In Social Media, Are We Looking For ROI in All The Wrong Places?

One of the hotter topics in my corner of the Twitterverse is Return on Investment (ROI).  How do you calculate the ROI of social media?  What’s the ROI of Twitter?  The questions are many, the answers too few.  There have been several blog posts on the subject (here are just three examples – Tim Ferriss, Olivier Blanchard, Zygote ), and I plan to post an overview and synthesis of some of the better ones in the near future.   One important question seems to be missing from much of the conversation, to what degree should social media be considered a cost of doing business (from a corporate/organizational viewpoint) rather than a distinct activity that must/should be justified by hard ROI?

If your customers want the option of customer service via Twitter do you really have an option long-term?  If crises are often spawned in social media, how optional is listening/monitoring if you want to protect your brand?  Increasingly, the corporate world will realize the options are all with the consumers/customers and how, how often, what and why we communicate will largely be in response to this dynamic.  When voicemail came on the scene (patented in 1983), I’m sure the ROI pencils were sharpened and presentations made.  When was the last time someone was asked to justify the cost of voice messaging or 800 numbers or email?  They are all considered part of the cost of doing business today.  In a relatively short period of time I believe many applications of social media – CRM, crisis monitoring and listening to customers/competitors/industry voices and many others – will be considered necessary, baseline activities to doing business in the 21st. century.

The ability and need to demonstrate ROI in social media should be considered contextual and dependent on specific program/initiative objectives.  If the objective is ‘listening and learning’, what’s the ROI on insight?  However, in other cases, program objectives will be to drive a specific business outcome, and demonstrating ROI will be expected and required if budgets are to follow.  Dell offering product promotions on Twitter was closed-loop and easy to calculate ROI.  HyperLocal marketing by Kogi or your local pizza shop on Twitter is measureable in incremental sales.  You can calculate the ROI on a hotel or resort offering last-minute cut-rate weekends via FaceBook.

Knowing when social media should be considered part of the cost of doing business and making this case to your company or clients may just make the ROI imperative a little less urgent and more focused in the right areas.

Thanks for reading and please comment if you agree or see it differently!

Don B

@donbart

With Primary Research Secondary, PR ROI Efforts Will Remain Elusive

A couple of months ago I was in a meeting with a client and their digital media agency.  The guy from the digital agency made an offhand comment I thought was interesting and hits on a key issue in public relations research and measurement.  He said he had always considered the number of posts a proxy for awareness, and the number of comments a proxy for engagement.  It struck me this notion of measurement by proxy is actually the norm rather than the exception.  Often, PR outputs are used to assess campaign performance rather than trying to determine whether or not the campaign actually touched and moved the targets in the ways we intended.  The continued industry reliance on the use of advertising value equivalents (AVEs) is perhaps the most common misuse of the measurement by proxy notion.  AVEs are an attempt to determine ROI by proxy.

We need more measurement by fact, not by proxy.  We need to move beyond just measuring what the PR result is (a hit, an OTS, a delivered message) to measuring what the PR result actually accomplished – did we reach the intended targets; did they engage with the content; did we cause them to rethink existing perceptions; did we change their attitudes; did we increase the likelihood they would consider the brand?  In order to move toward measurement by fact, a much greater emphasis on primary audience research is necessary.  As an industry, we would be well-served by a higher commitment to primary research.   Research allows us to shift the conversation from measurement by implication (i.e. x% of the coverage contained a key message therefore the campaign was a success) to measurement by fact (e.g. 10% of the target audience saw the PR campaign and 15% of these individuals plan to purchase the product in the next six months).  Rather than using content links or the comments/posts ratio as a proxy for brand engagement, wouldn’t it be better to do primary research designed to measure how engaged and attached online consumers actually are to the brand and why?  Importantly, efforts to determine the ROI of public relations are greatly enabled by primary research.  The better we actually understand whether or not PR has influenced the consumer and what actions, if any, they take as a result, the better we can assess the true ROI of a campaign.

There are three inhibitors to the expanded use of primary research in public relations measurement – education, lack of vendor focus, and perceived high costs.  Many PR practitioners lack the education and training to feel confident they know where and when to use primary research in their measurement efforts.  From a research vendor perspective, there are research silos of media content analysis firms and primary research firms.  While many firms offer both, their focus usually is in one area or the other.  And very few firms are actively attempting to use quantitative research together with content analysis to more holistically measure public relations.  (Echo Research is one company doing work in this area and I am sure there are a few others.)  Yes, primary research is generally more expensive than content analysis.  However I have seen content analysis systems costs in excess of $500K per year – you can do a lot of primary research for a fraction of that.  In 2009 if the PR industry spends about the same amount on primary research as we do in media measurement, we’ll be making great progress toward measurement by fact.