8 Steps To Demonstrate Positive Return On Investment For Social Media Marketing

Social Media Marketing’s ROI (Return on Investment) has been discussed on the web in blogs and websites and comments are frequently heard such as “You can’t measure the ROI of social media marketing”  

One commentator from the Search Engine Land website says that even if you can’t measure the increase in sales or reductions in costs that are an essential element of measuring ROI there are other benefits for placing your content on the highly trafficked Social media sites such 

• Links (sometimes 100′s and 1000′s of links)
• Long-term traffic from linking sites
• Improved search ranking
• Long-tail search traffic

Because you develop these high-value links, you can easily rank prominently for targeted terms in search engines and increase your long-tail traffic which will stabilize at a much higher number than the pre-social marketing campaign numbers.

The talented Peter Kim, a former Forrester analyst, outlined a framework for measuring Social Media and said

“Although social media channels seem to be mostly qualitative in nature, user activities can be easily quantified.  Although users interact with channels in different ways, four common factors quantify social media success:  Attention, Participation, Authority, and Influence.”

Here is his framework for measuring Social Media benefits

1. Attention.  The amount of traffic to your content for a given period of time.  Similar to the standard web metrics of site visits and page/video views.
2. Participation.  The extent to which users engage with your content in a channel.  Think blog comments, Facebook wall posts, YouTube ratings, or widget interactions.
3. Authority.  Ala Technorati, the inbound links to your content – like trackbacks and inbound links to a blog post or sites linking to a YouTube video.
4. Influence.  The size of the user base subscribed to your content.  For blogs, feed or email subscribers; followers on Twitter or Friendfeed; or fans of your Facebook page.

He says that “There’s an “x-factor” that comes into play well:  sentiment”…. but a lot of CEO’s will not buy into the  sentiment game. They will still be insistent…. saying “I don’t care about these sorts of soft numbers show me the hard facts ..show me the ROI on Social Media Marketing and I will give you the budget.” It’s chicken and egg scenario all over again, so how do you approach it.

Well one way is to  one way is to propose a low cost “Proof of Concept” which will allow you to provide a low risk pilot that will provide enough evidence and show a positive “ROI” for the management to take it seriously and give Social Media Marketing a place at the marketing table.   

So where do you get the budget for social media even for a proof of concept as social media isn’t free because it

• Needs People – Wages
• Requires Technology – Software and Hardware
• Takes Time – Money

You need to show a positive “Return On Investment” or ROI. In other words it needs to produce more dollars in profit than you spend on the marketing.

So what are core mangement goals and business drivers? In essence the pilot  needs to produce one of two results

1. Improve Revenue or
2. Reduce Costs 

or preferably both.

So you need to show that it will achieve at least one of these, this is what management will insist on rather than write a blank cheque

So you need to get a budget.. Essentially it is about proposing small reductions in marketing efforts that are experiencing low or negative ROI .. these could be as an example

• Yellow pages print advertising budget
• Reduction in external PR
• Cut back in outbound call centre marketing 

 So now you have a “Social Media Marketing” budget and what are the 8 stages in of ”Social Media Marketing” after you have the go ahead for the “Proof Of Concept” to help you progress beyond pilot and make it an integral part of your companies marketing armoury.

1. Investment (Time and Money) followed by
2. Planning
3. Baseline measurements are taken for important indicators so trends can be shown that will support your proof of concept
4. Measurements are taken at regular intervals to show trends to ensure you are on track and and adjustments can be made 
5. Action (Marketing commences)
   • Blogging
   • Twitter
   • Facebook
   • LinkedIn
   • YouTube
   • Plus Optimizing all of the above
6. Reaction by the market to the action which will produce two results in the following sequence
7. Non-Financial Impact (also called pre-cursors to the financial impact) such as increased
   • Website visitors
   • Click throughs
   • ReTweets
   • Positive and or Negative WOM (Word Of Mouth)
   • Facebook friends
   • Twitter Followers
   • Delivered emails
   • Positive or Negative Press
   • Blog CommentsYouTube Views
8. Financial Impact are elements like 
   • Increased sales
   • Increased average sale value
   • Reduced service centre costs

Note:  The  major hurdle along this journey will be the question “Where are the increased sales” after a few months. The answer to this is to be able to provide  analytics providing facts and figures that show the precursors to the financial impact such as

• Website visits increasing
• ReTweets numbers going up
• Positive comments on the blog

as compared to your baseline measurements that you took prior to the Social Media Marketing project

So the analytics need to be in place to capture these indicators that will ensure that mangement will keep the project live so that you can produce the final evidence that there is a positive “ROI” in Social Media Marketing. You will need a 6- 12 month timeline that will allow you to show that the pre-cursors do lead to the promised positive ROI.

The figures from your analytics will show the results are trending up and are the the “Pre-cursors” to the financial results. It will take time but as a good manager knows that the positive non- financial impact will certainly lead to a positive ROI.

So how do you measure the ROI of Social Media Marketing?