I suppose every blogger who says anything about social media has to write this post at some point. And considering I’ve had this particular question on the brain quite a bit recently, I suppose now is as good a time as any for me to write mine. I promise it’s going to be a lot more interesting than most posts of this nature.

David Meerman Scott famously ranted about the pitfalls of calculating the ROI of social media, saying in part, “What’s the ROI of social media? Well, I don’t know. What’s the ROI of that billboard you just put up?”

What indeed. I’ll add this to his suggestion: What is the ROI of the telephone in your cubicle? What is the ROI of intra-office emails? Or of conversations you have with co-workers?

You don’t know, do you? Of course you don’t. People don’t take time out of their busy days to calculate these things (unless you do, in which case I’d love to know who you work for). And why don’t people take this time? Because you can’t tie revenue to communication in any relevant way.

At least, that’s the way that traditionally educated C-level executives expect us social media types to think. They hear us say things like, “Social media is too fluid and organic to be measured.”

Many in the C-suite are swayed by this. It’s a shame, really, because that argument is just plain lazy.

It’s a Matter of Objectives

You likely know what drives revenue. If you’re a software company, you drive revenue by getting more companies to buy licenses, by getting existing clients to buy more licenses, and by working your butt off to sell add-on products and services with higher margins. And then every so often you release new software that you get people to buy. Whatever your company does, you likely know how this example is analogous to your business.

Social for Lead Gen

If acquiring accounts and upselling existing accounts are your objectives, then what are your marketing metrics? For new accounts, it’s cost per lead and lead conversion rate. For upselling existing accounts, it’s net new revenue per account. So if you’re going to measure the efficacy of social media, you’re going to need to measure its impact on these metrics.

All of this assumes that you’re doing things like tracking the source of traffic to web-based lead forms, putting query strings behind shortened URLs, giving leads the opportunity to tell you how they found you, and so on. That’s basic stuff, and I assume that you’re already doing it.

Let’s say you have a LinkedIn Group dedicated to providing information on a particular facet of your industry. The person you have monitoring this group makes a salary. Prorate this salary over the number of hours spent monitoring and participating in the LinkedIn Group. Then divide this cost by the number of leads generated over the same time. That’s your cost per lead.

If you have online user groups that you use as touch points for existing clients, and if you’re using those properties as opportunities to upsell existing clients, then your salespeople should be collecting data on incoming inquiries from clients asking about how useful a new product might be for them. Divide the salaries of the person maintaining the user groups (plus the cost of hosting the network, if it’s paid or proprietary) by the net new revenue gained from clients who bought new products or services as a result of a conversation on that user group, and you have the cost per net new revenue from existing clients.

(Notice how I haven’t said the words “followers” or “fans” yet?)

Social for Awareness

My agency just ran a what-if scenario for a client – an easily recognizable, multinational brand – about what would happen if we eliminated all marketing spend on television for the next 12 months. The upshot of the study was that very bad things would happen. Very, very bad things.

Why? Because one of the things driving revenue for that particular company is brand health, which is driven by awareness. More television means more awareness, which means better brand health and more revenue.

Social is a part of awareness, too. But – and this is where, in the movie about my life, the needle screeches across the record and the music stops – I’d be an idiot if I told you that a good social presence was as effective at improving awareness as a national television spot.

(We New Marketing social media guru-ninjas aren’t supposed to say things like that. I sure hope they don’t change the locks on the secret clubhouse doors on me.)

But that doesn’t mean that social can’t help build awareness. And if that’s your goal, then you need to find ways to measure awareness in relation to social initiatives.

So what are your awareness-boosting (sometimes called “branding”) initiatives? Map them out on a timeline. Then aggregate the data from the awareness surveys you are (or your agency is) taking periodically. Map the survey data against your social campaigns. Then map all of your other branding campaigns. Start drawing correlations.

This Stuff Isn’t Rocket Science

Look, I was an English major. I make no claim to advanced knowledge of anything statistical or strategic. But I’ve been noticing an alarming trend among so-called social media ninjas, one that involves the mass rolling of eyes and turning up of noses at the mention of ROI.

Let me be very clear on this. Any social media professional who claims that his craft cannot be practically measured is lying through his fangs.
It is perfectly possible to measure the impact of social media on ROI. The thing is that you just need to be smart about your expectations. Your mascot’s Facebook page likely isn’t going to drive leads, but it will drive awareness. Your LinkedIn Group might be small, but it could generate highly convertible leads. The point is this: first you need to figure out why you’re in social media in the first place. THEN start measuring your efforts.
Now to everyone who calls himself a guru or a ninja: let’s stop with the laziness and get back to work, okay?

Photo Credit: TerryJohnston