Channel Signal: Measuring social media's ROI top-of-mind for 2011

Now that social media marketing campaigns have caught on over the last few years, 2011 will be the year for questions about ROI by senior management. Are you ready with the answers?
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Channel Signal regularly shares some of its analyses of the major topics online that are important to the subscribers of SNEWS®. The topics will range from promotions to marketing initiatives, to issues that have virally exploded into crises. What are the online conversations? What issues are bringing people into the conversation? And which ones may be helping or hurting the growth of the industry? You’ll find out Channel Signal’s viewpoint here.

To ring in the New Year, Channel Signal has tracked several relevant facts that relate to social media from various surveys:






  • Virtually every survey and report indicates spending for online marketing is scheduled to go up by double-digit percentages in 2011.









  • In a 2009 survey from Mzinga and Babson, 86 percent of the respondents said they have adopted social media for work purposes




  • In the same survey, it was revealed that 84 percent of those companies do not measure their ROI.





  • In a study by Bazaarvoice (see below), surveyed business leaders had no idea about the return on Twitter or were unsure about the value of industry blogs or LinkedIn. Facebook and Brand Communities didn’t fare much better.






So, money’s going in, but few companies are trying to figure out what’s coming back.As Peter Drucker famously observed, “If you can’t measure, you can’t manage.”

Both of these studies were conducted in 2009. In 2010, companies were busy initiating programs, providing content and studying the online reaction. In 2011, though, Channel Signal predicts that you will hear senior management, i.e., CEOs, presidents and the like, across the outdoor industry…and every other industry…asking this question, “Fine, I see all of this data. Now, tell me, what does it mean? We generated 2 million impressions from a Twitter event that cost us $10,000. Is that good? Did 2 million people tweet or blog about the event? Can we boil this down to an ROI? Does this mean that for every dollar we spent, we generated 50 conversations about the event?” Answers better be forthcoming because marketing departments are asking for more money to finance new media programs.

Below is new data on the importance of measuring in 2011.

The measurement issue in not new, nor is it going away. Before starting Channel Signal and 3point5, I ran Kirwin Communications, an ad agency in the outdoor business, and was asked the same question by the CEO of virtually every client: “How do we know that these ads are producing?” They asked about image advertising then and they’re asking about community-building now. And no matter how it chafes marketing directors and creative directors, CEOs are paid to ask these ROI questions. Now there is enough ROI measurement capability to satisfy the CEO barrage.

Let's use some logic to handle at least one simple ROI question. The example: 10 promoted tweets are sent out presenting a special product offering on the a company website.

Hypothetical ROI Model:

1.(Data) Total potential unduplicated reach of the 10 tweets is 2 million people

2.(Assume) 10% of the potential audience will actually see the tweet = 200,000 people

3.(Assume) 20% of the individuals who see the tweet find it relevant to them = 40,000 people

4.(Assume) 10% of those finding it relevant will visit the site = 4,000 people

5.(Assume) 10% of those visiting the site will convert and buy the product = 400 people

6.(Data) Incremental profit margin on each sale is $50

7.(Data) Total cost of the social media initiative is $10,000

ROI Calculation: (400 x $50) = $20,000 – $10,000 = $10,000/$10,000 = 1 x 100 = 100% ROI

Solid logic needs to be applied to the assumptions when measuring. Senior management will challenge the assumptions, and that is a good thing. Let the debate rage. Because now you are getting closer to measuring and now management is getting closer to believing.

Once metrics are established, marketing will need to provide measurement and translation for all of the new media programs. That will take time and people power.

Channel Signal

Channel Signal is a social media monitoring and measuring platform that enables all businesses to track, manage and quickly react to online conversations. Channel Signal is the only software that offers: Intelligence through categorized analysis and reporting by social media experts; integration of all units of your business; work-flow processes and one consolidated dashboard. The result is a social media program that is accurate, measured and, therefore, easier to manage. For more information, email Paul Kirwin at paul@channelsignal.com or go to www.channelsignal.com.

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