Comments on: Social Media ROI Idiocy http://orange-envelopes.com/blog/2010/01/27/social-media-roi-idiocy/ Tue, 10 Aug 2010 12:07:28 -0700 http://wordpress.org/?v=2.9.2 hourly 1 By: links for 2010-02-04 « innovations in higher education http://orange-envelopes.com/blog/2010/01/27/social-media-roi-idiocy/comment-page-1/#comment-1252 links for 2010-02-04 « innovations in higher education Fri, 05 Feb 2010 03:06:00 +0000 http://orange-envelopes.com/blog/?p=726#comment-1252 [...] Social Media ROI Idiocy (tags: socialmedia strategy roi) [...] [...] Social Media ROI Idiocy (tags: socialmedia strategy roi) [...]

]]> By: John Heaney http://orange-envelopes.com/blog/2010/01/27/social-media-roi-idiocy/comment-page-1/#comment-1249 John Heaney Wed, 03 Feb 2010 21:36:38 +0000 http://orange-envelopes.com/blog/?p=726#comment-1249 Heidi, Your approach is the sensible and sane way to approach social media ROI. It doesn't attempt to apply a return on a specific action, but on a series of actions or an entire program. If you spend an hour per week on a social media chat moderated through Twitter and you see an increase in your blog traffic and website traffic immediately after, the odds are that your participation and engagement in that regular chat session is responsible. If those website visits result in a new website development project worth $5000, then you can calculate an approximate ROI. If you also engage in a weekly LinkedIn group that you determine generates no spike in visits, then you can adapt your strategy to focus on Twitter-based discussions. But without an objective and the ability to track specific metrics, you'd be flailing around the social media space like most companies do. Actually, I feel kind of silly discussing things that appear to be so fundamental and basic, but as long as there are social media "experts" who claim that ROI justifications are impossible, foolish or so business 1.0, I guess I'll just keep on taping. Heidi,
Your approach is the sensible and sane way to approach social media ROI. It doesn’t attempt to apply a return on a specific action, but on a series of actions or an entire program. If you spend an hour per week on a social media chat moderated through Twitter and you see an increase in your blog traffic and website traffic immediately after, the odds are that your participation and engagement in that regular chat session is responsible. If those website visits result in a new website development project worth $5000, then you can calculate an approximate ROI. If you also engage in a weekly LinkedIn group that you determine generates no spike in visits, then you can adapt your strategy to focus on Twitter-based discussions. But without an objective and the ability to track specific metrics, you’d be flailing around the social media space like most companies do. Actually, I feel kind of silly discussing things that appear to be so fundamental and basic, but as long as there are social media “experts” who claim that ROI justifications are impossible, foolish or so business 1.0, I guess I’ll just keep on taping.

]]> By: Heidi Cool http://orange-envelopes.com/blog/2010/01/27/social-media-roi-idiocy/comment-page-1/#comment-1248 Heidi Cool Wed, 03 Feb 2010 20:43:27 +0000 http://orange-envelopes.com/blog/?p=726#comment-1248 John, I really liked how you approached this so directly. I'd also add that the murkiness of measuring ROI isn't a new problem. Measuring sales from direct mail is easy, the order cards come in, you see which campaign they came from, you log it accordingly and within a few weeks you can see exactly what your percentage sales were. Other channels are more ambiguous. Brand advertising for example. Who doesn't love the winter Coke commercials with the frolicking polar bears getting refreshment from their coke bottles? Can Coke measure exactly how many units were sold as a result? No. But they can track how sales increase or decrease over the course of time, they can correlate increases with the timing of various marketing efforts, and their research can show them how positive perceptions and brand loyalty contribute to long-term sales. (I for one don't drink Pepsi.) Some of this stuff is more difficult to measure, but that's always been the case, and we still find value in these activities because we know how they are contributing to the ROI. An increase in name recognition and brand reputation will (generally) lead to an increase in sales, repeat business, etc. We just have to work a bit harder or measuring how that happens. It may not be in exact dollars, but we can certainly measure correlations in activity. When we do X, sales go up. When we stop doing X, sales go down. In many ways social media makes this easier. I can track how many visitors came to my site from Twitter, LinkedIn, etc. I can measure how much time I spend in those places (and what I do there) and see first when traffic increases and then how much of that converts to leads and sales. If I were advertising on T.V. I couldn't track that as closely. I'd just need to see correlation in the timing of the ads and the responses. I can measure sales leads from LinkedIn just as easily as I could a direct mail campaign. Measuring the impact of my blog is a bit more vague, but the blog gives me the foundation to make my LinkedIn strategy work. So it is still contributing to the ROI. I can't quantify it as specifically but I can measure the time costs of my blogging and social media activities to see how it all works collectively. John,
I really liked how you approached this so directly. I’d also add that the murkiness of measuring ROI isn’t a new problem.

Measuring sales from direct mail is easy, the order cards come in, you see which campaign they came from, you log it accordingly and within a few weeks you can see exactly what your percentage sales were.

Other channels are more ambiguous. Brand advertising for example. Who doesn’t love the winter Coke commercials with the frolicking polar bears getting refreshment from their coke bottles? Can Coke measure exactly how many units were sold as a result? No. But they can track how sales increase or decrease over the course of time, they can correlate increases with the timing of various marketing efforts, and their research can show them how positive perceptions and brand loyalty contribute to long-term sales. (I for one don’t drink Pepsi.)

Some of this stuff is more difficult to measure, but that’s always been the case, and we still find value in these activities because we know how they are contributing to the ROI. An increase in name recognition and brand reputation will (generally) lead to an increase in sales, repeat business, etc. We just have to work a bit harder or measuring how that happens. It may not be in exact dollars, but we can certainly measure correlations in activity. When we do X, sales go up. When we stop doing X, sales go down.

In many ways social media makes this easier. I can track how many visitors came to my site from Twitter, LinkedIn, etc. I can measure how much time I spend in those places (and what I do there) and see first when traffic increases and then how much of that converts to leads and sales. If I were advertising on T.V. I couldn’t track that as closely. I’d just need to see correlation in the timing of the ads and the responses.

I can measure sales leads from LinkedIn just as easily as I could a direct mail campaign. Measuring the impact of my blog is a bit more vague, but the blog gives me the foundation to make my LinkedIn strategy work. So it is still contributing to the ROI. I can’t quantify it as specifically but I can measure the time costs of my blogging and social media activities to see how it all works collectively.

]]> By: John Heaney http://orange-envelopes.com/blog/2010/01/27/social-media-roi-idiocy/comment-page-1/#comment-1230 John Heaney Thu, 28 Jan 2010 20:23:15 +0000 http://orange-envelopes.com/blog/?p=726#comment-1230 Mel, you've identified the complexity of determining precise ROI that can be applied to a specific event or activity, whether social media or otherwise. That's why it's essential to start with a strategic objective (to increase revenues or decrease costs) that can be measured and monitor your activities across a timeline. That timeline doesn't have to be limited to your SM activities. If there were a merger or a new product line introduced, that would also be included on the timeline to determine correlation between transactions and their precursors. The SM gurus who claim that you can't assign a dollar value to a single tweet or blog post are right. You can't. However, you can track activities and transactions that occur over time and map them against specific SM engagements. What activities caused a surge in traffic to your blog, to your website, to your store? If you're not tracking them you won't be able to discern what platforms and tactics are most effective in achieving your objectives. Mel, you’ve identified the complexity of determining precise ROI that can be applied to a specific event or activity, whether social media or otherwise. That’s why it’s essential to start with a strategic objective (to increase revenues or decrease costs) that can be measured and monitor your activities across a timeline. That timeline doesn’t have to be limited to your SM activities. If there were a merger or a new product line introduced, that would also be included on the timeline to determine correlation between transactions and their precursors. The SM gurus who claim that you can’t assign a dollar value to a single tweet or blog post are right. You can’t. However, you can track activities and transactions that occur over time and map them against specific SM engagements. What activities caused a surge in traffic to your blog, to your website, to your store? If you’re not tracking them you won’t be able to discern what platforms and tactics are most effective in achieving your objectives.

]]> By: John Heaney http://orange-envelopes.com/blog/2010/01/27/social-media-roi-idiocy/comment-page-1/#comment-1229 John Heaney Thu, 28 Jan 2010 20:14:20 +0000 http://orange-envelopes.com/blog/?p=726#comment-1229 Great question - or actually 5 great questions. First of all, when analyzing the effectiveness of a social media marketing program, it's essential to note that the ROI will not necessarily be calculated to the same level of precision as a direct mail campaign or a targeted mass e-mail whose results can be identified almost immediately by monitoring a specific phone number or URL. That's pretty easy. Social media ROI requires that you establish a timeline and track specific SM activities: blog posts, podcasts, press releases, webinars and twitter chats, for example. Then examine the activities whose movement you've identified as your objective and identify the correlations. If your overall objective is to generate website sales of your product and your sales have increased 15% since the start of your SM program, then you need to examine your timelines more closely. Was there a surge in traffic after your webinar? Did your mention on the industry's leading blog generate a burst in traffic? Did your post of the how-to video on Facebook result in website visitors that were converted into sales? What you <strong>can</strong> identify are transactions, their precursors and their results. If, after six months of SM activity you establish that your average customer is now purchasing from you once every four months instead of once every six months and that their average purchase has increased from $12 to $15 then you can calculate an ROI from your SM activity. And, by monitoring and analyzing the transactions and their precursors, you can adjust your SM strategies to reach the most people with the most impact. Great question – or actually 5 great questions. First of all, when analyzing the effectiveness of a social media marketing program, it’s essential to note that the ROI will not necessarily be calculated to the same level of precision as a direct mail campaign or a targeted mass e-mail whose results can be identified almost immediately by monitoring a specific phone number or URL. That’s pretty easy. Social media ROI requires that you establish a timeline and track specific SM activities: blog posts, podcasts, press releases, webinars and twitter chats, for example. Then examine the activities whose movement you’ve identified as your objective and identify the correlations. If your overall objective is to generate website sales of your product and your sales have increased 15% since the start of your SM program, then you need to examine your timelines more closely. Was there a surge in traffic after your webinar? Did your mention on the industry’s leading blog generate a burst in traffic? Did your post of the how-to video on Facebook result in website visitors that were converted into sales? What you can identify are transactions, their precursors and their results. If, after six months of SM activity you establish that your average customer is now purchasing from you once every four months instead of once every six months and that their average purchase has increased from $12 to $15 then you can calculate an ROI from your SM activity. And, by monitoring and analyzing the transactions and their precursors, you can adjust your SM strategies to reach the most people with the most impact.

]]> By: Mel Aclaro http://orange-envelopes.com/blog/2010/01/27/social-media-roi-idiocy/comment-page-1/#comment-1228 Mel Aclaro Thu, 28 Jan 2010 18:14:03 +0000 http://orange-envelopes.com/blog/?p=726#comment-1228 Hi John, I find myself agreeing with the gist of your post... but on one point I feel compelled to clarify... <i>"The reality is that ROI is much simpler than that. You only need to know two numbers: how much you gained from your investment, and the total cost of the investment itself. That’s it...ROI = (Gain – Cost) / Cost... If you spent $1000 and saw an increase in sales of $1500, then your ROI was: ROI = (1500-1000)/1000 = 50%"</i> While I agree with the gist of the underlying formula, the devil in the details is in that piece where execs "...saw an increase in sales...". The challenge for consultants is in the facilitative process required to map specific financial metrics to specific activities that are mostly the result of social media. Else, a simple application of the formula risks over-stating (or under-stating) the return due to non-social media effects on revenue. (For example: economic effects, mergers/acquisitions, new lines of business introduced in the same period, etc. all can affect the revenue picture.) But, I don't want the above comment to detract from a great post that I think hits the key points of this debate. Thanks for sharing. :) Hi John,

I find myself agreeing with the gist of your post… but on one point I feel compelled to clarify…

“The reality is that ROI is much simpler than that. You only need to know two numbers: how much you gained from your investment, and the total cost of the investment itself. That’s it…ROI = (Gain – Cost) / Cost… If you spent $1000 and saw an increase in sales of $1500, then your ROI was: ROI = (1500-1000)/1000 = 50%”

While I agree with the gist of the underlying formula, the devil in the details is in that piece where execs “…saw an increase in sales…”.

The challenge for consultants is in the facilitative process required to map specific financial metrics to specific activities that are mostly the result of social media. Else, a simple application of the formula risks over-stating (or under-stating) the return due to non-social media effects on revenue. (For example: economic effects, mergers/acquisitions, new lines of business introduced in the same period, etc. all can affect the revenue picture.)

But, I don’t want the above comment to detract from a great post that I think hits the key points of this debate. Thanks for sharing. :)

]]> By: Mark W Schumann http://orange-envelopes.com/blog/2010/01/27/social-media-roi-idiocy/comment-page-1/#comment-1227 Mark W Schumann Thu, 28 Jan 2010 16:17:33 +0000 http://orange-envelopes.com/blog/?p=726#comment-1227 John, thanks for this <em>very clear</em> statement. Here's my question though. I'm sure you've thought this through, it's actually very basic, but as someone who doesn't know much about corporate marketing I have <em>no idea</em> how one can attribute sales numbers to any specific marketing campaign. How do I know that <em>this</em> sale came from a tweet and <em>that</em> one came from a TV ad? Even if I run things like, what do you call 'em, split URLs or whatever... how do I know someone was or wasn't inclined to buy because of the TV ad, but then the Facebook fan group gave them a place to go before they committed money? Even though perhaps a direct email piece actually made the sale. I think you can measure the last step in the sales chain pretty easily: If they bought the product via this particular 800 number or a certain URL, you know they came from Source X. But then aren't you overweighing the significance of that last step? What about the two or three things that made them notice your brand and be interested in it and decide they want it first? How do you measure that? Wow, that's not one question, that's like five. But I'm really interested in what you're saying here. John, thanks for this very clear statement. Here’s my question though.

I’m sure you’ve thought this through, it’s actually very basic, but as someone who doesn’t know much about corporate marketing I have no idea how one can attribute sales numbers to any specific marketing campaign.

How do I know that this sale came from a tweet and that one came from a TV ad? Even if I run things like, what do you call ‘em, split URLs or whatever… how do I know someone was or wasn’t inclined to buy because of the TV ad, but then the Facebook fan group gave them a place to go before they committed money? Even though perhaps a direct email piece actually made the sale.

I think you can measure the last step in the sales chain pretty easily: If they bought the product via this particular 800 number or a certain URL, you know they came from Source X. But then aren’t you overweighing the significance of that last step?

What about the two or three things that made them notice your brand and be interested in it and decide they want it first? How do you measure that?

Wow, that’s not one question, that’s like five. But I’m really interested in what you’re saying here.

]]> By: markclayson http://orange-envelopes.com/blog/2010/01/27/social-media-roi-idiocy/comment-page-1/#comment-1226 markclayson Thu, 28 Jan 2010 08:51:47 +0000 http://orange-envelopes.com/blog/?p=726#comment-1226 Thanks for your post, great post! It's very nice and informative. Thanks a lot for helping me know more about this field Thanks for your post, great post! It’s very nice and informative. Thanks a lot for helping me know more about this field

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