Last month, we reported on a survey that found that 84% of social media programs don’t know how to measure return on investment (ROI) on social media. The comments in that post indicated that a lot of individuals and businesses want to be able know how to measure social media ROI of their social media strategies and campaigns, but they don’t know where to start.
Companies and executives are finally beginning to really jump on the social media bandwagon, and that’s fantastic. However, for social media to fully work (for everyone), businesses and brands need to be able to evaluate the impact their social media use is having, both positive and negative. Measuring social media ROI isn’t impossible, but it can be difficult because many of the pieces that need to be evaluated are difficult to track. This guide is designed to help you track down those pieces and determine the ROI you’re getting on social media.
ROI Reality Check
Oliver Blanchard’s Social Media ROI Presentation is a witty, fun introduction to ROI in terms of social media. If you’re confused about what ROI is (or rather, how it is measured), in the context of social media, check out his presentation (below), before you proceed with this post.
Defining Clear Goals
As a standard formula, ROI is pretty basic, ROI = (X – Y) / Y, where X is your final value and Y is your starting value. In other words, if you invest $5 and get back $20, your ROI is (20 – 5) / 5 = 3 times your initial investment. In the financial sense, ROI is measured purely in the context of dollars and cents, however, the principles can really apply to any type of investment — monetary or not.
Having concrete goals and concrete baselines is crucial to calculating your return on investment. So before you set out to measure and monitor your social media returns, you need to have a clear idea of what it is you want to accomplish.
Once you have your goals defined, you need to gauge the baseline for your levels before starting or changing your social media strategy. For example, if your goal is to increase social media mentions of your company, in order to measure the ROI of any actions taken toward that goal, you need to know where you stand now. You can’t evaluate the ROI accurately without a baseline.
Although ROI ≠ metrics, traditional web metrics like traffic counts, number of comments, Twitter followers, Facebook fans, etc. are an important component when calculating your ROI.
The trick is to not rely solely on the numbers, but on what the numbers end up leading to. For instance, does your increase in website visitors correlate with higher sales? Are people that find your website from Twitter or Facebook then clicking on your product pages or going to the e-Commerce section of your site? That’s the sort of data you want to be able to look for.
Back in January, we did a round-up of 50+ Tools for Measuring Web Traffic. Here are some of our favorites and some additional social media related measuring options:
Google Analytics — It’s free and it can provide a really powerful baseline for a variety of different factors. You can track incoming links and then the activities of the users they send, which can be helpful.
Omniture — Omniture has a slew of services available for businesses, including components that track Facebook and Twitter metrics.
TweetMeme Analytics — This is useful if you use TweetMeme’s retweet buttons on your sites. It’s a lot like Google Analytics, but focused on TweetMeme.
PostRank Analytics — This suite of tools measures social engagement on other platforms and services. What’s nice about PostRank is that instead of just a raw number, you can actually see the messages and comments from other sites that contribute to your stats. This can be really important for sentiment analysis (more on that later).
HootSuite — HootSuite is a great Twitter manager but also offers impressive analytics. The nice thing about the click data you get from an app like HootSuite (or bit.ly) is by looking deeper you can more easily see if those clicks translate into transactions or impressions on your other sites.
Having a metric for something like Twitter mentions is pretty meaningless if you don’t know if those mentions are positive or negative. This is where sentiment analysis is interesting. Sentiment is also a useful baseline to look at before implementing or changing a social media strategy and calculating your ROI.
We’ve written a lot about different sentiment analysis tools for Twitter and here are some highlights:
Viral Heat — Viral Heat is an affordable social media monitoring service that includes a sentiment breakdown for Twitter mentions.
Twendz — Twendz is a very basic real-time Twitter sentiments tool.
Tweet Feel — Tweet Feel is another real-time Twitter sentiments search-engine.
Crimson Hexagon — Crimson Hexagon is an Enterprise-level social media tracking tool. The algorithm they use for their VoxTrot Opinion Monitor is really impressive stuff, and will help you determine what consumer sentiment is toward your brand based on social media mentions.
Social Media Product Suites
These products can be extremely useful in measuring ROI on social networks but are primarily designed for bigger brands and corporations. Still, in terms of all-encompassing tool sets, these tools have the edge.
Vitrue SRM — We’ve covered the Twitter Pages component of Vitrue SRM (Social Relationship Manager) before, but the whole suite is really dedicated to managing and getting the most information out of your social media accounts. Vitrue does analytics for links posted on Twitter or Facebook and can also plug into third-party services like Omniture and Google Analytics. Vitrue SRM is basically a CMS for controlling and monitoring your Twitter and Facebook accounts.
Salesforce.com — Salesforce.com’s Service Cloud 2 line of products is really designed to integrate Twitter and Facebook results and pages directly into a company’s CRM. Although this isn’t ROI in the most clear-cut terms, by improving customer service and getting a handle on problems quickly, brands can save themselves from potentially costly mistakes. Those savings can be taken into account when computing your ROI.
Making the Data Usable
This is the hard part. After you have defined your baseline, you need to take the metrics from your monitoring tools and see how they correlate to higher sales, better customer retention, or whatever your primary markers for output are.
If your ultimate measurement is sales for instance, look at your sales level. If it has increased, look at the number of referrers on your e-commerce site (assuming you can track this data) from your website or Twitter or the number of coupons used that were given away in a Facebook campaign to start calculating which sales stemmed from your social media campaigns.
Do you see any trends? Is traffic up to your store after posting on Facebook? What about Twitter? Does store traffic correlate with more sales when evaluating that same data? Does a higher sentiment analysis on Twitter lead to more sales or more visits?
Finding trends and tracking them back to their point of origin is the key to measuring ROI.
What do you think?
What do you use when measuring social media ROI? Is ROI the best term for measuring impact of social media, or should something else be used? What have you found to be good indicators of things that work and don’t work when using social media? Let us know!
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Mark Montoya has been working in personal branding for more than a decade for hundreds of online and offline companies, small businesses and individual service professionals. His focus has been toward improving the way jobseekers find employment on the Internet. He has synthesized his expertise by helping job seekers obtain their ideal choice of employment over the Internet on his sites MyOnlineCareerSpace.com and MyOnlineCareerCoach.com, and through his books 101 Tips Every Job Seeker Should Know and The Ultimate Online Job Search eBook.
“It is the responsibility of the individual to reject the prospect of mediocrity and to strive for the betterment of society as a whole” ~ Mark Montoya