ROI and measurement


Social media ROI and the mystery of brand equity

Jul 22nd

8 comments

Our theme this week is measuring the value of social media. After crunching the hard numbers, we’ll spend some time on SM contribution to brand equity, which has always been a bit mysterious in its own right! To help unravel the social media-brand equity value proposition, I’ve enlisted my friend Jamie Lee Wallace, who posts this guest blog for {grow}:
Let’s start by getting on the same page and going old school. Back in 1989, Dr. Peter H. Farquhar was a leading academic at The Claremont (CA) Graduate University and the author of several important books and articles, including Managing Brand Equity. His insights still hold up in an era where the buzz of social media can make or break an emerging brand in a matter of hours! Farquhar wrote:
“A well-known brand can enhance the perceived value of a product. For example, a brand can assure customers of consistent product quality, differentiate the product from competitive offerings, or facilitate customer’s purchase decisions. In many cases, the principle source of a brand’s added value is the set of associations customers hold in memory.”
In layman’s terms, brand equity is your brand’s “street cred.” Its foundation is an aggregated series of associations (positive or negative) that people retain about your product or company. What is the implication for social media marketing?
Let’s look at the three stages to building and managing brand equity (italics are mine):
 
Introduction – Introduce a quality product with the strategy of using the brand as a platform from which to launch future products. A positive evaluation by the consumer is important.
Elaboration – Make the brand easy to remember and develop repeat usage. There should be accessible brand attitude, that is, the consumer should easily remember his or her positive evaluation of the brand.
Fortification – The brand should carry a consistent image over time to reinforce its place in the consumer’s mind and develop a special relationship with the consumer.
Now let’s consider these points and the potential benefits of today’s social media tools:

 

 

Positive consumer evaluations: Consumers now have powerful ways to voice their opinions about your products and services. From personal blogs to review sites to the comment sections of industry-specific blogs and news aggregators, consumers are becoming ever-savvier when it comes to letting you (and everyone else on the Web) know how they feel about your company.
 
 
–> The impact of social media — Engage these voices (whether positive or negative) in their natural environment (the social Web) to ensure that the bottom line associations customers have with your brand are positive ones. Use these connections as an opportunity for informal market research, to start building your brand’s network, and to increase customer affinity with your company.
Make your brand both memorable and accessible: Gone are the days when “cut and dry” was all you needed to win new business. Today’s consumers (B2C and B2B alike) are aggressively raising the bar when it comes to the definition of a positive brand experience. In today’s fast-moving marketplace, you need ways to stand out and facilitate customer collaboration.
–> The impact of social media — Use today’s social tools to keep your brand top-of-mind with existing and potential customers while simultaneously giving them an insider look at your company and what you stand for. Leverage repeated points of contact to create valuable ambient awareness. Provide your audience with valuable and useful content to share with colleagues. Try new media tools like video and podcasting to make your message more memorable and viral.
Consistent Image: One of the key tenets of successful content marketing (a big part of B2B social media marketing) is consistency. In their upcoming book Trust Agents, Julien Smith and Chris Brogan explore the concept of trust. Current discussions around the topic focus on the importance of “consistent reliability” in the development of trust.
–> The impact of social media — If you start a corporate blog, publish posts consistently. If you participate in industry forums, engage consistently. If you moderate a customer community, interact consistently. Be there for your customers and they will learn to rely on you. Increase your influence by nurturing their perception of you as an expert.
Special Relationship with Product: Customers no longer tolerate being “just a number.” They demand one-to-one interactions, ultra-responsive customer service, and the ability to engage in meaningful dialog with the brands they buy.
–> The impact of social media — Use social media tools to grant companies and individuals “backstage access” to your sales staff, idea labs, and customer service. Make your customers part of your team by listening well, encouraging collaboration, and taking actions that prove the authenticity of your words. The ultimate benefit of such efforts is a deeper relationship that leads to that holy grail of marketing – brand loyalty.
Farquhar probably could not have foreseen the revolution just a few years ahead of him but his thought process and research are just as fresh and meaningful as we seek to fortify brands in 2009. Sometimes you have to filter new tools through old concepts in order to clearly see the potential.
What are your thoughts on brand-building with social media tools? Do they carry as much clout as traditional media? Do you think they surpass traditional media when it comes to delivering on the elements outlined above?
Jamie Lee Wallace is a versatile strategist and copywriter with nearly 20 years of varied experience and a passion for working with clients where business, the social Web, and real life intersect. She also has way too much fun blogging Savvy B2B Marketing with her five “Savvy Sisters.”
This article is part of a series on social media value measurement issues:

Part 2: Social media ROI shock treatment

Part 3: Irresponsible social media measurement research

Part 4: Social media impact on brand equity

Part 5: The most important question to ask in social media marketing

Part 6: A double standard for social media marketing?

Part 7: Yes, it IS about the money!

Part 8: Creating a measurement plan

Part 9: Measurement is like a bartender

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More irresponsible social media financial "research"

Jul 21st

10 comments

One of the hottest articles on the web yesterday was a new study by Wetpaint and Altimeter Group proclaiming that they had cracked the code on social media value measurement. It is also one of the most irresponsible examples of data mis-management and audience manipulation I have observed.

The report trumpets with breathless enthusiasm that “for the first time ever, Wetpaint/Altimeter Group have gone beyond surface case studies to measure the true financial value of social media.”

But what’s this … buried on page 6: “While no one yet has the data to determine direct cause and effect, what we do find is a financial correlation between those who are deeply engaged and those who outperform their peers.”

Wait a minute … At this point I have to ask the report’s authors, Ben Elowitz and Charlene Li, how can you seriously purport to “measure the true financial value of social media,” while admitting that nobody has the data to do so? What are trying to pull on us here?

So WHAT did they do? I give Elowitz/Li props for developing a secret formula to measure social media engagement by 40 criteria. But it just goes downhill from there.

1) They are making their claims based on ONE YEAR of financial data and THREE MONTHS of social media engagement. Is that an appropriate timeframe to discover anything you are claiming to be a trend? You’re trying to make a statistical correlation to financial performance based on limited data during a RECESSION?

2) So, what IS the correlation? Is it a strong statistical correlation? Did you actually apply the correct mathematical tools to this analysis? How would we know? Are you seriously telling me that the social media budget of these companies is having a measurable and material impact on the financial results? You have discerned the unique contribution of Facebook compared to billions of dollars spent on advertising and decades of brand-equity building?

3) Finally, I could make an argument that your “data” provide a conclusion quite the opposite of what you’re trying to spin here. Well-managed companies generally manage EVERYTHING well. Is it any surprise that Coca-Cola and Starbucks have a successful social media effort? I will challenge you that the financial success of these premier brands enabled the creation of the effective social media programs, not the other way around!

Here is the real message from this “break-through study:” Financially-successful companies with important brands invest in deep social media engagement. That is hardly earth-shaking.

The fact that these so-called researchers are trying to pump up their own companies through trumped-up, unsubstantiated claims is inexcusable. And now it’s out there and we’ll be hearing about these faux-facts for months.
This is Part 3 in a series on social media and measurement:

Part 2: Social media ROI shock treatment

Part 3: Irresponsible social media measurement research            

Part 4: Social media impact on brand equity                                                        

Part 5: The most important question to ask in social media marketing     

Part 6: A double standard for social media marketing?                   

Part 7: Yes, it IS about the money!                                                          

Part 8: Creating a measurement plan                                                     

Part 9: Measurement is like a bartender                               

 

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Your social media ROI shock treatment

Jul 21st

14 comments

Today, let’s do a very simple calculation to determine how much cash your social media strategy should be generating to justify its existence. I think this might just blow your mind.

I’ll have to make some broad assumptions because every company is different, but you can insert your own numbers and do the math for your own organization.

Let’s assume you are a medium-sized company, and have one person working full-time on social media marketing. We’ll assign that person a salary of $60,000.

In a typical company, health, 401(k) and other benefit costs equal another 50% of the base salary, or in this case, an additional $30,000.

We’ll assign another 20% of base salary for overhead such as office space, shared services support and technology. That’s $12,000. We’re on a tight budget so we will forbid our new employee to do any travel, training, or company entertaining. And forget about bonuses this year. No whining, either!

So, our full-up cost for one social media professional is $102,000.

Let’s assume your company has a moderate profit margin of 15%. So, to break even and just cover the incremental costs of your new social media initiative, this professional would have to produce quantifiable new sales of $680,000. In other words, you would have to make that amount of money to have an ROI of 0.0% on a year’s worth of social media expense and effort.

That’s a lot of money for a lot of nothing, isn’t it? There are two reasons why I needed to shock you into social media de-tox.

First, I wanted to bring home the point that social media is not “free.” Even a modest effort at a small company takes a lot of time, which must be funded through the sweat of your manufacturing and sales efforts.

The second reason is this: For now, some companies may be willing to experiment with social media, but at some point the big boss is going to sharpen her pencil. If you can’t accurately and logically measure what you do, your marketing initiative will be in peril, as it should be.

The other day, I heard an “A-List” blogger tell his audience, “If your company is not expecting you to account for your efforts with financial measures, well, that’s just great — do whatever you want!”

And for a short period of time, you might get away with it. But to gain credibility as a company leader in a B2B environment, you must hold your activities accountable to the same standards as an engineer trying to get funds approved for a new production facility. You should be able to demonstrate a business case and that business case must be built on hard dollars … eventually.

In the mean time, the softer side of metrics may be the only thing available. Tomorrow we’ll start taking a look at the importance of “non-financial indicators” that can influence brand equity.

This is part 2 in a series addressing social media marketing measurement issues.

Part 2: Social media ROI shock treatment

Part 3: Irresponsible social media measurement research

Part 4: Social media impact on brand equity

Part 5: The most important question to ask in social media marketing

Part 6: A double standard for social media marketing?

Part 7: Yes, it IS about the money!

Part 8: Creating a measurement plan

Part 9: Measurement is like a bartender

 

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The Biggest Lie in Social Media Marketing

Jul 20th

23 comments

This is what real ROI looks like. Except if you’re in Canada. Then it would be red, blue and purple. Canadian money rocks.
Do NOT skip over this article — It might just save your reputation, your credibility and your career!
ROI (Return on Investment) seems to be THE social media marketing topic right now — How do we make money on this darn stuff? There are hundreds of articles on SM and ROI. So why am I writing yet another one? Because almost all of them have it WRONG. Furthermore, I don’t want you to get it WRONG and be misled by these ROI lies because I want you to become fabulously successful and wealthy so you can buy me things.
Let me illustrate our problem through the headlines of three articles posted in the past two days …
“Forget ROI. Measure Return on Conversation.”
“Social Media ROI measures – Influence and Mention”
“Social Media ROI: The Currency is Content.”
.. and one quote from a prominent blogger I love and respect:
“When you ask businesses why they are participating in social media, what do they say? If they say, “to make money,” then they will fail, because currency in the social web is found in both relationships and content.”
Let’s start our discussion with a point I think we can all agree on. Businesses exist to create value for their shareholders. No profit = no company, no jobs, and no social media marketing. So it is neither wrong nor undesirable for a company to make money and expect to make more of it through investments in efforts like … oh, I don’t know … social media, perhaps?
Second, you CANNOT measure ROI with any parameter other than money. ROI is a financial metric – amount of money returned for the amount of money invested. Not “page views” invested, or “conversations” invested. Greenbacks.
So, from now on, if you see any article proposing to measure ROI by any measure other than cash returned to the enterprise, I request that you write the author directly and tell them “HOOOEY!” because you are a very smart person and know that when speaking within a responsible corporate environment, management expects ROI to be expressed in terms of MONEY. Instead of “hoooey,” you may also substitute “poppycock,” a seldom-used word sure to get their attention.
Measuring true ROI for social media marketing can be very difficult, but that does not excuse anyone to tell their CEO that the ROI is coming in “number of tweets.” If you are having difficulty connecting your effort to either new revenue or cost savings, you will be far more credible telling your management, “At this time, it is beyond our ability and resources to accurately measure this in dollar terms, but we think (insert your non-financial measure here) is a reasonable indicator of our success until we get more experience and data to make the correlation to profits.”
So now you’re thinking, “Great. I no longer have an excuse to measure page rank and call it ROI. Now what am I going to do? I have a report due on Friday!”
Don’t freak out on me. I’m here for you and we’ll get through this together! Over the next few days, we’ll continue our dialogue on marketing measurement with articles on calculating true ROI, the importance of non-financial indicators and that ever-so-tricky intangible, “brand equity.”  You should be fine by Friday : )
This is Part 1 in a series on social media marketing and measurement
 

Part 2: Social media ROI shock treatment

Part 3: Irresponsible social media measurement research            

Part 4: Social media impact on brand equity                                                        

Part 5: The most important question to ask in social media marketing     

Part 6: A double standard for social media marketing?                   

Part 7: Yes, it IS about the money!                                                          

Part 8: Creating a measurement plan                                                     

Part 9: Measurement is like a bartender                               

 

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