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Measuring Social Media ROI From a CFO’s Point of View
By Anthony Viceroy
n today’s challenging economic and business environment, every marketer understands the need to demonstrate return on investment (ROI) for marketing investments as well as the clear need to deliver short-term results as well as long-term benefit for the brand. At the same time, finance chiefs charged to delivering improved operating margins to the organization’s financial community continue to look for cost efficiencies and cost-benefit relationships in their organizations. As a result, more and more CEOs and CFOs are demanding quantifiable ROI before allocating and approving marketing budgets. Measurement Challenges Many marketers use both traditional media and, increasingly, social media in their overall marketing mix calculations as a way to understand ROI. However, accurately measuring the results of individual social media tactics or programs through marketing mix modeling remains challenging for several reasons: • Marketing mix calculations get less accurate outside of broad strokes, and many social media efforts are laser-focused or don’t have access to the level of data that other channels do, making for a bad mathematical fit. • Social media value for ROI manifests itself in a range of ways—brand building, crisis mitigation, advocacy—that are very difficult to capture inside a marketing mix calculation.
Someone who is followed by only 10 highly influential people can offer far more value than somebody who is followed by an audience of thousands who are not followed.
• Traditional ROI models that focus on number of impressions to quantify marketing investments simply don’t work with social media, as impression counts on most social media campaigns are rough estimates at best. With the advent of social media, we need to view ROI in a different way where the quality of a social media program is measured through valuation of various types of consumer engagement. Measurement must be based around such things as consumer attitudes, beliefs and behaviors; comments on Web sites and blogs; and participation on social networks. We then assign an estimated value for each of those actions and the cascading value they can create to develop a measurement program that represents real and effective consumer engagement. So why is measurement of ROI through consumer engagement more relevant than more traditional means? Simply put, consumers by way of their engagement control social media as well as its ongoing word-ofmouth support, validation and amplification. Earned social media is the most transChapter 4: Social Media Measurement
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parent and credible, and it maximizes the potential that a brand message has to be fully leveraged, shared and engaged with by a virtually unlimited number of consumers— the very same individuals who will buy your product or service and build brand value for you. By better aligning social media goals and objectives to valued consumer engagement, brands will be able to determine more accurate ROI. And, ultimately, the greater the consumer engagement, the greater the growth in brand equity and the greater the improvement in top-line sales performance. Measuring Engagement The key to measuring social media ROI effectively is to do the negotiation, research and value estimates of each type of engagement and behavior change upfront. Then movement in value created by engagement can be tracked with real-time analytics at regular intervals, and the cost effectiveness of subsequent efforts may be compared. Periodic checks of macro trends in attitude and behavior change also are smart moves as part of this process, as they allow you to track the effect your engagement is having on the larger audience. To calculate ROI for social media programs, follow these steps in order: 1. Establish articulated goals and objectives for the program as you would for any serious marketing effort. 2. Establish agreed-upon values for desired business outcomes and their associated social media engagement types. For instance, if the goal is to increase sales, conduct a comparative
study to establish the value of a Facebook “like” for your brand compared to the general population. 3. For key influencers, estimate the value of future communication about your brand based on relevance, following, authority, tonality, key message pickup and other related factors. This is not an advertising value equivalent; it is a question of estimating the value of the influencer to the brand’s goals. Remember that someone who is followed by only 10 highly influential people can offer far more value to an organization than somebody who is followed by an audience of thousands who are not followed. 4. Track the value of changes in the attitudes, beliefs and behaviors of the target audience through your engagement metrics. Measure the percentage of change and gauge how it impacts sales based on your estimates. 5. Establish success triggers if targets are met and designate the ability to correct course in real time if targets are not met. Consider surveys as macro pulse checks of program success. Once appropriate estimates of value are agreed upon and all appropriate values have been assigned, you’ll then be able to follow the tactics undertaken through to the results they generate, measuring costs against the metrics and values established at the outset. Measuring Crisis Impact Over the last few years we have seen how
The key to measuring social media ROI effectively is to do the negotiation, research and value estimates of each type of engagement and behavior change up front.
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social media can impact a crisis in both positive and negative ways. Coupled with lead-up advocacy work, a reasonable, transparent and rapid social media response to consumers has helped organizations either fully avoid a crisis or manage through a crisis with success. We have also seen organizations that have had their brands and stock prices severely penalized when a robust consumer engagement platform is not available or even when a social media mistake actually caused the crisis. In crisis communications where the social media valuation does not correspond to the model outlined in the section above, you need to look at measurement differently and measure money saved as opposed to revenue generated in crisis management. To do so, look at recent crises in companies of comparable size and get a comparable baseline by examining how the social media crisis impacted the company’s stock price or other value and profitability measures. Then estimate the likelihood of various types of social media crisis to your business (e.g., how
often do consumers or stakeholders lodge significant complaints now) and factor in that drop in value. The significant value of preparedness, monitoring and crisis mitigation will quickly reveal itself. All of this measurement is ultimately a proxy for doing the right thing and funding the right programs for the short- and longterm health of the business. Although as a CFO I do recognize that some things may never be able to be measured fully, it would be incorrect to assume intangible benefits do not have fundamental value to my business or that of my clients. An army of consumer advocates who are consistently and proactively promoting your brand, standing up for you on and offline in crisis, and helping you evolve your products and services is one of those benefits. These intangible benefits have a very real and lasting impact on your organization and your bottom line. PRN
Anthony Viceroy is president and chief financial officer of Porter Novelli.
Chapter 4: Social Media Measurement