study is designed to give the marketers the
means to do just that. This study is also designed to determine, through the research, if ROI can
be calculated effectively and efficiently. The research will either affirm or disprove the current
status quo behind the ROI social media marketing conundrum.

Literature Review
A review of literature was conducted with the objective to determine the best means
available to calculate the return on investment of social media marketing, including Facebook
and Twitter. The thorough analysis of current business strategies will determine the
effectiveness of online marketing campaigns as concerned to their estimated investment. Journal
articles, research studies, case analysis, and books were used as the framework for this research
analysis, dating back three years. The following literature review also provides a framework for
readers to gain a better understanding on how the return on investment in the social media realm
is calculated. Business organizations are calculating this often desired analytical and
quantifiable metric to show business value for their social media campaigns. As explained by
Zarella, “effective measurement and proving the merit of the investment in social media is key,
not just wasting time on Facebook” (Zarella, 2010, p. 205).
The problem that much of the marketing world is having with social media is exactly
how to gauge the tactic’s overall value. The truth of the matter is that social media does not
quantify in a straightforward manner. This research analysis will examine calculable ways in
which experts in the social media marketing field believe there is a quantifiable algorithm(s) to
determine ROI. To the contrary, a variety of cases and articles from other social media experts
will provide clarity to why ROI is not able to be determined by market or industry related
business performance indicators. The analysis and case research will elaborate on the ethereal
social quantifiers that these respective marketers will help determine for each individual business
case, rather than ROI. Finally, the analysis will research the accuracy of the results and provide
clarity for marketers as using social media as a marketing medium for business results.
Social Media Background Content
Facebook was created on the objective to allow people to communicate and connect
online. What Mark Zuckerberg and his colleagues didn’t know was how businesses and other
organizations would build Facebook pages to promote and advertise their products online. Those
brands that are leaping ahead are making social the way they do business by operationalizing
their social media marketing practices, according to Lithium’s website (2012).
As of December, Facebook claimed more than 800 million active users worldwide, with
50% logging on every day (Rosenbaum, 2012). With that being said, “86% of companies maintain
a Facebook presence, 84% are active on Twitter, and 72% show up on LinkedIn”, according to
Keim (2012). In fact, a significant 58% of marketers are using social media for six hours or
more each week and 34% for 11 or more hours weekly, according to the Meltwater Group’s
Study (2010). Companies in the social media divide range from visionaries (16%), followers
(26%), catching up (23%), reluctant (14%), and adverse (21%) according to Meltwater Group’s
study (2010). Organizations should keep in my mind the sentiments from Zarella, “not all
businesses can beneficially engage in all types of social media; focus on the ones that work for
you” (Zarella, 2010).
Most marketers will spend more on social media this year than they did last yet few claim
to know what they are really getting for their money. The social networking phenomenon has
created a new online subscriber which advertising and marketing research groups are eager to
analyze and track current and future statistics and results. Forrester Research Inc. says that
social media is the fastest-growing segment in the interactive marketing category (Henry, 2010).
In addition to conducting research to identify which social sites your audience is using, you
should also set goals with clearly defined levels for success (Zarella, p. 205, 2010). When we
truly grasp the ability to define a social media action and measure it, we can expand the impact
of new media beyond the Financial Statement. We can then adapt business processes, inspire
ingenuity, and more effectively compete for the future (Paglia, 2010).
Social media has transformed organizations and their marketing strategies and business
philosophies. A survey of 4,261 global executives conducted by McKinsley late last Fall (2011)
found that 72% reported that their companies deployed at least one social media technology
(Rosenbaum, 2012). “The business philosophy around social media is to embed it across the
company to be a better business” said Richard Binhammer, who coordinates all social media
programs at Dell Computer (Gillin, 2011). ”Social media gives you what is on the customers
mind in real time. If you have a business that is agile enough to reply and do something about it,
you will have business growth (Graff, 2012). Pratt (2009) suggests, ”when you look at the value
of conversations with people, then you can ask whether you can spend less time in a 140-
character tweet versus a 15 minute conversation on the phone. So we’re beginning to measure
that: Is it a less costly service channel than phone or e-mail, and is it preferred?”. A properly
designed social media marketing scorecard validates achievement of broad based business
objectives. (Ray, 2010).
Several businesses have developed new and dynamic techniques for their organizations in
order to stay ahead of the social media trends, which in some cases, has resulted in additional
value and added ROI for their respective organizations. For example, Amazon now has total
market domination based on social media leadership, vision, and technological advances
(Gitomer, 2012). The same can be said for Apple, Inc social’s ingenuity. Microsoft used to
laugh at them; now their employees all have iPads and iPods at home, which they are able to
connect and link directly to their social media sites. Cisco Systems has recently taken advantage
of massive layoffs of journalists to hire former BusinessWeek and Wall Street Journal writers to
tackle weighty topics, such as the impact on social media in a revamped newsroom called the
Network (Gillin, 2011). These interactive blogs have improved the engagement amongst their
clientele, thus providing added value to their organizations.
At Dell Computer, 3,000 people have been certified to use social media on behalf of the
company. Dell Computer has hired professional trainers; published a four-color, how-to-manual;
and flown speakers in from around the country to share their wisdom (Gillin, 2011). IBM has set
up its own version of popular social media applications because it wanted to be able to
authenticate users and ensure security. The company’s internal version of Wikipedia, called
Bluepedia, is a global intranet encyclopedia of all things IBM that is co-authored by employees.
Its in-house version of Twitter is called BlueTwit, and it’s internal version of Facebook is called
Beehive. Carol Somilic says, “it starts to make the organization much smaller. It flattens the
organization and we’re exchanging ideas now” (Gillin, 2011). These are just a couple examples
in which organizations have benefited from different social media strategies.
Managers must realize that the social media environment is highly dynamic and rapidly
evolving (Hoffman, 2010). Scott Travasos, CFO, Blue Shield of California Foundation puts
social media in social media verbiage, “#movefast #movesmart #movenow” (Rosenbaum, 2012).
Even as dynamic and rapidly evolving as social media has become, some marketers tend to shift
towards the focus of downplaying current ROI strategies and rather become socially relevant.
The majority of social media marketers surveyed (71%) say they are not concerned with
demonstrating value to upper management, but rather being in the social media game (Keim,
2012).
Return on Investment (ROI)
Traditional media measurement seems almost quaint in today’s dynamic and increasingly
complex social media marketing environment (Hoffman, 2010). In the absence of traditional
marketing and standardized best practices, some turn to ROI as a means of proving social
contributions, but many benefits delivered by social media are not easily measured in dollars and
cents (Ray, p. 2, 2010). Ghali states, “the return on investment in social media marketing should
directly tie in to the goal of your social media presence and messages from your organization”
(2011). Sometimes we simply need ROI to signify a meaningful return on investment of time
and money into social media marketing and reputation management practice (Paglia, 2010).
Social media provides endless marketing exposure and countless opportunities otherwise
unattainable, but tracking and measuring this can be difficult. Many of Meltwater Group’s
survey findings reflect an industry still in its infancy, with companies learning as they go and
areas such as social media ROI and impact measurement very much the preserve of the
sophisticated minority (2010). Nailing social media marketing ROI means a few things: face
your social fears, benchmark, track key performance indicators, and measure the social success
against business outcomes (Lithium, 2012). According to Ghali who conducted a survey of 414
iContact customers reported that there three largest social media challenges are: lack of time,
uncertainty about how to determine ROI, and lack of knowledge about social media (including
Facebook and Twitter) (2011).
Very crucial to driving ROI from social channels like Facebook and Twitter is not just to
be there, but to be there with purpose (Lithium, 2012). Nearly a quarter of all individuals polled
indicated that their activity on Twitter was not at all effective last year, a third say the same for
Facebook, 37% for LinkedIn and 44% for YouTube (Graff, 2012). This is why Ghali stated,
“although it is important to track your Facebook fans and Twitter followers, a goal-based
approach to ROI will help you better understand the “why” behind the “how” of your marketing
initiatives” (2011). Keim, Lithium, “people used to want Fans on Facebook. Then, they realized
what you want is engagement with these fans. After, they realized what you want is ROI, for
people to engage and then follow-through and buy things on Facebook and Twitter. The truth is,
depending on what you are doing, it could be all of those three things…..all valid objectives”—
Matt Magee, CEO SearchEngineLand (2012).
Analytics
This is where we begin to enter the art, rather than the science, of social media ROI, the
measurement stage (Ghali, 2011). According to Hoffman, Fodor, “effective social media
measurement should start by turning the traditional ROI approach on its head” (2010). You can
measure the ROI of your social media marketing, but it requires a new set of measurements that
begins with tracking your customers’ investments, not yours (Hoffman, F0dor, 2010). This
suggests that returns from social media investments will not always be measured in dollars and
cents, but also in customers behaviors (consumer investments) tied to particular social media
applications (Hoffman, Fodor, 2010). To start driving and measuring real ROI from social
media, we must now make the leap from talking about the concept to actually building one
(Lithium, 2010).
The most important thing you can measure as a marketer is your return on investment, or
how much money your efforts are contributing to your business. Is the cost of your investment
in social media outweighed by the value it is providing? (Zarella, p. 207, 2010). Pratt says, ”A
lot of people end up measuring activity, but getting from that to value is the hard part. It’s very
difficult to measure value” (2009). According to Meltwater’s Group survey, IBM has calculated
the ROI for its efforts, but it declines to release those specific numbers (2010). Somilic,
however, did explain that “IBM has found these new tools to be collaborative and helped reduce
non-value-added-time. The results were very positive and some of the returns from social media
were soft benefits, but yet added value to our organization” (Meltwater Group, 2010).
According to Hoffman and Fodor, there are three social media objectives that help
calculate ROI; Brand awareness, brand engagement, and word of mouth (2010). Zarella believes
that it is much less complicated than that. To calculate the actual ROI from your efforts, simply
deduct the cost of your social media work (include monetary and time investments) from the
income generated. If the result is positive, it has been profitable; if not, revisit the campaigns
and pay attention to which sites (Facebook and Twitter) and tactics generate the most value
(Zarella, p. 209, 2010).
While most organization’s are concerned about delivering the ROI results, other
organizations are less concerned about the ROI statistic and more concerned about business
outcomes. ”While Macy’s and most other department stores are measuring ROI, Zappos is
cleaning their clock, delivering value, connecting with and responding to customers one-on-one
and building a billion-dollar empire in less time than it took Macy’s to expand to a second store
some 100 years ago” (Gitomer, 2012). According to Graeme Boyd, social media marketing
manager for Xbox says this will be the year that marketers will spend their money on this type of
media carefully, and will be trying to measure its effects (Graff, 2012). Furthermore, “Listening
to what our customers have to say about us is a fundamental component of getting to social
media marketing ROI because it allows us to identify and develop relationships with our key
advocates and influencers (Lithium, 2012).
ROI Measurement
The various ways to measure ROI can often lead marketers to shift their focus to
activities gauged only to introduce sales based results. Many social media experts would argue
that sales-producing based analytic organizations are striving to produce numbers that maybe are
incalculable. Zarella suggests that marketers should think about metrics for social media ROI in
two categories: on-site and off-site (2010). On-site metrics measure activity that takes place
directly on your site, whereas off-site metrics measure activity that happens on other sites where
you and your customers interact and produce buying decisions. To Zarella’s point, Paglia argues
that 53% are unsure about their return on Facebook or Twitter and 50% are unable to assess the
value of their LinkedIn or industry blogs. Organizations are now choosing to either purchase or
design analytics packages to measure the oft desirable ROI. Analytics packages allow you to
track certain actions on your site whether they are purchases or lead forms (Zarella, p. 207,
2010).
Organization’s that shift away from sales crunching analytical data have determined that
there are countless other ways in which social media marketing have provided added value or a
return on their investment otherwise unattained. Surveys revealed that many companies and
CMO’s (89%), tracked the impact of social media by traffic, pageviews, and the size of the
social graph or communities (Paglia, 2010). Ghali states that there are things that we can use to
gauge the impact of your social media efforts: Surveys, social media-specific offers, Google
analytics, and different links to produce the best ROI for a given campaign (2011). Paglia also
admits to marketers that now is the time in which social media graduates from experimentation
to strategic implementation with direct ties to specific measurable performance indicators
(Paglia, 2010).
Companies are also introducing their own software and analytical data to provide
marketers the most feasible way to generate an accurate ROI and produce accurate analytics.
Adobe launched a tool to help analyze the monetary value of these platforms called
SocialAnalytics, which it claims is particularly useful when looking at Facebook “likes”. It helps
to measure the effect of platforms on a customer’s buying decision(s) (Graff, 2012). According
to the Automotive Marketing Association website (2012), EdgeRank is an algorithm that
controls what appears in an individual’s Facebook News Feed. You can think of it as a scoring
system with the higher your edge rank score, the more likely you are to appear in your fan’s
Newfeed. EdgeRank has three main parts that all work together: affinity (frequency of
interaction between you and users), edge weight (number of comments, likes, and shares), and
time decay (the age of the post). Ways in which an organization can increase EdgeRank, thus
improve an organization’s ROI include; create posts that encourage interaction, post pictures,
avoid automated postings, keep it fresh, figure out timing, avoid spamming, include links to
content, and get users to share your information (AMA Website).
Marketers and other business segments can examine the organization from an
organizational-wide view to see if other business functions are gaining value or decreasing lead-
times besides just focusing on the analytical data available. For example, as Ariba’s Fogarty
explains, “while ROI may be hard to measure and difficult for companies to track metrics and
gain social media confidence, organizations are indeed able to take metrics to see if social media
is lowering their call-center costs, lowering time-to-time resolution, or improving customer

satisfaction” (Rosenbaum, 2012). Paglia further explains, revenue is the only form of metrics we
can introduce, but defining the “R” in ROI is where we need to focus as it relates to our business
goals and performance indicators (2010). Even though much of social media is free, we do know
the cost of engagements it relates to employees, time, equipment, and the opportunity cost (what
they’re not focusing on or accomplishing while engaging in social media). Tying those costs to
the results will reveal a formula for the assessing the “I” as investment. When viewing the
organization’s analytics in these terms, you want to make sure to include reach, engaged users,
individuals talking about this, and virality as methods of achievement for an organization and
potential ROI.
Managers and Leadership
Although measuring the ROI of social media efforts is important and necessary, it is far
more important that managers make sure their social media efforts are effective, even if the state
of the ROI measurement may be less than satisfactory (Hoffman, 2010). The next time you’re
pressed for ROI, turn the conversation towards big ideas and forward-thinking companies
designed to move forward from smart decisions and penetrable social media goals (Gillin, 2011).
Hoffman, Fodor determined that “Managers should begin by considering consumer motivations
to use social media and then measure the social media investments customers make as they
engage with the marketers’ brands rather than just solely focus on ROI” (2010). Lithium website
explains that 42% of marketers say they are very concerned about demonstrating the value of
social medial to executive management—35% say improving social media measurement is a top
priority. But just 4% of marketers say their ability to measure the over impact of social media is
excellent.
ROI at Maturity
According to the Lithium website there are four components to ROI. The art of getting to
real and quantifiable social media marketing ROI means driving your social practice towards
maturity. Maturity happens when we do these four things very well. Listen to our social
customers. Engage with them with purpose. Operationalize our business around the social
customer. Extend the business value of our social interactions (2012). Developing a mature ROI
model is every bit as important to realizing the full benefit of social media marketing as having a
social media strategist on board. In fact, nailing social media marketing ROI is as least as
important as having a Facebook page or a Twitter account (Lithium, 2012). Only when we reach
maturity in the social media marketing process can we share social customer data, insights, and
decision-making across the entire organization—service & support, marketing, sales, public
relations, and operations. Integrating social across all these channels is part of operationalizing
our social media marketing practice and crucial to nailing ROI.
Once an organization is able to measure ROI during the maturity stage, a balanced social
media scorecard can be developed just like in the traditional marketing strategist platforms.
Augie Ray explains, “a balanced social media marketing scorecard will consider and monitor
effects across four perspectives that balance the short term and long term and the directly
financial with indirectly financial outcomes”. The four perspectives are listed below.
Hausman’s 5 Steps for ROI
Hausman developed a five-step system designed for calculating an effective ROI in social media
for an online marketing campaign. Step one, a business should set objectives. What do you
want to achieve from an online social media marketing campaign? Step two is concerned with
what marketers should measure. Unlike the more traditional hierarchy of the sales funnel, the
social media hierarchy depicts additional actions by your community that reflect loyalty, sharing,
trust, and advocacy. These actions have effects far beyond creating ROI, but spread your
message, increase your brand mentions, create a positive image for your brand, and encourage
other in the social network to purchase the brand—thus amplifying your ROI across social
networks. Step three is to collect relevant data. Google Analytics, Facebook Insights, or other
sources will help eliminate guesswork for tracking numbers otherwise undeliverable.
Most marketers feel that it is important to collect current snapshots that illustrate where
you are and high level data that plot trends over the last month, six months, and year. Step four
is to take the aforementioned data and analyze it. This data will help marketers find out what are
your current trends telling you? Certain types of posts generate significantly more (less) visits.
Certain days of the week of time of day generates significantly more (less) visits. Certain actions
generate more (less) engagement—i.e. comments, sharing, liking. Certain types of content
generate more (less) engagement. This stage is trying to find out where folks are coming from
and why. Finally, step five is to provide the social media action pressing the organization. Good
marketers will stop at step five. Successful social media marketers will not step here and
continue to the last step and reassess with the clear understanding that measuring ROI isn’t
enough, now is the time to improve your ROI.
ROI Contradictions
Despite the fact that organizations are spending billions of dollars in the social media
arena each year, many believe that measuring ROI is still virtually impossible; but yet social
media marketing should not be altered nor ignored. According to the ANA website, a study
found that while more than 70% percent of marketers are currently using newer media platforms
to reach their customers, 62% say the inability to prove ROI is still a top concern (2012).
Eliason states that, “people are still missing the boat with ROI, it’s not about how much you sell
in social media, it’s not how much you engage with your customers (Meltwater Group, 2010).
The ROI is in the information that’s out there that leads to change and process improvement.
But you can take this information customers are providing and bring tangible improvements to
your business” (Crosman, 2012).
Some organizations are even admitting that they no longer focus on trying to provide ROI
for their social media marketing efforts. Paglia concludes from a 2009 study performed by
Mzinga and Babson Executive Education, “84% of professionals representing a variety of
industries reported that they do not measure ROI” (2010). Rosenbaum provides his own insight
to this argument, “If you were a CFO back in the early 90’s and I came to you and said I wanted
to implement an e-mail, and you asked, “What’s the ROI?” could you have gotten an answer?
Social media has become table stakes” (2012). Forrester Research Analyst Nigel Fenwick also
states, “There are 800 million Facebook users; that’s not a fad” (2010). “Even the most plugged-
in brands still defend their investments in social media in atmospheric terms; there are a few
acknowledged cases where activity in this space has rung cash registers. It’s still a lot about
faith. Just like an IPO.” (Philip, 2012). Gitomer states that “If someone measured the ROI at
Amazon in the first five years, they (Bezos) probably would have quit for failure to show gains.
But, he accomplished market domination while Barnes & Noble was measuring ROI and Borders
was going broke” (2012).

Engagement
Marketers may not have solved the ROI algorithm yet, but they have determined that
social media has allowed them to engage with their customer base in an unprecedented way.
Paglia explains that “return on engagement—the duration of time spent either in conversation or
interacting with automotive social objects, and in turn, leads or contacts that transpired and
gauged as worthy of measurement”(2010). Social media also does a bang up job at deepening
this engagement. 72% of customers report that because of social media, they are more like to
stay engaged to brands (Lithium, 2010). Consumers like connecting to brands through social
media because it is a two way street. They get to listen actively when and where they want to,
interact with others, and be heard.
Brand engagement and undivided social media attention is about your organizations
marketing efforts and their effectiveness. It is no longer effective to just have a large group of
followers; they also need to be engaged with your brand (Ghali, 2011). According to Lithium’s
website, 54% of marketers say customer engagement is the most important measure of marketing
effectiveness. These online communities also increase loyalty, deepen engagement, and drive
SEO results (2012). “Facebook has to convert the fan engagement into a business outcome for
marketers—it’s about giving the finance people, who are cutting the checks, proof that its ad
products are working,” said Craig Atkinson, chief digital officer of PHD, a media buying firm
owned by Omnicom Group, Inc. He noted, however, “as long as Facebook is the bedrock of
consumer engagement, advertisers simply can’t ignore it; couple that with the 900 million plus
users available at their disposal” (Keim, 2012). Ken McKeikan, chief executive at Greggs says,
“social media will make you money if you act upon what your customers are telling you. That is
not just as a marketing team, that is the whole business acting on it” (Graff, 2012). Engage with
your customers and focus on the deepened loyalty and commitment to future results and
organizational effectiveness.
Keim suggests “with social media now a staple in the marketing mix, marketers have
shifted their focus from establishing a presence toward addressing how to create meaningful
engagement with consumers, how to measure it, and how to connect these activities to their
impact on the bottom line” (2010). Gitomer states that ”People (marketers) guarding nickels
have no idea the power nor the value of business social media, much less social media. They
have no idea of the lost opportunity of the lost revenue. They have no idea the perception and
participation of customer engagement” (2012). BookRenter.com, CFO Gene Domecus says, “I
can’t impose only financial-return expectations on social media investments. Social media is
how the customer chooses to interact with us” (Rosenbaum, 2012). Hoffman, Fodor explain the
success from Proctor & Gamble’s social networking site, which has over 350,000 members who
talk about P&G products; by linking these customers to investments in brand conversation to
sales, the site is credited with market response increases of up to 30% (2010).
A couple significant engagement and brand metrics from the Meltwater’s Group study
that we should all be concerned with going forward in calculating ROI. The results of the
Meltwater Group’s Future of Content Study are based on telephone interviews with marketing
and social media executive decision makers from 450 companies across the globe, all employing
at least 250 employees. These are the metrics that the top organizations from their study are
using.
Content engagement = Shares + Replies/Total pieces of social content
Content engagement = Clicks/Content reach

Brand engagement = Likes + Tweets + Comments + Mentions
Attention = Reach x Engagement
Positive sentiment = Number of positive brand engagements/Total number of mentions
Brand reach = Facebook fans + Twitter followers (Ghali)
Content reach = Brand reach + Sum of shares x Reach of each sharer (Ghali)
Managers must control who interacts with the company’s brand and establish some rules
over participatory framework of how consumers engage with their brands in the social media
space. According to the Meltwater Group’s survey study, 84% of companies think it is
important to monitor what is said online about their brand, but only 1 in 5 have invested in the
tools to do so, and with only 29% planning to do so in 2012. ”Anybody can post a Tweet or a
status update on Facebook, but the brands and people who are being the most successful are
really taking into account who their audience is, what they care about, and how they can stand
out”-Jordan Viator Slabaguh, Spredfast Marketing Manager (Lithium, 2012).
Marketers need to avoid the “digital waste” that has been created and design ways that
consumers and organizations can engage with brands via social media (Graff, 2012). If you’re
among the 90% of marketers who say brand engagement is a social media objective, or the 78%
who say driving visitors to your brand website is a social media objective, your brand should
have or be making plans for an online community to engage with your implied clientele
(Lithium, 2012). Let’s not forget that customers need a reason to engage with a company’s
website. With that being said, roughly 16% of Facebook fans see a company’s posts and
updates. Let’s repeat that, 16% (AMA.com, 2012).

Analysis
Marketing
Marketers say that social media penetration is one of the core business objectives for their
organization moving forward. According to Lithium, 86% of marketers say they actively use
Facebook in their marketing efforts to penetrate the market (2012). One in three marketers
indicated measuring results and integrating social media activities were on their top questions
when marketing with social media, according to the Social Media Marketing Report. The ANA
website also indicated that mobile marketing (70%) ranks the highest in terms’ of a marketer’s
desire for measurement, deepening the already complicated ROI algorithm for organization’s to
calculate.
Social media marketing has resulted in a large contingency of individuals working either
in-house or from a third party to monitor their organizations social media sites. ANA website
indicates that according to all the marketers surveyed in their study, the primary reasons they
conduct social media monitoring is because of brand integrity, insights/trends, customer service,
and corporate public relations. 51% of marketers claim that their social media monitoring is
done in-house (AMA website). Bob Liodice, President and CEO of AMA indicates that,
“marketers are rapidly learning what monitoring works best for their brands and they look to
remain nimble and move to adopt new opportunities” (2012). Liodice also explains, “monitoring
platforms offering the most tangible ROI will be favored by marketers moving forward. It is
imperative for the industry to standardize measurement practices for digital, social and mobile
markets” (2012).
Social Media Headquarters indicates that it has worked with numerous business owners
and when it comes to social media marketing; their top concern is return on investment (2010).
In fact, business owners understand that social media can have a direct financial impact on every
aspect of your business. Marketing Week columnist Mark Ritson, often outspoken about the
effectiveness of social media methods agrees that the rules of return on investment should apply
to these newer forms of social media communication just as they do to traditional platforms
(Graff, 2012).
Hoffman says that marketers are now being told to display metrics and calculations
which can provide evidence that their marketing efforts are paying off for organizations.
“CEO’s and CFO’s are demanding evidence of potential ROI before allocating dollars to
marketing efforts” (Hoffman, 2010). A micro-management approach towards ROI directed by
CEO’s or CFO’s may even confront many marketers as they try to get their own social media
programs off the ground. While marketers are busy building social media brand exposure and
awareness to demonstrate forward-thinking ideas, management crunches Excel formulas trying
to make their case that market changing ideas come from the back of an envelope than the
bottom line of a spreadsheet (Gillin, 2011). Graff indicates from his research that only 30% of
marketers “strongly disagree” that their management understands why their brand is investing in
Facebook, and 28% say the same for Twitter (2012). Proving that there is a genuine disconnect
between what is being spent and what business leaders expect from the investment.
Marketers have combated this pressure from CEO’s and CFO’s by altering their social
media strategies. According to Keim, “marketers have quickly turned to ROI as the equalizing
measuring metric, however, an over-emphasis on ROI has led some marketers to implement
”hard sell” tactics that do not resonate well in social media environments” (Lithium, 2012).
Ghali determined through his studies that your social media marketing goals may or may not be
tied to the purchasing process, which involves strengthening your brand, acquiring contacts,
generating sales, and gaining brand advocates (2011). Whatever your end goals may be, it is
important to use a goal-based approach to calculating ROI and evaluating your social media
marketing campaigns. According to Hoffman and Fodor, and organization premise is that social
media efforts that are developed in the context of the 4 C’s—connections, creation, consumption
and control—that underlie consumer motivations to participate will lead to higher ROI because
the company’s marketing investments can better leverage the active “investments” its customers
will make as they engage with the company’s brands (Hoffman, 2010).
Brand awareness and ROI can also dictate further connection from current or prospective
online clientele. Companies may have a difficult time quantifying the ROI of social media with
regard to brand awareness, but a strong ability to measure secondary objectives suggest that
marketers are zeroing in on ways to evaluate social media’s effectiveness (Keim, 2012). 42% of
marketers say that brand awareness is quite important to their business—only 5% say they are
able to measure it well. 37% say that ROI is important, while only 6% say they are able to
measure social media ROI well according to the Lithium website (2012). Further expanding on
Lithium’s reports from the ANA website, according to the ANA (Association of National
Advertisers) 2012 Digital and Social Media Survey, the inability to prove ROI has done little to
instill marketer confidence in the measurement of social media marketing channels (2012).
Social Media Marketing Advocates
Marketers believe that social media is either working for their organization, or believe it
is an investment that carries very little merit and those marketing funds should be used in other
strategic business practices. From reviewing the cases and research, analysis of both sides will
be discussed. First will be the marketers and research illustrating why social media proves
beneficial for organizations.
A significant percentage of participants strongly agreed that overall marketing costs
dropped when social media marketing was implemented. 78% of participants in the Meltwater
Survey found that increased traffic occurred with as little as 6 hours per week invested in social
media marketing. According to Lithium website, consumers fully corroborate the value of social
media for word of mouth marketing—80% report that they are more likely to try new things
based on friends suggestions because of social media. A significant 78% consider social media
marketing to be important to their organization, according to the Meltwater Group study.
According to a study performed by comScore says that Facebook ads are effective and it has
earned a statistically significant positive lift on people’s purchasing of a brand (Yarow, 2012). If
costs can drop and businesses are adding current or future value, social media marketing will
prove to be beneficial for organizations, today and in the future.
It is not only enough to just post and re-tweet, but to include the entire organization in
social media practices and future consideration. As Boyd explains, “there’s little point in going
to the board and jumping up and down about fans and followers and re-tweets if they don’t
understand what it all actually means. Marketers need to turn these buzzwords into something
that is meaningful for the wider business” (Graff, 2012). Those organizations who listen,
engage, experiment, and importantly approach their social media marketing practices with
business goals in mind, are those best able to take advantage of all the things social does right
(Lithium). Even with minimal time investment, the vast majority of marketers (81% or higher)
indicated their social media efforts increased exposure for their business. A significant 90% of
marketers said that social media was important to their business and half of the marketing
industry have less than one year of social media marketing experience. Despite the fact that an
organization may have very little social media marketing experience, it is never too late to get on
board and try to provide added exposure otherwise unrealized from traditional marketing means.
Social Media Marketing Opponents
For all the organizations that feel they are hitting new pinnacles with social media
marketing to provide the greatest ROI for their organization, many organizations believe that
their Facebook and Twitter spending is not producing the results for their respective investment.
Look no further than the auto industry for this social media paradigm shift. The automotive
industry is the largest pool of U.S. advertising dollars and can often make or break a
marketplace. Automotive industries shelled out $13.89 billion on U.S. ads across all media last
year (Edwards, 2012). GM started to reevaluate its Facebook strategy earlier this year after its
marketing team began to question the effectiveness of the ads.
GM only spent about $10 million last year to advertise on Facebook, that is a fraction of
GM’s total 2011 ad spending of $1.8 billion (Raice, 2012). GM Marketing Chief Joel Ewanick
explained, “the company as a whole is definitely reassessing our advertising on Facebook,
although the content is important and effective” (Edwards, 2012). Reuters reported that users
ignore Facebook ads, further adding to GM’s claims that Facebook ads are a waste (Yarow,
2012). Edwards explains that “the issue is whether Facebook is right for all advertisers . Search
advertising—the kind Google provides—tends to be more effective on customers who are
actively doing pre-purchase research. Facebook, on the other hand, is more of an entertainment
medium; no one is shopping for cars on Facebook—a fact GM seems to have learned” (2012).
Tester Tinit-Kane, Director of Online Marketing and Research at Pearson Learning Solutions
says, ”It’s time-consuming and challenging to use multiple tools to understand their impact of
your online marketing search efforts. If I had one dashboard fed by all of these marketing tools,
my benchmarking reporting and optimizing would be much simpler and easier to provide a ROI”
(Schwartz, 2011).
Earlier this month, another top marketing executive from the US division of Kia Motor
Corp. questioned the value of Facebook ads saying it was unclear how paid ads help sell cars.
Despite these remarks, the Korean manufacturer still planned on increasing its ad spending on
Facebook this year, and for 2012 (Edwards, 2012). Despite the fact that ROI is so difficult for
organizations to calculate, it is still hindering only a small percentage of organizations’ from
their social spend. Only 4% of marketers surveyed say they are “excellent” at measuring the
impact of social media on company performance, with another 16% saying they do an “above
average” job at this. That means the majority of marketers (80%) feel they perform at average
levels or below in this regard (Ghali, 2011).
Facebook has criticized GM’s approach of having multiple firms managing its
advertising for the site. With this criticism, GM has been revamping its marketing, hiring a new
ad firm to buy its media. Some organizations are adopting SocialEye, an interactive dashboard
introduced a few months ago adopted by Dow Jones & Co and the FedEx Corp., which is
designed to gain a better understanding of what’s happening in terms of where we are putting our
time, effort and resources to gain a better understanding of social media ROI. The program
should make a huge difference in allocating our people and budget for the entire social media
marketing spend (Schwartz, 2011). GM should consider applying the SocialEye to their
organization prior to relinquishing all their social media paid advertisement. Also, despite the
Facebook fallout from GM, they will continue to promote its products on Facebook, but without
paying the social media company through its paid advertising channel.
Automotive Social Media Statistics
Since the automotive industry is single largest means of advertising, in terms of dollars in
the world, a significant amount of research was focused to see how social media marketing
exposure has been affecting the automotive industry. According to the consulting firm Borrell &
Associates, “the auto industry will spend about $1.2 billion this year on social media advertising,
and that number is projected to grow to $4.6 billion by 2015” (Henry, 2010). At this year’s
NADA (National Automotive Dealers Association) Expo in Orlando, much of the discussion
revolved around social media marketing. Prior to the expo there was a two-day automotive
social media boot camp being held providing in-depth training that is difficult to learn for dealers
and automotive retailers (Rucker). The retailers understand that social is not only their
responsible, but social media marketing knowledge forwarded to their dealers is just as
important.
In the early stages of the social media boom, many dealers lacked direction. They turned
to the same old traditional marketing and advertising techniques applied through social media.
They would put up photos of new and used vehicles, as a result, customers would come and go
(Rucker, 2010). Some organizations hire in-house at their stand-alone dealership(s) and others
are using third party agencies to monitor and deliver their social media marketing platform.
According to Dealer.com, one of the leading vendors selling social media services to dealerships;
says the best way for dealers to get started is to identify and support a single dealership employee
who already is a social media user, and use that person to start growing a local network (Henry,
2010). While some dealers are turning to the manufacturers for social media support, Marlboro
Nissan in Boston has built a blog, become active on Facebook, Twitter, and LinkedIn, and are
engaging with their potential customers in a way that is driving tremendous traffic as well as
increasing sales and increasing their ROI (Rucker, 2010). This is the best way to start increasing
the return on participation for an automotive dealership. According to Paglia, return on
participation—the metric tied to measuring and valuing the time spent by automotive consumers
participating in social media through conversations or the creation of social media content
(2010).
According to Paglia, In 2010, driven by thought leaders such as Ford Motor Company’s
Scott Monty, Autonation’s Gary Marcotte and Stephen Higgins and even several members of the
Automotive Digital Marketing Professional Community (2010). The auto industry’s marketing
professionals generally began to enter into a new era of social media marketing based on
information, data collection, measurement, cost-benefit rationalization and a generally pervasive
resolve to move towards the establishment of generally accepted return on investment
performance metrics. Rex Briggs, CEO of marketing analytics firm Marketing Evolution said,
“auto makers like GM are used to focusing on discounted marketing promotions to bring people
into the doors, but they can’t afford to ignore tools that can help improve people’s feelings
toward a brand” (AMA.com, 2012). Paglia calls this phenomenon the social media return on
involvement—similar to participation, automotive social marketers measured touchpoints for
social media driven interaction and tying those metrics to the propensity of revenue based on
return of each point (2010). Finally, a return on trust can be realized from automakers and
dealers—a variant on measuring customer loyalty and the likelihood for referrals, a trust
barometer establishes the state of trust earned in social media engagement and the prospect of
generating advocacy and how it impacts future business.
Sales
One of the main goals from the social media marketing channel is to provide customers
with a reason to make a purchase. Marketers in the social media realm understand that this
process can be difficult to attain, but organizations are desperately trying to use this online space
to produce business results and ROI for their online investment. Today’s marketers resoundingly
agree that social media does a great job at the top of the sales funnel—75% say their social
media efforts have generated brand exposure, but leading to a purchase becomes increasing
difficult (Lithium, 2012). This is why the move by GM, one of the largest advertisers in the
world, puts a spotlight on an issue that many marketers have been raising: whether ads on
Facebook help them sell more products.
According to the Social Media Marketing Industry Report, 45% of people who’ve only
invested 12 months or less in social media marketing report new partnerships were gained
(Stelzner, 2011). The Meltwater Group’s Study concluded that 72% of marketers who have been
using social media for more than three years report it had helped them close business (2010).
Stelzner also goes on to say that by spending as little as 6 hours per week, 52% of marketers see
lead generation benefits from social media.
Rebecca Corliss, Social Media Marketing Director at HubSpot, evaluates their social
media marketing efforts, “we measure the traffic, leads, and sales that we’ve generated through
social media specifically and track social’s impact on our other channels as well. That’s really
powerful and helps me justify the time we’re spending on social” (Hausman, 2012). Ten years
of experience working with AT&T, Best Buy, and Sephora to unlock their full potential with
working with their social customers has helped companies listen comprehensively to their social
customers, engage with them, grow brand advocacy, harness their ideas for product
innovations—and most importantly, measure ROI in real dollar terms against real business
objectives (Keim, 2012).
According to the Social Media Headquarters, the most common ways that social media
can be measured is through sales and revenue streams (2012). Several cases were examined and
will be introduced to determine the influence of social media marketing and the ROI for the
organization’s marketing investment efforts. Graff indicates that Proctor & Gamble is one of
those dedicated to the digital approach, to the extent that it has restructured its marketing team in
the belief that social media is the major driving force (2012). They are now selling a new
cleaning product solely through Facebook, in line with its decision of a future where social
media, sales and marketing are more integrated.
The struggling Atlanta Aquarium offered 25% to 40% off admission prices from
February to May to people who followed it on Twitter or signed in on Facebook as a fan. The
promotion brought in $42,000 in sales, something that the Atlanta Aquarium could track through
a URL it created to use specifically for the promotion (Pratt, 2009). These quick incentives have
been successful for organizations to use in order to gain quick sales and increasing revenues that
may otherwise be unrealized without the use of social media.
Another retailer that is delivering social media return on investment is Burberry. The
expensive clothing retailer has demonstrated most effectively through the use of social media to
get to number one on Thinktanks digital index, which has called the label an icon on digital
investments and how it has translated to shareholder value. In Burberry’s case, a 29% increase
in revenue for the last six months and even being credited during Facebook’s initial public
offering to demonstrate how businesses are using their tools to launch new and/or existing
products.
According to Dells’ Lionel Menchaca: Our @delloutlet is now close to 1.5 million
followers on Twitter, and back in June we indicated that @dell outlet earned $3 million in
revenue from Twitter. In total, Dell’s global reach on Twitter reach on Twitter has resulted in
more than $6.5 million in revenue. In fact, our Brazilian and Canadian accounts are growing
rapidly. Dell Canada responded because the team heard our customers. In less than a year,
@DellnoBrasil has already generated $800,000 in product revenues (Paglia, 2010).
Retailers are also comparing the current marketing medium to the social media marketing
medium for their best value in regards to their marketing investment. Hoffman and Fodor
evaluated General Mills by reviewing their recent social media marketing campaign for Kellogg.
Kellogg, which created the “Special K Challenge”, translated those website digital interactive
experiences through click-through market responses over 18 months, and found that online ROI
for Special K cereal was twice as large as that from Television (2010). General Mills will most
likely seek out more social media exposure for their big box brands going forward and
concentrate less on unsuccessful traditional forms of marketing strategies.
While there will still be those situations in which behavior cannot be completely and
accurately traced (offline purchases or offline word-of-mouth), we think that carefully planned
social media campaigns afford phenomenal opportunities for relatively easy and cost-efficient
measurement of customers’ online investments in a company’s brands through respectful means

(Hoffman, Fodor, 2010). A study conducted through 500 phone interviews and 21 in-person
interviews with representatives from the major US brands concluded that a social media solution
for businesses across the United States would provide and distribute compelling, strategic
content, integrate reputation management and email communications, drive SEO results and
create reliable return on investment information which would provide exceptional value to
businesses across the board (Ray, 2010).
Organizations also need to realize the power in social media today. Crossman states that
“a small business owner desires more customers. Their goal is to grow their business. If you’re
a facilitator, you can help them with their business. The same holds true for customers in
general, you want to deliver things that they could want. That’s a different way of thinking,
especially in the banking world, but it’s at the core of what banking historically was about:
community and relationships. Social media is helping to bring banks back to that place” (2012).
In the case of Bank of America, they didn’t measure or understand the power of Facebook. They
were greedily measuring increased revenue from debit-card customers. “Their billion-dollar loss
paled into comparison to their complete loss of good will. I doubt they will recover in a decade”
(Gitomer, 2012). Understand the power of social media and use it effectively and accurately to
deliver business results and aim to provide the greatest ROI for your organization from business
growth, including past, present, and future metrics.

Conclusions/Prescriptions
Social media has gone mainstream and it represents an unprecedented marketing
opportunity that transcends the way companies connect and communicate directly with
customers. Nearly every business is exploring social media marketing initiatives with their
vision and business plan to better promote their products and services. Social media is the
fastest-growing segment in the interactive marketing category and companies overall will spend
upwards of thirty percent more this year than they did last. With this increased expenditure,
organizations are asking their marketing directors and financial officers to effectively calculate
the return on investment for these practices and strategies.
The return on investment in social media marketing should directly tie in to the goal of
your social media presence and messages from your organization. My recommendation from the
research is that the first step for a business is to determine what their itemized goal(s) are from
their social media marketing campaign. Sometimes we simply need ROI to signify a meaningful
return on investment of time and money. Other organizations may just want to occupy online
space in an arena that they otherwise wouldn’t be in and communicate with their customers.
Many other organizations will look to social to boost retail sales, drawing from the examples of
Burberry, Gillette, and the Baltimore Zoo. Determine what the goals from your social media
investment will be and occupy that space accordingly and effectively. Then, map out a timeline
in which an honest assessment of the goals be evaluated for direct evaluation.
As the research and case studies indicate, social media has transformed organizations and
their marketing strategies and business philosophies. Despite this transformation, most
marketers will spend more on social media this year than they did last yet few claim to know
what they are really getting for their money. The research indicates that organizations with three
or more years of social media experience have a better grasp of ROI compared to those
organizations with less than three years of experience. Those organizations with longevity in the
social media marketing arena should implement the social media balanced scorecard to better
calculate your social strategy and keen in on the ROI. Organizations can then calculate and
compare “real” ROI compared to their overall averages and industry averages. For larger
businesses that may have just launched a Facebook page or Twitter account within the last three
years, the research would recommend hiring an outside agency to gain a better understanding
and more knowledgeable approach to marketing spend towards the social giants; Facebook and
Twitter. Studies show that the smaller organizations are also realizing success with the hiring
and acclimation of only one individual to navigate and address their social media marketing at
their organization. Organizations can also determine a more simplified ROI with only one salary
towards their ROI algorithm than increments of more than one employees earnings.
After reviewing the research and analyzing the case studies, I would highly recommend
organizations implement a social media budget and allocate specific funding towards their
business philosophy not just immediate ROI. My recommendation are that managers should
begin by considering consumer motivations, overall brand awareness, brand engagement, and
increased exposure for their social media campaigns. Then measure the social media
investments customers make as they engage with the marketers’ brands rather than just solely
focus on ROI. Then, next time you’re pressed for ROI, turn the conversation towards big ideas
and forward-thinking companies designed to move forward from smart decisions and penetrable
social media goals, highlighting the examples of Amazon, Apple, and other retailing giants.
With 800 million plus Facebook users and the ability to connect online with each at your
fingertips, social media is here to stay. Despite the few organizations that have decided to cut
funding in this realm, the research would indicate and recommend to promote your brand,
organization, service, product, or entity through your current and future social media marketing
allocated means. The return may not be immediate, but the inexpensive exposure and
accessibility for countless Facebook and Twitter users to explore, educate, and gain an increased
knowledge towards your idea (whatever that may be) is priceless. Organizations that are
promoting through this model may find it to be incalculable, and also difficult to calculate as far
as future earnings and proceeds towards current campaign investment.
Finally, some top priorities moving forward for social media marketers should be trying
to bridge the measurement gap for ROI at your organization. Instead of thinking about social
media marketing only in one segment, try to address social media across all the channels of your
organization, not just sales and marketing. Don’t miss out on opportunities because ROI is
difficult to address at your organization in the short-term, be more concerned about losing
viability for the long-term. Social media presence is no longer the name of the game, show
decision makers how your marketing efforts impacted the bottom line of your organization and
how it will to continue to do so in the future. Understand and achieve success with sophisticated
tools and analytical algorithms to interpret the metrics and apply them to your business goals and
objectives and see if this process is efficient for your organization, otherwise hire outside third-
party consultative social media agencies. The bottom line is this, marketers that can grow
awareness, connect to their customers socially, and turn lead-based opportunities to brand and/or
organizational conversions should increase their ROI in social media marketing.

References
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Return On Investment Concerns

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Return On Investment Concerns

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Running Head: RETURN ON INVESTMENT CONCERNS IN SOCIAL MEDIA 1

RETURN ON INVESTMENT CONCERNS IN SOCIAL MEDIA MARKETING:

Luke Benjamin Wendlandt

Name of Capstone Sponsor: Frank Plachecki, Ph.D.

Name of Second Reader: Erik Burns, M.A., MBA.

Approved: September 17th, 2012

All rights reserved

INFORMATION TO ALL USERS

All rights reserved

INFORMATION TO ALL USERS

and encouragement during my pursuit of my Master’s of Business Administration and Master’s

fellow graduate students in the Master’s of Business Administration and Master’s of

remain in this work, of course, the responsibility is entirely my own.

analytics further discussed in this study.

Management and Leadership……………………………………………………...21

Social Media Marketing Advocates………………………………………………31

Social Media Marketing Opponents…….………………………………………...32

Automotive Social Media Statistics………………………………………………34

marketing managers and chief financial officers are demanding.

ROI testing will be challenged and researched.

Statement of the Problem

organizations then simply a social media website.

Purpose of the Study

Statement of Research Question

organization’s social media marketing campaign?

definitions are provided below.

(Zarella, 2010, p. 65).

proportion of consumers who know of the brand” (Hausman, 2012).

outcome for marketers” (Raice, Terlep, & Vranica, 2012, p. 4).

Facebook users and the general public (Lithium, 2012).

(Philip, 2012, p. 17).

Hoffman, 2010, p. 2).

online investment programs” (Keim, 2012).

term and in both ways, qualitative and quantitative” (Ray, 2010).

aspect of your business” (Social Media Headquarters, 2010).

Delimitations and Limitations

revenue in a traditional sense, revenue less cost, divided by cost.

most current and updated information available.

validate some the findings.

Significance of the Study

incalculable, while others have methodology behind their forecasted numbers.

status quo behind the ROI social media marketing conundrum.

effectiveness of online marketing campaigns as concerned to their estimated investment. Journal

not just wasting time on Facebook” (Zarella, 2010, p. 205).

Social Media Background Content

their social media marketing practices, according to Lithium’s website (2012).

you” (Zarella, 2010).

objectives. (Ray, 2010).

clientele, thus providing added value to their organizations.

in which organizations have benefited from different social media strategies.

Return on Investment (ROI)

Facebook and Twitter) (2011).

Matt Magee, CEO SearchEngineLand (2012).

(Zarella, p. 209, 2010).

advocates and influencers (Lithium, 2012).

to strategic implementation with direct ties to specific measurable performance indicators

to the Automotive Marketing Association website (2012), EdgeRank is an algorithm that

content, and get users to share your information (AMA Website).

is lowering their call-center costs, lowering time-to-time resolution, or improving customer

Managers and Leadership

our social media marketing practice and crucial to nailing ROI.

Hausman’s 5 Steps for ROI

enough, now is the time to improve your ROI.