How can a business cook up the best ways to measure ROI from social media investment? A new Social Media ROI Cookbook proposes “recipes” that can help.
The report was prepared by Susan Etlinger with Jeremiah Owyang and Andrew Jones of the Altimeter Group, an industry research firm. They spoke with 6 brands, 38 vendors, 3 agencies, 4 ecosystem contributors and 71 social media and analytics practitioners.
The first takeaway, according to Altimeter's research, was that only 30 percent of brands consider themselves to be either “effective” or “extremely effective” in connecting their social media marketing efforts to revenue. The top reasons: 56 percent said that they were not able to tie social media to business outcomes, 39 percent cited a lack of analytics expertise and/or resources, and 38 percent said they had poor tools.
The authors noted that, “while revenue is important, it isn’t everything” when measuring the value of social media. In fact, 84 percent of their respondents said that the primary business impact wasn’t generating revenue, but creating “insight that helped us meet customer experience goals.”
But, when companies want to measure social media’s impact on company revenue, the Cookbook identified six primary top-down and bottom-up “ingredients” or approaches, as well as three case studies.
The top-down approaches were Anecdote, Correlation and Multivariate Testing. Anecdote provides specific examples where social media led to sales, and Correlation compares two data sets to see if there is a relationship, such as the number of likes compared to revenue increases.
Multivariate Testing compares the responses of one group that was exposed to the social media content under consideration, versus another group that was exposed to different or no such media.
Bottom-Up, Mixing Criteria
The Bottom-Up ingredients were Links and Tagging, Integrated and Direct Commerce. Links and Tagging track sales conversion via links embedded in content, and tags or cookies that are connected to links. Integrated refers to apps or software-as-a-service offerings that have integrated analytics, and Direct Commerce indicates that an e-commerce storefront is connected to a social platform.
The Cookbook notes that different companies will mix their ingredients with as much variation as, say, a cook making soup.
The criteria determining how the ingredients are mixed, according to the guide, are the nature and structure of the business, the type of product or service, the type of media being used, and the type of customer. The Cookbook outlines steps to determine the best mix -- the “recipes” -- for a given organization, as well as case histories presenting various strategies.