Why is it so hard to understand social media ROI?
It shouldn’t be. Social media is just another channel in the marketer’s toolbox for accomplishing business objectives. If you’re not accomplishing any business objectives with social media, don’t do it. You’re wasting your time.
Those who use social media have created a language barrier that other people in the organization, especially decision makers, do not understand.
To a community manager, success is defined in terms of “likes”, “shares”, “followers”, “mentions”, “retweets” and other measures of social activity, engagement and influence. These metrics are important for gauging the success and effectiveness of your online brand, however, we understand that business leaders and decision makers do not speak this language. The terms you care about are sales, costs and revenue because that is what you are responsible for.
According to Nichole Kelly, author of ‘How to Measure Social Media,’ social media practitioners must stop using typical “social media metrics” and instead transform the conversation into one that others in the organization can understand. When social media managers communicate the value of social media in terms of business objectives, it is a lot easier for the company to see the value that social media provides.
You don’t need your company staff to be social media experts. You don’t need to understand the nuances of social media or the specific apps and how they work. You just need to outsource the social media work to professionals who are experts at social media marketing. An expert should be able to understand how social media fits into your overall integrated marketing program. They should be able to communicate how social media is accomplishing overall company objectives in a way that is understandable to the entire company.
When you start to hear social media in terms of business metrics that business leaders understand and use every day, then the conversation will change from “What is this Twitter thing you’re doing?” to “Wow! Look at how social media has lowered costs for our customer service department,” or whatever your organization is trying to achieve through social media.
Here’s how to translate social media metrics into ‘business metrics’ that demonstrate ROI:
1. Align social media goals with the sales funnel
You’re already familiar with the sales funnel, an illustration of the typical sales process – brand awareness, lead generation and customer retention.
a) Brand awareness – in terms of social media metrics, brand awareness is demonstrated by reach, impressions and engagement, e.g. Facebook fans or Twitter followers. If you were to show where they sit on the sales funnel they would be at the top.
b) Lead generation – measured in terms of leads and content versions, would appear at the middle of your sales funnel, e.g. content downloads, webinar attendees, and e-mail opt-ins.
c) Customer acquisition – these are people at the bottom of the sales funnel. Using social media and content marketing, you have built a relationship with the lead, provided valuable resources, proved your expertise and credibility, and shown how you can solve their problems. They like you, know you are competent, and know you can solve their problem.
d) Customer retention – measured in terms of repeat business from the same customer, would be illustrated on the backside of the funnel, flowing back in through the top as shown in the diagram above.
So if your organization has a Twitter follower or a Facebook fan that went through the sales funnel, ask yourself these questions:
- How fast did that fan or follower move through the funnel?
- How much money did they spend?
- How many times did they buy?
- How long did they remain a customer?
- If you compare a social media customer and a traditional marketing customer are the results better, worse or the same?
Social media can be very effective at moving customers through the sales funnel. The concept of getting new leads and converting them to sales is something that most everyone in your company can appreciate, because everybody knows that increasing sales is a good thing.
- Social media produces almost double the marketing leads of trade shows, telemarketing, direct mail, or PPC. (Source: HubSpot)
2. Convey business data to the C-Suite
If you’re trying to get leads through social media you need to understand the difference between “soft leads” and “hard leads.” Soft leads are people who have given you their email address in exchange for valuable content. Hard leads are qualified prospects that are on their way to becoming a customer. You can get soft leads through social media but often you will need your email marketing channel to convert them to hard leads.
It’s important to understand how social media works for lead nurturing, but usually not for selling. This means that social media content is more focused on building a relationship, providing valuable resources, and establishing credibility as a thought leader. It’s not appropriate to try to jump right to “here’s my product now go buy it today,” or even “look at my product,” so it’s unreasonable to expect social media marketers to write tweets that are directly pushing your product. You can now rest a little easier knowing that the social media content created by marketers has a purpose – it’s aimed at moving consumers from the top of the sales funnel to the bottom.
As marketing or sales managers, you will want to know the cost and value of social media leads. Cost can be measured by cost per impression or cost per lead. Value can be determined by how long it takes for the lead to purchase, how much they have purchased, and how many more times they have purchased. This is also called the “Path to Conversion”. These customer metrics will help you understand how your social media strategy is important for your organization.
You will likely find that the leads acquired through social media are much less costly to your organization.
Quick Wrap up
It’s easy to understand the ROI of your social media campaign if you work with marketers who can communicate the value of social media by explaining how specified business objectives were met through social efforts.
Want to learn more? Download our guidelines for social brand management white paper: