Understanding ROI on Social Media Campaigns

Here's the presentation I gave on the topic of ROI in Social Media Campaigns. This was one of the many deliverables as part of MKTG 6226 @ Schulich School of Business, York University.

As the dust settles around Social Media, ROI remains one of the key deciding factors scrutinized by C-Suite executives. Companies are under pressure to justify involvement in the Social Media arena as budgets shrink. The two main problems with applying this approach in Social Media are; 1) Top management falls into the baby boomers category whose first experience with social media was during seminars or while overhearing industry buzz words as opposed to an audience that is growing up with it and accepts it as a part of life 2) Social Media Marketing requires a paradigm shift in the thinking towards customers and the brand itself.

Traditional ROI would be measured in terms of Increased Sales, Brand Awareness, Purchase Intention etc by launching campaigns that would seek these goals. Social Media Marketing tries to measure these objectives and also allows the brand to present itself through authentic conversations that radiate transparency, which probably cannot be measured. As a result, attitudes towards Social Media Marketing are still evolving. A 2009 survey by Mzinga and Babson Executive Education revealed that 84% of respondents did not measure the ROI on their social media efforts while 40% were not aware of how to do so.

A simple example of how to monitor ROI is that of @DellOutlet. Dell chooses to send out tweets offering discounts on products, provided buyers enter the promo code mentioned in tweets. The company has generated $3M in sales through this channel itself. By tracking the purchase to its source, Dell is able to establish a relation between the effectiveness of its twitter account.

Companies that choose to market through social media should be mentally ready to enter a world where the power is with the consumers. Such companies also understand the power of being genuine and not trying to push marketing messages at every opportunity. While evaluating ROI, the firm must begin by asking itself the important question of what value is being added for the customer? Why would a customer like to engage with the brand and how much? (MIT Sloan Management Review, 2010) Companies can twist ROI to match the campaign objectives. Ex, companies can consider generating awareness as a campaign objective for a new product. In light of this objective, it can measure current awareness through metrics such as tweets about the brand, members on Facebook page, votes etc. Once the current position and expectations are set, campaigns can be designed to measure if the campaign achieves well defined objectives.  

To drive ROI, a social media campaign that allows users to fine-tune the marketing message is essential in terms of connection, creation, consumption and control. (MIT Sloan Management Review, 2010) Ex. Petco.com operates an e-store where it sells food and other accessories for pets. On product pages, viewers are able to share links with their friends, “like the product” on Facebook, add reviews or recommend to friends. Customers also find the page meaningful as it shows the history of detailed comments about the product left by loving pet owners with a tab that shows the number of people who liked versus the ones who did not. It also brings authenticity to the site by allowing viewers to freely see negative comments and make a decision. For petco.com, ROI is indirectly measured as the site has 20 % lower returns for products with reviews and 45% for products with 25 or more reviews. This translates into savings on shipping, restocking and customer service costs.

While every aspect of social media cannot be quantified, it is essentially a continuous brand management exercise where every touch point is judged by the customer. These interactions are also “listening posts” that brands can use to their advantage to better products /services.