Social networking and community engagement technology made easy

As more and more companies dive into social media, there’s a rising tide of expectations and understanding of ROI. I wanted to share some recent thinking from different view points as a means to stimulate discussion.

I recently read an interesting article from Jay Deragon about social media ROI:

”People and businesses don’t like spending time and money without defining the return on their efforts.  At the same time people and businesses engage in non-productive activities without even considering an ROI on those activities. So one must ask why do they think social media activities will produce an ROI? The reason is that social media has become in vogue and everyone seems to want to capture value from it rather than with it.”

Community strategist, Connie Benson laid out the following list in her blog entitled 2010 The Year of Social Media ROI:

1. Companies will expect ROI from their Social Media efforts.

Social Media will shift from being experimental to mainstream. Larger organizations can’t justify embracing it without having it meeting their business objectives. It has to increase their bottom line.

2. The Social Media Specialist (Community Manager) position will become mainstream.

Companies are going to quickly find that they need someone to guide their efforts externally and internally. Social efforts should be extended across the board.

3. Cultural shift inside of companies.

This is going to be a challenge for many companies. In order to be successful in connecting with customers, organizations are going to have to have communications channels in place and the openness to utilize the information.  Management is going to need to have a level of trust for their employees interacting online and understand that the risk can be mitigated by education & training.

4. Social Media Monitoring will be a necessary component

My colleague, John Tonini, made the prediction earlier this year that the market would shift from brands wondering if they should be monitoring social media to ‘What tool should we be using?’. 2010 will see a huge shift in the adoption rate of social media monitoring.

5. Agencies and companies will hire data analysts

A new position is emerging. My favorite title is Social Media Metrician. Social Media monitoring tools don’t drive themselves. They need more than a human touch. They require people who enjoy digging into the analytics aspect, looking for patterns and trends. Web analytics people will be able to expand on their roles. Brands and agencies are going to need this new specialized position to drive their marketing intelligence. Marshall Sponder lists many predictions in regard to the role of the data analyst in 2010.

6. Integration of platforms and processes will be critical.

I think there are key indicators that social media is working for an organization and certainly things need to be measured regularly.  But for those of you who don’t believe in social media ROI, there are a few things to consider. Amber Naslund writes on metrics and social media often. On January 27, 2010, she says the following about practical social media measurement:

“One of the chief things that managers seem to want is the ability to draw lines and connect dots between their social media participation and sales (or other conversion metrics). There are two ways to do that, and one is much more difficult than the other.

Cause and Correlation

First is attribution or direct cause, which would indicate that the social media initative is the sales channel itself. Much like Dell claiming that it has reaped millions in sales via their Twitter channel, here you’re saying that your endeavors in one channel or another are the primary driver for a particular revenue stream. The tricky bit here is that a) there will *always* be external factors that influence sales transactions and b) you have to track and control how you output information in these specific channels in order to accurately attribute the revenue.

The second and more realistic way to track the impact of social media on revenue is by correlation. In other words, you track your sales in aggregate, or perhaps in the more global online environment (inclusive of your website and how leads funnel into your pipeline through the web overall).

Then, you overlay trends in your online activity – say, the establishment of your community or the building of your blog – and look at them alongside your sales activity. If they go up together, you can indicate a positive correlation, or the likelihood that the social media stuff is helping to drive the sales. If social media activity goes up but the sales stay flat or go down, something isn’t working, or the social media bit isn’t effective from a sales standpoint.

Likewise, correlation can also be in *ratios*, so for example, a $50,000 investment in social media (including time, money, or both) correlates with a $25,000 increase in sales over the same time period. Note that this is NOT precise ROI, because you’re talking an investment in a single channel against TOTAL sales. But you can look at the proportion in sales or lead traffic increase over the time period in which you track your social media activities, and extract a relationship between the two.”

Where do you stand on this subject? What is your organisation noticing as you participate more and more in the everyday activity of business and personal? Have you noticed the correlation that Amber spoke about? Or have you taken time to consider the up and coming positions and responsibilities that Connie spoke of? What are your thoughts on social media ROI?

posted by Piers Hogarth-Scott in the category ROI Social Media
Tags: Amber Naslund, Connie Benson, Jay Deragon, social media ROI