I think social media ROI is fairly easy from a marketing stand point. In B2B marketing, you want to drive traffic from the web to your properties (like a blog or .com) and capture conversions in your CRM as leads. There are intermediate steps in there that have their own health indicators, like relationship building and output. But the bottom line hasn't changed. In B2C, it's either used for branding and is measured in terms of exposure. Or it's used to drive traffic to marketing programs, like a coupon offering, which is measured in terms of conversion. Or it drives traffic to an ecommerce site where it's measured in terms of sales. The hard part is getting the tracking all set up. You need analytics software to connect to market automation software with both dumping data into a CRM. While it's conceptually easy, integration is time intensive and expensive, which makes it inaccessible to most people using social media. How many people are using a set up like Webtrends Analytics integrated with Eloqua, Radian6, and Salesforce? Probably not many. That is why people are struggling with how to prove ROI. We simply lack the integrated systems that do it, which is mostly a resourcing issue. Regardless, from a marketing perspective social media offers additional channels and should be measured in comparison to the other channels, like email and advertising, to know how much budget to allocate to it. Marketing isn't the only thing you can do with social media, though. You can also use it to administer support. In which case you measure value in terms of reduction in phone calls, number of cases closed per person compared to other channels, and other traditional support and call center KPIs. HR has it's own KPIs. So does Product. So does IT...etc.

Wow Dave. Seems some were unclear of your meaning. Anyway I'd like to share 2 measurements of ROI that I have used personally. What I want to make clear here is that it is important to build a 'static pipeline' of metrics and measurements that DO NOT change. The tactics whether they are social, or television commercials are the flexible or creative aspect.... Before this gets REALLY long, I will create a post on my site and trackback to your post. I have been using social media exclusively for PR and marketing in both my art business as well as working with Best Buy. I will cover the real measurements used in both. Thanks for more great ideas :) Keith

I've never had a client ask about ROI -- in the real, "dollars in return for my marketing/PR investment." Every client asks about "results," and the sophistication of what they expect in response to "How are we doing?" varies. For some, they mean "How many media or big-blog clips do we have?" Others mean "What's our click/conversation rate on the site?" Others what to know about how some other relevant performance "needle" is on the move. It's about meeting objectives we've set more than it is delivering a hard ROI.

ROI definition conversation aside, I think the larger point to keep in mind here is getting clients and organizations to think about integrated communications programs (including a social component) in terms of return on investment (the lowercase version, as Shel so nicely stated). And, as you said, Dave, showing a linkage back to the original objectives. As communicators and counselors, if we can demonstrate those kinds of results to our clients on a consistent basis, we'll have made huge progress. Huge. @arikhanson

Dave, As usual, you certainly have stimulated some great discussion! I think the key point has to do with establishing clear and measurable goals that ultimately correlate to business performance. Successful initiatives (both in social media and elsewhere) have this in common. Thanks to you and Alex for pointing out the Radian6 integration with Webtrends. Obviously, there is a long way to go in integrating social media with the online measurement/ analytics world, but we are excited about the first steps. Warren Sukernek Director of Content Marketing Radian6 @warrenss

This is why I try to distinguish between ROI (capital letters denote the official financial meaning) and roi (the generic usage meaning, "What did I get out of what I put into it?"). Most people -- even skeptical executives -- usually mean the latter. They just want numbers to show the investment paid off, and they call it roi. The best way to show lower-case roi is to demonstrate that your efforts (social media or otherwise) addressed had a positive outcome on an issue that keeps the CEO awake at night.

I should probably read everyone else's comments before flapping my big mouth, but I got excited. Hah. People ask me how FreshBooks measures the time we spend on Twitter pretty often. And the best answer is often another question: Do you measure the time you spend talking to a client or customer on the phone? What's the ROI on sending an e-mail to someone? We've made the decision to use social media as another customer service tool. It's not hard to see we have a strong brand in many online spaces. It's also not hard to see without us being there, our brand wouldn't be as strong as it is. Thanks for making the stand to talk about this. Not enough people do.

As always, I'm in violent agreement with you :) The only thing I have to add, is that what is tripping many marketing and PR folks up is the word "Media" Traditionally, media has been measured in terms of CPM, earned OTS or AVE or some variation of the "eyeball" metrics. So because we've come to call it "social media" people keep trying to evaluate it as if it were "media." I would argue that social networking is actually a complete change of work flow and process. It's having the same impact on business as the telephone. I'm sure at some point, someone was demanding to know the ROI of that new fangled purchase from Mr. Graham Bell, but after awhile it was universally understood that companies that used it were more efficient, productive, etc. We need to be measuring the improved efficiencies, idea flow, customer satisfaction etc that social media creates, not just the clicks, eyeballs etc that it generates.

Dave, this is discussion is fantastic! ROI is only a form of measurement and important only if it is important the the user. The key message here, is that Measurement is key. Whatever measurement matters to those who care. I do believe ROI is an important one as it provides the easiest way to calculate tangible business value. But other forms of measurement are needed to get there. I guess what annoys most are those who say "Social Media" cannot be measured (and there are lots of those). IMO that's where our industry's "Snake Oil" reputation comes from in the eyes of many corporate executive decision makers.

Chuck - hear hear!

Dave - my apologies. We actually agree entirely. Perhaps more of our focus should be spent on defining the differences between measurement and ROI - there are plenty!

Sigh. I must have been unclear. One more time: ROI is important. Other forms of measurement are equally important ROI isn't always directly measurable if your program isn't directly linked to sales. Many people are using the ROI term incorrectly. Other people are trying to inappropriately crowbar other metrics into a new 'one kind fits all' social media metric rather than considering client needs and trying back to their business goals. Both need to end.

ROI is a term that is kicked around and has been abused. I do agree that ROI is difficult to measure and challenging to explain the numbers in certain instance. Social media is probably one of those instances where ROI numbers get thrown around as if they were gospel. I worked for a company early one in my career where every IT dollar proposed, whether expense or capital, was put through the grinder to dissect its impact on our bottom line. What I learned is that for the more fuzzy cases, you really had to dig deep and involve a number of organizations/people to come up with meaningful numbers...and sometimes those numbers were tied to other factors such as brand strategies, expected behavioral changes, etc. In other words, the ROI was not standalone but depended on a number of other factors. So IMHO, ROI is difficult to measure in social media but a multidisciplinary approach might tease out some meaningful numbers.

Dave - Agree and disagree with you. Where we agree is that the ROI argument is incredibly overdone when it comes to social media. I find it to be less of an actual problem, and more of an excuse to not figure out where XYZ corp fits into the equation. Where we disagree, albeit a minor detail, is the lack of a need for ROI. PR constantly has to justify it's existence because we aren't all that great at talking about how communications can contribute to bottom line impact. There is some novelty with SM, so there's less of a push on that front at the moment. I just don't want us to end up where PR is now. By the way, one point I might also add is that there is a distinct difference between measurement and ROI. We often use the terms interchangeably and they really aren't the same. Anyway, thanks for the thought-provoking post as always! @chuckhemann

If ROI was the only measurement of value then no one would bother getting health insurance.

Michelle - I agree with you to a large extent. Where ROI is an attainable metric, that's fantastic. In many cases you CAN manage that - if you know what a new customer is worth, for example, you can track traffic, conversions and hence provide an ROI for a given initiative. In other cases, however, that's not attainable, and may not be what the client is looking for. I've worked with people where the goal is a number of new customers, or a positive sentiment (with long-term implications re: revenue). Those aren't measured in dollar figures. I'm a measurement addict. I'm not saying that measurement, or even "ROI", isn't relevant. I'm saying that people need to recognize when that specific measurement is appropriate, use it properly and that when it's not relevant to the client's goals, they need to find another way to measure that IS relevant.

As much as we might hate the term ROI, and sometimes have difficulty applying it to PR in general and social media in particular, we're going to have to find a way to address this issue, as it represents a reality that we can't escape, no matter how hard we'd like to. Basically, because it doesn't come down to us. The challenge is that we are trying to justify investment in social media to companies who have to think in terms of return on investment, in the sense of "if I have to convince upper management or my shareholders that it was wise to invest $X in this campaign, I have to be able to get back to them at the end of the day with a measure of success and a confirmation that it was indeed a worthwhile investment." Social media represents much more than new tools - it represents a new mindset, and things like long tail, niche markets, 'Free' models etc. I feel it'll be awhile before business is ready to invest heavily in a proposal that isn't particularly measurable. Meanwhile, we can do what is possible and continue to explain the new social media context in our dealings with clients. Enough with social media ROI already ... maybe ... but only when the client is ready to listen. At the end of the day, he's paying the cheques and wants to know that the campaign he's signed off on and paid for brought in an appropriate return. So how are we going to meet this need?

One issue this debate has raised over the last few months is the need for social media strategists and organisational management to gain a common understanding of the terms used and set expectations. Asking what the ROI of putting your pants on in the morning may impress some social media folks but it is going to do nothing towards fostering understanding and buy in from a corporate minded management team. Any self respecting and successful business person is going to want a strategist to present a solid business case. Indeed there needs to be movement and effort on both sides to understand each others perspectives, however, more often than not it is the person doing the selling (social media strategist) that needs to convince the person doing the buying. Understanding the business need and perspective has to be the starting point.

It's simple: Why would you measure "new media" with old methods of measurement? Social media requires measurement with a 21st century lens. Is there another way to define goal attainment?

Dave, One of the challenges in measuring social media ROI is some are easily measurable (e.g. sales, clicks), while other are "soft" (e.g. stronger brand, better customer service). Many companies are focused on the former because they need to justify their social media investments given the market is so new. The downside, however, is they tend to ignore or not pay enough attention the "soft" benefits, which can be just as valuable. Hopefully, this approach will change over time as more companies become comfortable with what kind of returns social media can produce. cheers, Mark

So glad you wrote this post. When we do seminars for entrepreneurs and small business owners on social media one of the questions we hear the most is "how am I supposed to find time to use social media when I need to work on my business?" and we always say using social media IS working on your business. Just because you can't measure ROI like you can using other marketing methods doesn't mean it isn't useful and beneficial for your business. Thanks!!

Hey Dave, great perspective! The focus needs to be on "Return" as a value defined by the business. What are they trying to accomplish and why? Measurement is key to providing proof of this Return. Is it money, profits, sales, cost reduction, market share, reputation? That depends on the specifics of each individual project and purpose. I believe that the issue stems from so many "Gurus" saying that companies must get involved in Social Media because.......everyone else is and the train is pulling away from the station. Companies are in business to make profits therefore always looking to address that issue. Although projects have intangible benefits, real tangible returns dictate absolute value. The more of these that can be proven, the higher the value of the project.

Alex, I'm with you. I spend large chunks of my day thinking about measurement and how to communicate the results of social media programs. I'm not arguing against that at all. In fact, I'm arguing for a higher standard and more rigor instead of made-up metrics and terms that mean nothing. I'm arguing against the abuse of the term "ROI" when there are many other appropriate measurements available (and yes, I have explored the Radian6/WebTrends integration, which got me quite excited when I first heard about it). It may be a semantic point, but if the *professionals* can't get it right then how can we expect others to?

IMHO, when we try to apply ROI to social media outcome, we allow a false dichotomy to further perpetuate. At its most basic understanding, if the "thought" is to drive sales and boost revenue, then ROI might only serve to provide a false sense of comfort and ease of mind because we might identify better with formulas and structured approaches to achieving objectives. And while its certainly good reason to choose structure over loose and aimless approaches, the "action" might fall short or be badly misled by our "thoughts" and perceptions on measurable outcomes. Rather than ROI taking on a life of its own in SM, lets focus instead on delivering results and objectives that can be backed-up by action rather than promise that can't be kept. Joseph @RepuTrack

I do see where you're coming from in that, taken too far, the ROI focus just gets in the way of getting things done, but on the other hand, I think it's worth focusing on heavily while moving along with ones' Social Media iniativies. Furthermore, while we're not there yet, the ability to positivley correlate Social Media iniatives with ROI continues to improve. Have you seen the work Radian6 has done with Webtrends yet? Even if you're not familiar with the Web Analytics space, get them to demo you-- it's enlightening in the sense that you can see the online measurement world coming together, and since different aspects of the online measurement world are obsessed with ROI, the links are largely already there-- allowing for the two to be tied together. It may never be perfect, but particularly if your online properties sell products or offer support, ROI is increasingly evident via social channels. What's more, if you do check the demo I mentioned, you can see the immense potential. In effect, you can tell what/whom people were reading when they came to your properties-- purchased, converted on another goal etc. By using those standards as a base and improving on them via your social media initatives, you should expect to see a positive correlation of some sort on your measurement side. Having said all of that-- you're right. There is and will ALWAYS be an element of faith and aspects of Social Media that cannot be strictly related to the financial aspects of an organization. In an ideal world people will take a balanced perspective-- prove what you can, celebrate your successes/avoid your prior mistakes, and, in the meantime, understand that just because some iniatives don't show up on a balance sheet, they can still matter. I just hope that neither side throws the baby out with the bathwater so to speak.

I give props to anyone who understands that they have to track back to something. My fear is that someone gets into social without a clearly defined goal that is indeed measurable. I agree it does not have to be ROI by definition. Hell it could be a return on effort, on engagement, influence, etc..Let's just make sure we are measuring; because if we don't, then your perception or those above you, will be that it was a complete waste of time. Maybe it's really ROTI- Return on time invested. Jacob Morgan recently wrote about how much time this takes. But the upside is that the results are inversely tied to the amount of time invested..and I agree with that metric.

Hi Dave, Great points. I tend to agree with Joe above that while the ROI formula continues to play a role as intended in many organizations and business, the concept has grown beyond the proper use, as has the definition. For government, it's results-based management and measurement. As you note, how are your activities tied to objectives (at any level,) have "appropriate" indicators been identified (biggest misstep in my opinion) and do you have the capacity to properly measure. Social media in gov't is being sold as 'easy' which makes it all the more important for us to properly measure, or be able to communicate some 'return.' Whether people are calling it a return, a result or a measurement, let's not dismiss the effort. @mjmclean

I think this might be a semantic point, Dave. While you're right to say that return on investment isn't always possible to evaluate in a strictly financial sense (especially for campaigns with a social media component), the concept of 'return on investment' seems to have grown beyond its original definition. It may not be strictly measurable by the formula you cited above but if you can't sell your higher ups / clients on a viable return on the time, resources and energy they invest, you won't sell them on the merits of the campaign.

I think social media ROI is fairly easy from a marketing stand point. In B2B marketing, you want to drive traffic from the web to your properties (like a blog or .com) and capture conversions in your CRM as leads. There are intermediate steps in there that have their own health indicators, like relationship building and output. But the bottom line hasn't changed.

In B2C, it's either used for branding and is measured in terms of exposure. Or it's used to drive traffic to marketing programs, like a coupon offering, which is measured in terms of conversion. Or it drives traffic to an ecommerce site where it's measured in terms of sales.

The hard part is getting the tracking all set up. You need analytics software to connect to market automation software with both dumping data into a CRM. While it's conceptually easy, integration is time intensive and expensive, which makes it inaccessible to most people using social media.

How many people are using a set up like Webtrends Analytics integrated with Eloqua, Radian6, and Salesforce? Probably not many. That is why people are struggling with how to prove ROI. We simply lack the integrated systems that do it, which is mostly a resourcing issue.

Regardless, from a marketing perspective social media offers additional channels and should be measured in comparison to the other channels, like email and advertising, to know how much budget to allocate to it.

Marketing isn't the only thing you can do with social media, though. You can also use it to administer support. In which case you measure value in terms of reduction in phone calls, number of cases closed per person compared to other channels, and other traditional support and call center KPIs.

HR has it's own KPIs. So does Product. So does IT...etc.

Wow Dave. Seems some were unclear of your meaning. Anyway I'd like to share 2 measurements of ROI that I have used personally. What I want to make clear here is that it is important to build a 'static pipeline' of metrics and measurements that DO NOT change. The tactics whether they are social, or television commercials are the flexible or creative aspect....

Before this gets REALLY long, I will create a post on my site and trackback to your post.

I have been using social media exclusively for PR and marketing in both my art business as well as working with Best Buy. I will cover the real measurements used in both.

Thanks for more great ideas :)
Keith

I've never had a client ask about ROI -- in the real, "dollars in return for my marketing/PR investment." Every client asks about "results," and the sophistication of what they expect in response to "How are we doing?" varies.

For some, they mean "How many media or big-blog clips do we have?" Others mean "What's our click/conversation rate on the site?" Others what to know about how some other relevant performance "needle" is on the move.

It's about meeting objectives we've set more than it is delivering a hard ROI.

ROI definition conversation aside, I think the larger point to keep in mind here is getting clients and organizations to think about integrated communications programs (including a social component) in terms of return on investment (the lowercase version, as Shel so nicely stated). And, as you said, Dave, showing a linkage back to the original objectives.

As communicators and counselors, if we can demonstrate those kinds of results to our clients on a consistent basis, we'll have made huge progress.

Huge.

arikhanson

Dave,

As usual, you certainly have stimulated some great discussion! I think the key point has to do with establishing clear and measurable goals that ultimately correlate to business performance. Successful initiatives (both in social media and elsewhere) have this in common.

Thanks to you and Alex for pointing out the Radian6 integration with Webtrends. Obviously, there is a long way to go in integrating social media with the online measurement/ analytics world, but we are excited about the first steps.

Warren Sukernek
Director of Content Marketing
Radian6
@warrenss

This is why I try to distinguish between ROI (capital letters denote the official financial meaning) and roi (the generic usage meaning, "What did I get out of what I put into it?"). Most people -- even skeptical executives -- usually mean the latter. They just want numbers to show the investment paid off, and they call it roi. The best way to show lower-case roi is to demonstrate that your efforts (social media or otherwise) addressed had a positive outcome on an issue that keeps the CEO awake at night.

I should probably read everyone else's comments before flapping my big mouth, but I got excited. Hah.

People ask me how FreshBooks measures the time we spend on Twitter pretty often. And the best answer is often another question: Do you measure the time you spend talking to a client or customer on the phone? What's the ROI on sending an e-mail to someone?

We've made the decision to use social media as another customer service tool. It's not hard to see we have a strong brand in many online spaces. It's also not hard to see without us being there, our brand wouldn't be as strong as it is.

Thanks for making the stand to talk about this. Not enough people do.

As always, I'm in violent agreement with you :) The only thing I have to add, is that what is tripping many marketing and PR folks up is the word "Media" Traditionally, media has been measured in terms of CPM, earned OTS or AVE or some variation of the "eyeball" metrics. So because we've come to call it "social media" people keep trying to evaluate it as if it were "media." I would argue that social networking is actually a complete change of work flow and process. It's having the same impact on business as the telephone. I'm sure at some point, someone was demanding to know the ROI of that new fangled purchase from Mr. Graham Bell, but after awhile it was universally understood that companies that used it were more efficient, productive, etc.
We need to be measuring the improved efficiencies, idea flow, customer satisfaction etc that social media creates, not just the clicks, eyeballs etc that it generates.

Dave, this is discussion is fantastic! ROI is only a form of measurement and important only if it is important the the user. The key message here, is that Measurement is key. Whatever measurement matters to those who care. I do believe ROI is an important one as it provides the easiest way to calculate tangible business value. But other forms of measurement are needed to get there. I guess what annoys most are those who say "Social Media" cannot be measured (and there are lots of those). IMO that's where our industry's "Snake Oil" reputation comes from in the eyes of many corporate executive decision makers.

Chuck - hear hear!

Dave - my apologies. We actually agree entirely. Perhaps more of our focus should be spent on defining the differences between measurement and ROI - there are plenty!

Sigh. I must have been unclear. One more time:

ROI is important.

Other forms of measurement are equally important

ROI isn't always directly measurable if your program isn't directly linked to sales.

Many people are using the ROI term incorrectly.

Other people are trying to inappropriately crowbar other metrics into a new 'one kind fits all' social media metric rather than considering client needs and trying back to their business goals.

Both need to end.

ROI is a term that is kicked around and has been abused. I do agree that ROI is difficult to measure and challenging to explain the numbers in certain instance. Social media is probably one of those instances where ROI numbers get thrown around as if they were gospel. I worked for a company early one in my career where every IT dollar proposed, whether expense or capital, was put through the grinder to dissect its impact on our bottom line. What I learned is that for the more fuzzy cases, you really had to dig deep and involve a number of organizations/people to come up with meaningful numbers...and sometimes those numbers were tied to other factors such as brand strategies, expected behavioral changes, etc. In other words, the ROI was not standalone but depended on a number of other factors.
So IMHO, ROI is difficult to measure in social media but a multidisciplinary approach might tease out some meaningful numbers.

Dave - Agree and disagree with you. Where we agree is that the ROI argument is incredibly overdone when it comes to social media. I find it to be less of an actual problem, and more of an excuse to not figure out where XYZ corp fits into the equation.

Where we disagree, albeit a minor detail, is the lack of a need for ROI. PR constantly has to justify it's existence because we aren't all that great at talking about how communications can contribute to bottom line impact. There is some novelty with SM, so there's less of a push on that front at the moment. I just don't want us to end up where PR is now.

By the way, one point I might also add is that there is a distinct difference between measurement and ROI. We often use the terms interchangeably and they really aren't the same.

Anyway, thanks for the thought-provoking post as always!

@chuckhemann

If ROI was the only measurement of value then no one would bother getting health insurance.

Michelle - I agree with you to a large extent. Where ROI is an attainable metric, that's fantastic. In many cases you CAN manage that - if you know what a new customer is worth, for example, you can track traffic, conversions and hence provide an ROI for a given initiative.

In other cases, however, that's not attainable, and may not be what the client is looking for. I've worked with people where the goal is a number of new customers, or a positive sentiment (with long-term implications re: revenue). Those aren't measured in dollar figures.

I'm a measurement addict. I'm not saying that measurement, or even "ROI", isn't relevant. I'm saying that people need to recognize when that specific measurement is appropriate, use it properly and that when it's not relevant to the client's goals, they need to find another way to measure that IS relevant.

As much as we might hate the term ROI, and sometimes have difficulty applying it to PR in general and social media in particular, we're going to have to find a way to address this issue, as it represents a reality that we can't escape, no matter how hard we'd like to. Basically, because it doesn't come down to us.

The challenge is that we are trying to justify investment in social media to companies who have to think in terms of return on investment, in the sense of "if I have to convince upper management or my shareholders that it was wise to invest $X in this campaign, I have to be able to get back to them at the end of the day with a measure of success and a confirmation that it was indeed a worthwhile investment."

Social media represents much more than new tools - it represents a new mindset, and things like long tail, niche markets, 'Free' models etc. I feel it'll be awhile before business is ready to invest heavily in a proposal that isn't particularly measurable.

Meanwhile, we can do what is possible and continue to explain the new social media context in our dealings with clients.

Enough with social media ROI already ... maybe ... but only when the client is ready to listen. At the end of the day, he's paying the cheques and wants to know that the campaign he's signed off on and paid for brought in an appropriate return.

So how are we going to meet this need?

One issue this debate has raised over the last few months is the need for social media strategists and organisational management to gain a common understanding of the terms used and set expectations. Asking what the ROI of putting your pants on in the morning may impress some social media folks but it is going to do nothing towards fostering understanding and buy in from a corporate minded management team.
Any self respecting and successful business person is going to want a strategist to present a solid business case. Indeed there needs to be movement and effort on both sides to understand each others perspectives, however, more often than not it is the person doing the selling (social media strategist) that needs to convince the person doing the buying. Understanding the business need and perspective has to be the starting point.

It's simple: Why would you measure "new media" with old methods of measurement? Social media requires measurement with a 21st century lens. Is there another way to define goal attainment?

Dave,

One of the challenges in measuring social media ROI is some are easily measurable (e.g. sales, clicks), while other are "soft" (e.g. stronger brand, better customer service).

Many companies are focused on the former because they need to justify their social media investments given the market is so new. The downside, however, is they tend to ignore or not pay enough attention the "soft" benefits, which can be just as valuable.

Hopefully, this approach will change over time as more companies become comfortable with what kind of returns social media can produce.

cheers, Mark

So glad you wrote this post. When we do seminars for entrepreneurs and small business owners on social media one of the questions we hear the most is "how am I supposed to find time to use social media when I need to work on my business?" and we always say using social media IS working on your business. Just because you can't measure ROI like you can using other marketing methods doesn't mean it isn't useful and beneficial for your business.

Thanks!!