What’s the R.O.I.? A Framework for Social Analytics

“Not everything that can be counted counts, and not everything that counts can be counted.”
- Albert Einstein

Say hello to my little friends, R.O. & I.

Yes. Return on investment have become the bane of an entire new media industry. However, avoidance is not the answer.

While the question of “what’s the R.O.I. of social media” is difficult to answer, it is necessary as it forces us to dig deeper. The result is maturity.

This conversation is important as you are expected to answer it not just today, but and also over time.  The source of the question though, may also impede innovation and experimentation. Why?  The answer in of itself is as elusive as the question asked. As much as the previous sentence sounds like a riddle, it is a very real observation. Often it is asked without a clear understanding as to whether or not the answer will actually change the company vision or the current course of business. Sometimes it is genuinely asked to do just that, change the vision and the course of business toward relevance. Either way, this is an opportunity to show how new media enables desired business outcomes.

Before we tackle the question, let me share a quote with you. After hundreds of executive discussions, I’ve stitched together a recurring theme that I believe will help you…

“If you come to me with a request for budget and resources for social media, to make it a priority for our business, you will lose every time…If you tie social media to our business priorities and objectives and demonstrate how engagement will enable progress, you will win every time. Social media must be an enabler to our business, just show me how.”

- Your CEO

Your job is to connect the dots between the value of new media, the expectations of your customers, and the business roadmap the company is operating against.

So, when it comes to R.O.I. in social media, perhaps we’re asking the wrong question.

Again, the answer is difficult, but not impossible to answer. If I ask you, “how are you?” you will probably respond with “fine,” “ok,” “good,” or “great.” But if you take a moment to think about it, each of those answers begs a follow-up question to deepen the conversation, “why?” Or, “why do you say that?” Otherwise the question serves no real purpose other than to casually acknowledge another person or to run through the traditional ritual of easing into a conversation. The same is true for R.O.I.

If we are indeed to discover the “Return,” we need to tie it to more than the “Investment,” we need to understand the circumstances, intentions, and potential impact and outcomes business leaders need to see in order to understand new or foreign opportunities. Said another way, we need to define the “R” that defines tangible success and work out a formula that allows us to find the answers. Therefore, R.O.I is specific to an outcome or a goal, which means that there is no one answer.

To help, Susan Etlinger (@setlinger), my colleague at Altimeter Group, recently published an open research report, “A Framework for Social Analytics.”

The report opens puts ROI in context to help you focus on business value in your social media efforts:

“What is the ROI of social media?” This is one of the most frequently asked questions related to social strategy. While 48% of social strategists reported earlier this year that their primary internal focus is to develop ROI measurements,2 ROI is just one metric in the social business toolkit. Rather than focusing on social media as a monolithic entity, businesses should evaluate it based on its contribution to a range of business goals. Says Richard Binhammer, Strategic Corporate Communications, Social Media. and Corporate Reputation Management, Dell Inc., ‘There is no single ROI for social media.’”

As we see in the executive quote earlier in the post, tying social media to business objectives and metrics helps them see a clearer picture. We have to remember that executives most likely do not use social networks personally. It’s impossible for them to see what you see, therefore taking the extra time to connect the dots helps you make the case and in doing so, brings the R.O.I. answer into focus.

Susan also does a wonderful job of not only showing us how businesses should view R.O.I, but she also helps businesses identify how to develop analytics frameworks that define the “R” or the return for specific business objectives.

Prep work: Assess how your business is measuring R.O.I. on other fronts today

Step 1: Align your strategy with business objectives

Step 2: Determine how you will measure success and also define critical milestones

Step 3: Evaluate your organization’s readiness to measure social media and bridge the gaps

Step 4: Choose the right tools to measure progress and outcomes

Remember, there is no one way to measure R.O.I. There are many business pillars that stand on a solid foundation for growth. Susan introduces the Social Media Measurement Compass to guide businesses as they’re planning social media programs. Remember, social media doesn’t just belong in the marketing department, a social business is customer-centric and social media enables more effective engagement, learning, and adaptation. Therefore, it is the responsibility of other critical business functions to engage.

1. Innovation: Collaborating with customers to drive future products and services

2. Brand Health: A measure of attitudes, conversation ad behavior toward your brand

3. Marketing Optimization: Improving the effectiveness of marketing programs

4. Revenue Generation: Where and how your company generates revenue

5. Operational Efficiency: Where and how your company reduces expenses

6. Customer Experience: Improving your relationship with customers, and their experience with your brand

The three tenets of social business, Connected, Engaged, Adaptive create a transparent relationship with customers that opens the door to meaningful metrics to measure success and improve everything in between. In the end, understanding the relationship between business objectives and social media tactics will create a series of relevant strategies and critical links that in of themselves serve as opportunities for measurement and the establishment of R.O.I.

We cannot measure, what it is we do not know to value…

You can download Susan’s report here and also follow her on Twitter for more insights into metrics and analytics.

Connect with Brian Solis on Twitter | LinkedIn | Facebook | Google+ | BrianSolisTV
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  • http://efanpage.com Sebastian

    Great infographics and interesting perspective. How do you think Susan defined as the difference between “connected” and “engaged” in the 3 Tenets of Social Business.

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  • http://twitter.com/CAAdvertising C.A Advert Solutions

    Excellent and well researched as always.

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  • Ryck

    I am not sure that I learned more about the ROI of social media from this article.  I think you could replace the term social media in your piece with any other activity–e-mail campaigns, telemarketing initiative, etc.–and the article would read the same way.  However, I do wholeheartedly agree that many business people have too narrow and restrictive a  definition of ROI, expecting it to be a simple $100 invested generating a $150 return.  As you identified, you need to understand how an activity–be it social media or any other program–will help an organization achieve its key objectives. Those key goals may increasing revenues, but they may also include increased customer satisfaction, lowered support costs, and the list could go on.  When you consider linking an activity to a corporate goals, it may easier to justify the implementaiton of a new activity, even one based in social media.

  • http://www.redplanet.biz Social Assistant

    Hi Sir Brian, i’m a silent reader of your blog and book: Engage, always learned from your articles i’m also providing my services to some US based businesses as a freelance social media marketer. I think it is still debatable matter in Social Media Marketing, because to understand and get output from social media first of all people/businesses need to understand what is social media is actually “Automation, or Engage” having focus on targeted audience and how much your content is generic and unique.

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  • http://dempseymarketing.com/journal Patricia

    Hello Brian. I appreciated the 4 steps to prep work. Sometimes the preparation towards a project is WAY more important, or even equally important than anything else. If a proper foundation of a project is laid it CAN succeed greatly. If not, the whole campaign can fall flat.

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  • Ying

    It is true that social media is not acting alone, but an additional tool in terms of communication other than marketing or traditional PR strategies. ROI for social media actually is hard to measure if measured alone, but regarding measurement outcomes, social media definitely contribute more on credibility, relationship, reputation, trust and confidence on stakeholders. Social media is the trend of future, every business of functions should engage, as you said in the article. It drives to develop a brand new era in which social media function should definitely be brought in in measurement of ROI.

  • Carla D.

    I know this is terrible, but I laughed hysterically at your comment Karelrei. Thanks for that, and for reminding me that Google hasn’t captured all of our souls just yet :D 

    • Anonymous

      Thankyou. Some of us get to the page because of Einstein, not business.
      There are too many initials that are background or context sensitive.
      Enjoy the laughter.

  • http://twitter.com/data_monkey Neil Charles

    “Remember, there is no one way to measure R.O.I”

    Yes, there is.

    It’s the amount of money made vs. amount of money invested. You can
    argue about whether the benefits of a marketing activity accrue now or
    later and about how hard they are to measure, but activities with a
    positive ROI make more money for a company than they cost. That’s it.

  • http://bizcommunicator.wordpress.com Hania Whitfield

    THANK you! I am so tired of those who expect exact measurables on social media. Even traditional marketing was bs’ing it when they reported ROI. Since it typically takes 7 touches for an ad to register and a customer to typically respond, a time frame within which to measure is virtually impossible. And if the only true measurable is increased sales/profits, there are always external and internal influencing factors that could detract from the campaign results. Even a viral response is not always a guarantee of increased sales just the same as the most-talked-about Superbowl commercial. What counts is recognition and awareness. The rest is up to the business to follow up with good product, sales, and merchandising.

  • Joanelectricscooter

    Great article, i enjoy your articles they are on the heavy side but the art of the internet is heavy.  keep them coming.

  • http://www.cleancutmedia.com/ Clean Cut Media

    wow excellent piece. really summarizes everything well.
    there are just so many benefits of engaging social media – love the way it is summarized in the 6 points to consider

    thanks

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  • http://twitter.com/jonathanblaine Jonathan Blaine

    This
    has been a burr under my saddle ever since social media marketing took
    off. Nobody doubts that it should be considered and tested, but I’ve
    seen companies shift resources from something measurable and that
    certainly gets good results to something steeped in alchemy and fog…

    I’ve yet to see any real proof that Twitter works better than something
    else, or that advertising on Facebook works better than Google or a
    direct mail piece, or a display ad in the local newspaper for that
    matter. It’s no wonder many CEOs and CFOs still don’t “get it,”
    especially when the new media sales guys cannot provide the metrics. As
    proved during the Great Dot Bomb, eyeballs do not equal revenue.

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ABOUT ME

Brian Solis is a digital analyst, anthropologist, and also a futurist. In his work at Altimeter Group, Solis studies the effects of disruptive technology on business and society. He is an avid keynote speaker and award-winning author who is globally recognized as one of the most prominent thought leaders in digital transformation.

His most recent book, What's the Future of Business: Changing the Way Businesses Create Experiences (WTF), explores the landscape of connected consumerism and how business and customer relationships unfold in four distinct moments of truth. His previous book, The End of Business as Usual, explores the emergence of Generation-C, a new generation of customers and employees and how businesses must adapt to reach them. In 2009, Solis released Engage, which is regarded as the industry reference guide for businesses to market, sell and service in the social web.

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