Currently, there is a heated debate raging about whether we can (or should) measure the return on investment (ROI), of social media marketing campaigns.  Some have argued that it is impossible to measure the impact of an online conversation.  Others suggest that ROI is important, but we are using the wrong metrics.  Noted communications expert David Meerman Scott is one of them.  In his new e-book, Lose Control of Your Marketing! Why Marketing ROI Measures Lead to Failure he notes:

“I often get pushback . . . from executives, who demand that their marketing ROI be measured in precise financial terms.  It seems that business schools teach their students to obsess over measurement and insist that marketing results be treated in the same way you’d treat electricity use at company headquarters or revenue from the Canadian market. These executives want to know exactly how much revenue each dollar spent on marketing is producing, and they want to see it in detailed campaign-by-campaign spreadsheets.  This trend is causing marketers to become too cautious and boring.”

He suggests that executives engaging in social media marketing initiatives should have only one measure of success:  whether lots of people are talking (hopefully positively) about products, services or issues they care about.  At least some of these individuals will turn into customers. 

On the other end of the spectrum are people like marketer Kyle Flaherty of BreakingPointSystems.  He suggests that “social media marketers can – and must – prove ROI.”  The consulting firm McKinsey & Company also believes it is critical to measure the impact of social media and other digital marketing efforts.  In October 2008, the firm published an interesting article, How Poor Metrics Undermine Digital Marketing.  In it, McKinsey provides examples of companies that are successfully building new ROI yardsticks.  For example:

“[C]ompanies are starting to tap into the real promise of social media.  Our research showed that a major European cable company undertook a marketing campaign along these lines to sign up customers for a cable service.  The campaign, targeting online customer segments, sought to maximize the ROI of each individual ad opportunity by serving whatever ad most promisingly combined likelihood to convert with profitability of conversion.  After the company segmented its customers by the [social media] sites they visited online, it could use each person’s past behavior to deploy the most appropriate ad vehicle—e-mail, graphics-rich media, or video. This strategy raised conversion rates by 50 percent.”

Social media marketing is in its infancy.  Given this, it is important, as Scott argues in his e-book, to not let our obsession with ROI stifle innovation.  We should be open to experimenting with different channels, including social networks and blogs.  However, in the long run measurement is going to be critical.  At some point people are going to want to know whether a social media-related campaign or initiative had an impact on sales, perceptions and other important metrics. 

The Social Media Measurement Trifecta: Activity, Sentiment & Behavior

Ultimately, those measuring social media marketing are seeking to answer three important questions:

1. Did people respond?
   

2. What is the tenor or sentiment of the online conversation?
   

3. Did social media content influence behavior?

Activity (or response) is one of the first things people look at when they measure a social media marketing effort.  This can be measured by examining metrics such as:

• Website traffic (e.g., click-through rates)
  

• The number of people participating in or joining an online community
  

• The amount of content developed on blogs, social networks, online forums and other sites that can be attributed to the social media campaign

Sentiment analysis involves figuring out whether the tone (or sentiment) of the online conversation was influenced after a social media marketing effort was initiated.  For example, some corporations are employing firms like Cymfony (an Envision Solutions partner) and Nielsen BuzzMetrics to measure the tonality of online conversations before, during and after a campaign. 

Measuring behavior can entail determining whether content related to a social media campaign:

• Increased sales – e.g., the number of people who read a positive article on a blog who went on to purchase a product
  

• Changed attitudes – e.g., examining whether reading negative information about a recalled product impacted corporate reputation

In an era characterized by scarce marketing resources and intense competition, measurement will continue to be critical.  In the end, focusing on ROI will free rather than stifle experimentation as marketers become more confident of social media’s ability to build rewarding relationships with key stakeholders. 

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