The debate over whether or not social media programs should show positive ROI (a financial outcome) or not is kind of silly. It’s a dogmatic argument: People who believe social media activities shouldn’t be about making or saving money for the organization can articulate with conviction why they shouldn’t be. They will use terms like “engagement” and “conversations.” Their measurement methodology will shun terms like ROI (return on investment) in favor of terms like ROE (Return on Engagement) and ROC (Return on Conversations).
Conversely, people who believe social media programs should focus on the P&L and the bottom-line have their own set of valid arguments to support their point of view. They tend to use terms like “net new customers” and “buy rate.” Their social media programs’ measurement methodologies tie ROI to net new revenue, customer acquisition and retention, cost efficiencies, and various types of conversion funnels.
Both sides of this argument have been fighting over the same piece of turf for going on three years now, and with little to show for it. In the end, the argument itself is rubbish. The simple truth is this:
1. An organization’s social media program doesn’t have to focus on generating positive ROI, but it can. That is why professionals who work in the Social Media program management space have to understand the ROI piece.
2. An organization’s social media program can (and should) serve more than one purpose. One purpose may be to generate revenue for a particular group, or cut costs for an existing program. (This increased revenue/cost savings type of objective, being financial at its core, is the basis of the ROI issue in Social Media programs as it is with all business programs.) Injecting ROI and business justification into a Social Media program, however, does not mean social media activity cannot also serve PR, marketing and business intelligence functions. Generating positive ROI and pushing non-financial outcomes can coexist perfectly within the same social media program. Most successful Social Media program managers don’t make the mistake of taking sides in this pointless profit vs. “purity” debate.
3. Whether a Social Media program should generate positive ROI is really up to the organization’s leadership. The CEO is the ultimate arbiter here. Every organization has different sets of goals and objectives. Social Media is merely a tool kit. How it is used – and in support of what types of objectives – is unique to each organization. There is no universal right or wrong way to apply Social Media to an organization’s business model. There is only the way that best benefits each unique organization. Sometimes, monetizing Social Media is relevant. Sometimes, it is not.
Take the example of a fully funded NFP (Not-For Profit organization) or a government program. Such an entity isn’t looking to acquire new customers because it doesn’t have customers. It may not even be interested in recruiting donors or benefactors. Its sole purpose in creating a Social Media program may be to increase its reach, educate the public, and improve awareness about an issue – like teen pregnancy or the health risks of smoking cigarettes. ROI may not ever be a factor, yet Social Media can be integrated into the organization’s communications mix with potentially powerful results.
Likewise, a for-profit company may realize that at some point, it will have to deal with a major PR crisis that will involve consumer outrage in the social media space. Companies whose PR departments find themselves both unprepared and out-gunned in the social media space on the day a crisis hits tend to take a brutal beating by angry digital denizens that leaves a lasting stain on their brands, at least in the world of search engines. Among them recently were BP, United Airlines, Southwest Airlines, Nestle, and more recently Kenneth Cole. Digitally-savvy PR professionals understand that the faster a crisis can be defused in the social media space, the smaller the footprint both in consumers’ collective psyche and in the world of Google. To this end, new digital PR functions such as keyword monitoring, online reputation management, and digital crisis planning and management form an invaluable insurance policy against sudden unpleasant (and potentially damaging) situations. This takes planning, diligence, and a lot of front-end work in terms of building relationships with consumers through social media channels, participating in the activities of various communities (digital, in this case),etc. Some companies may decide that building this type of digital protection mechanism should be the primary focus of a Social Media program, and that is perfectly fine if that is what they want to focus on.
For other organizations, the focus of their Social Media program seems to naturally fall into any number of business functions like customer service, marketing, lead generation, advertising, market research, customer retention, consumer insights management, etc. Every business is different. Coca Cola and Pepsi don’t use social media in the same way in spite of the fact that they have very similar business models. In the same way, GM and Ford’s both use social media in their own unique way, and each works well for them. An organization’s decision to focus on financial outcomes and non financial outcomes (or the degree to which they focus on both) is entirely up to the leadership of the organization.
As advisors, program managers, social business directors, consultants, agencies or partners, our job isn’t to steer companies towards financial or non-financial outcomes. It isn’t to push our own skewed dogmatic beliefs about what Social Media and Social Business should be about. (The term “social media evangelist” suddenly comes to mind.) Our job is to first understand all of the ways in which Social Media fits into our organization – in other words, how it can benefit the organization, – and second, properly implement its use in support of key business objectives.
If an organization then wants to only focus on using social media to guard itself against a PR crisis, so be it. If it only wants to use social media to push out promotions and special sales, that is perfectly fine for them to start there. (It worked well enough for Dell.) If it wants to focus on combing the Twitternets for potential customer service opportunities, start there. (Comcast didn’t fare too badly in this area either.) If it feels most comfortable using social channels to simply extend its digital marketing efforts and make them more interactive, that works too (Old Spice, Pepsi and Coca-Cola come to mind). Likewise, if a company decides that it wants to build a more robust, operationalized program that plugs social media into every department and business function, then be ready to build that type of program as well. (Companies like Ford, GM, Starbucks and Best Buy are well on their way.)
Whether an organization starts out with one area of focus and naturally gravitates towards expanding social media into other areas of its business, or starts out looking to build a comprehensive social media program that plugs into every facet of its business, the basic process of turning a social media program into what my friend Brian Solis calls “Social Business” is at its core fairly straightforward:
1. Take a step back and look at your entire organization, talk with your department heads, and together figure out how social media might fit into every single business function and process, from marketing, sales and customer service, to internal collaboration and data analysis. This is primarily a strategic discussion.
2. Follow the “how does it fit?” discussion with a “how do we make it fit?” series of sessions. These will be operational discussions rather than strategic ones, so you may want to invite a different set of people to participate in this phase of the process.
3. It isn’t enough to vaguely attach facets of a Social Media program to business functions. You also have to identify specific goals proper to these functions that your social media program will be tasked with supporting. There is no need to create a different set of goals for your social media program. Start with existing business goals. In regards to sales, this could be increasing sales by 13% YoY. In regards to marketing, it might be to reach 300,000 net new households in Q2, or generate 5,000 new leads. The PR department’s objective may be to both create a digital crisis response plan and improve its media outreach efforts. Each function has its set of objectives. Identify them, understand them, and make sure that your social media program supports these objectives.
Note that whether or not those objectives are financial or non-financial doesn’t matter. The distinction is irrelevant to the purpose of the Social Media program’s activities. It can support both financial and non-financial objectives with equal effect and fervor.
4. Once you have established what business functions your Social Media program will support, how it will plug into each of these functions from an operational perspective (who does what and how, who do does everyone report to, etc.), and what objectives the program’s activities will focus on achieving, specific goals have to be set. This is the process of converting sometimes vague objectives into specific numbers. “More sales” is thus turned into “$20,000,000 net new revenue in Q2.” “Improve brand perception” becomes “increase positive sentiment for the brand by 20%.”
The question this step aims to answer is “How will I measure my program’s success for each of those objectives?” Measuring the ROI of a Social Media program may be tied to specific increases in net new revenue or cost savings so this part is important. Having said that, measuring a Social media program’s value to an organization beyond financial justification requires an equal degree of accountability. PR, for example, is rarely asked to show ROI. Like Customer Service and Human Resources, it is a function whose purpose touches on aspects of the business that do not directly impact sales. As Social Media becomes integrated into the PR function, ROI (financial justification) may not be nearly as relevant a topic as focusing on properly measuring its impact on the PR department’s effectiveness.
You can see how setting adequate targets is pretty crucial at this juncture. PR is just one example. The same reasoning can be applied to every business function: If the business function is not generally asked to show ROI, introducing a social media element to that business function may not necessitate an ROI discussion. A discussion about how adding a social media component to its activities will help it hit specific targets (in this case non-financial) may be more appropriate. If, however, the business function or program is tasked with showing a positive financial return on investment, then an ROI discussion is appropriate when it comes to assigning resources to social media roles in support of those financial targets. What setting targets teaches us is that the ROI question is case-specific.
What this part of process also teaches us is that the effectiveness of a Social Media program should not only be tied to typical social media metrics like the number of followers, fans, likes and subscribers, but also to the program’s ability to help each business function it supports hit its targets. In fact, the latter should be your priority. Each business function has its own set of objectives, and each of these objectives must have its own set of targets.
This is how you start to build functional Social Media programs, by the way. Not by treating social media as a 5th marketing wheel or a vague consumer “engagement” engine, but as a fully-integrated competency deployed across every department in your organization.
So the lesson here is this: Don’t get all tied up in the philosophical arguments regarding social media and business, the ROI question, or even the pros and cons of monetizing social media. debating personal opinions can be pretty entertaining, but from a practical standpoint, these types of discussions don’t lead to either answers or solutions.
Instead of picking a side or arguing over conjecture, look at Social Media’s role in business from a practical perspective: Understand all of the ways the Social space, with all of its tools and capabilities, can help an organization improve everything it does. Figure out how the organization you serve can use Social Media to become safer, smarter, faster, friendlier and more successful in every way that matters. Some of it will hinge on financial outcomes and some of it won’t. Learn to be equally comfortable with both and you will find that building and managing social media programs that bear fruit will become a lot easier.
I hope I didn’t confuse anyone with this.
Cheers.
PS: You can find a lot of this stuff in Social Media ROI: Managing and Measuring Social Media Efforts in Your Organization (Que Biz-Tech / Pearson), due out in March, but available for pre-order now on Amazon.com and at Barnes & Noble. Order it now:
Additional reading:
Vadim Lavrusik’s The Evolution of the Social Media Manager – Social Monetization Manager? (Mashable) – Finally, businesses are beginning to look past the “it’s really about conversations and engagement” evangelism and into a more complete approach to social media operationalization. Vadim’s post made me realize it was finally time to start sharing some of this with a broader audience.
Sean McDonald’s Dell – A Leader in Social Media Innovation (Ant’s Eye View) Hat tip to @RichardatDELL for pointing this one out. The statement that “You will never fully scale your operation by just adding more headcount to a central social media team. You scale smartly when you enlist your existing employee population to listen and engage on behalf of the brand” echoes my sentiment exactly. Social media isn’t a department or a function. In order to yield the best results (whatever they may be, based on the organization’s needs) it must be a fully-integrated competency deployed across every department in an organization.
Brand Building and Online Marketing Blog 
Solid. Possibly your best post yet.
Thank you sir. A fine compliment from anyone, but especially from you. That just made my day. 🙂
Great stuff. I am doing some research on a presentation for an industry that is highly skeptical, and this will ring with them. Awesome spin, thanks!
I have to agree with Mack on that one!
Extremely good one
Great post. Great example of how ‘Operational Social Media’ is much more functional than the Marketing Based Social Media.
At last, a credible view of social media ROI from someone who actually understands the inner workings of organizations, especially large ones. Thank you for articulating it so well.
Thanks!
Yep. That’s kind of the difference between social media cheerleaders/speakers and business management pros who understand how to make the stuff work.
This isn’t to say that the cheerleaders aren’t as important, relevant or legitimate as the folks with stronger business acumen, but the difference in their roles and function in regards to social media adoption in the business world is pretty huge.
Where companies and agencies get in trouble is when they assume that a cheerleader can also be the guy who can build a program for them. Some already kind of know how. Most aren’t ready to take that on yet.
One step at a time, I guess. 🙂
Exactly 🙂
This is what I call “Do not let social media become a Face(book)lift”. Strategy before tactics. Internal + external.
Agreed. I was having a debate recently with folks and we discussed many of these same topics and concerns. The fact that you’ve shown there are multiple reasons (some directly related to revenue, others not) to engage in social media helps companies understand that we’re talking about much more than Facebook likes.
Great post, Olivier.
Glad I could help. 🙂
Nailed it, Olivier. It’s great to finally see material written about social media that is at an advanced level. Thank you. Social media has been around too long to only have a documented body of knowledge that covers the 101 level. You’ve done a great job exploring and explaining the intricacies involved for those who are serious about using social media for business.
You know what’s funny about that? That it’s considered advanced. 😀
The content of this post is basically hour #1 of meeting #1 with a client. This field has been carpet-bombed with crap articles and blog posts for almost 3 years now, mostly written by medium evangelists repeating each other’s stuff. Most of them know how to write blog posts and attract traffic, but have never worked at this level with real companies.
Still… I couldn’t have posted this two years ago. It would have been heresy.
This is a weird little industry, isn’t it?
Cheers, David.
Confuse? On the contrary, I was marveling as I read it just how clearly you were articulating what could have been an “he’s in the weeds and where is he going and I know he’s saying smart things but what’s his point” argument.
Well done.
Thanks!
Hi,
This post is pretty solid. It seems like there are many ways to use Social Media but they need to be really thought out since social media can spread awareness of a brand, allow the companies to build up a loyal number of followers, and create incentives to be used by customers. Yet it should not be the only way to get attention to the consumer, there has to be more and companies should be able to supply that information/attention grabber.
Yep. It’s basically like a really smart telephone. Anyone in the org can use it, either to goof off or accomplish something. The platforms themselves are secondary to the business’ needs. 🙂
Hey, Oliver, thanks for the response. I have to agree, I would also have to say that I hope they accomplish something without goofing off.
I have often argued that most of social media is not actually “new”, and is more easily understood as “improved ways of performing very traditional functions”.
Some of those functions have always had clear ROI implications and brightline measurements, and others never had and never will.
I’ve been a traditional agency guy, a digital agency owner, and am now client side. Let me offer some inside baseball.
When a client pulls out the ROI cudgel and starts flogging the social media agency with it, it’s possible it’s because the client truly “doesn’t get it”. But its far more likely he or she finds the relentless social media cluetrain cheerleading tiresome and wants to cut to the heart of the question: “is there value in this for ME and MY brands, or not?”
The right answer to this question is NOT to trot out more and louder cluetrain cliches. This will never earn you a seat at the grown-up table.
The right answer is to do what this post suggests: work to understand business objectives first and talk about tactics second.
P.S. Olivier, I agree with Mack Collier: this may be your finest post yet. Well done.
Yep. The ROI question is almost always “what’s in it for me?”
It’s also a litmus test: This jackass can sell me his social media “services” well enough. But can he articulate his understanding of what my expectations are? 😀
A client that asks that question and doesn’t take BS for an answer probably won’t get taken for a ride. Everyone else might end up with a whole lot of nothing, a few proxy tweets, and not a whole lot to show for their investment. That latter scenario is the one that rubs me the wrong way.
We’re getting there though. Companies have been burned enough times now that they’re getting smarter about who they work with.
Cheers, Tom.
There’s so much focus on ROI….I agree with you, it’s important to look at big picture objectives, thanks.
This is why I count this site among the “Life Changing Blogs” on my own. Simple, solid, actionable information on social ROI. Even beyond ROI, this is sound analytical advice for measuring the success of social initiatives regardless of personal belief.
Ironically enough, I had a conversation with my boss yesterday afternoon wherein he mentioned our superiors are supportive of all the new social initiatives we’re preparing to roll out behind the firewall, but expect quantifiable results. I could see the concern in his eyes as he said this. We both believe in what we’re doing, but how do we figure ROI?
Next thing you know, I’m channeling TBB…
Who are we serving and how will these initiatives affect the customer, thus impacting business? We need to define our metrics and establish baselines for each. Only then can we track our progress and provide quantifiable data to back it up.
High fives all around.
Thank you, TBB.
That’s scary. In a good way. 😀
I’ll say. Scary awesome.
Social media, for all the ways it enables us to connect with people around the world, raise the bar, and expand our horizons, is inherently exciting, but it gets REALLY exciting when we start to see just how far the bar moves.
Great post Olivier. But I’d be interested in your thoughts outside the marketing world. You’re right about social media not being the fifth P – but my thinking is that social must extend far beyond marketing – beyond the PR/Sales/Customer Service groupings.
It should be part of HR, of innovation and research. It should be part of IT. These will have financial and non-financial indicators for performance.
Yep. I completely agree. I ran out of room for boxes in my image, but yes: SM plugs into every business function and process: IT is definitely a huge component of this. Collaboration is also key. HR, legal, etc.
I started a series on why Marketing is killing social media that I will revive and conclude – probably next week to address that specific topic.
Cheers, Gavin. Missing the flat whites, man. 🙂
I think this post actually makes other of your posts even stronger but buy projecting the message in this way it can be less intimidating for a company that wants to start there presence in Social Media.
It gives a starting point so they can actually realize that eventually they need to follow the other factors you have spoken about on previous posts.
Right. I’ve been saying this for a very long time, but I haven’t exactly presented it this way before. I probably should have. These diagrams seem a lot clearer and more accessible than some of the ones I have used before. Agreed.
Cracker article. Thanks. Sometimes I cringe at the length of some blog posts but I read it all the way to the end.
The thing that struck me was that we still have to “justify” social media in relation to how it can help the business (financial or otherwise).
Do you have to do that when new phones or PC’s are ordered? Of course not. But imagine the look on the IT Dept’s face if you said “Why do we need or what is the ROI on everyone having PC?”
We all know that it is because it helps us do our job better and that it doesn’t need to be tied to a specific goal. I look forward to the day when SM is “just part of the fabric” and it’s use is justified as much as the telephone (or as little as 🙂
PS – Gavin makes a good point that I had had a thought about as well. Why do people automatically assume that SM is the marketing/sales responsibility. For me this stinks of the attitude “Oh goody, a channel to use to sell more stuff to people”
Mind-rendingly awesome, sir. Well written.
Particularly love the idea of corporate introspection – very important missing step insofar as creating a real strategy (as opposed to a sequential tactical plan) goes.
Fantastic.
Loved this post and perfectly articulated! There’s enough debate about ROI vs ROEngagement to drive anyone crazy.
What really resonates is the fact that social media can support all business functions – it adds value. If you’re not plugging into these functions and their objectives you’ll tire very quickly as you’re likely swimming against the current.
Yep. I watch scores of companies get into social media with no plan, no objectives, just… some vague notion that they have to be there and produce content and track numbers that don’t tie back to the business, and very few accidentally do well.
On the consulting and agency side of things, very little of the advice I see and hear about takes this approach. That’s been a pretty big problem these last few years. Hopefully, posts like this (and the book) will help companies start to shift into a more practical understanding of social media as opposed to the confused marketing mess that most have been struggling with so far. 🙂
Thanks for this, Olivier. With the increased focus on ROI in social lately (much needed, of course), I think we tend to lose sight of business objectives as the important goal.
ROI is nice. It may be an intended result. But it isn’t necessarily a requirement. Slavish pursuit of ROI while being blind to business goals is a recipe for disaster.
Many objectives are intermediate goals that are costs, pure and simple. They’re costs we incur, though, because they’re steps in the path to profit.
Example: Our goal is to build a customer email database and obtain 10,000 opt-in email addresses. It’s a goal. Period. And there’s a specific reason for that goal. The marketing plan that achieves that goal and the lowest cost is the best one, but it still is a cost. Achieving positive ROI is impossible because those 10,000 email addresses are only POTENTIAL revenue. What you do with those addresses — the email marketing campaigns you run, or the reduced customer service costs — can have a positive ROI, but achieving the goal of building the database will have a cost, not a profit.
While it may not be a top-level objective, it’s a business objective nonetheless.
Yep. That’s exactly right. 🙂
Thank you Olivier! Great, practical advice on company goals and objectives as the starting point when planning all programs. I don’t think companies ask themselves “what are we trying to accomplish here” nearly enough. Social media is a means to an end, a tool. Corporate goals and objectives will always be the starting point (or should). It’s pretty clear when you start there, but I guess not to some folks, ha.
Thanks for the great post and the book recommendations. I’ll be checking them out for sure.
🙂
That’s why when I hear people talk about their social media strategy and their facebook strategy, I cringe a little bit. I would rather hear about their business strategy or their customer service strategy – and how social media fits – than about how they’re going to create a content strategy to fill out their Facebook strategy that supports their social media strategy. You can always tell when a consultant with zero business or social business experience has been there. 😉
Cheers, Anna.
Thanks for the additional reading, sorry, I was blinded by your book 😉
Wow. This should be required reading for anybody in college for business right now. In my experience, social media was so pushed as an ***ULTIMATE SOLUTION!!!*** that nobody even stopped to consider why.
Yep. Lots of cheerleading and evangelizing out there. Not a lot of practical thinking though. It’s still a young topic.
I was telling myself the other day, “That Blanchard guy is smart and his stuff is always a great read, but I hear an awful lot from him about what DOESN’T work, what he DOESN’T like, how NOT to do things — and almost nothing about the path he prefers.”
This excellent post has addressed all of that. It’s the one I’ve been waiting for.
Excellent, thoughtful post but if there’s such a thing as a fully-funded non-profit organization, I’d like to be on their board of directors. All non-profits have customers–they are donors and in the case of social service organizations they have the people served by the organization. In those cases, social media has the dual purpose of promoting programs as well as engaging volunteers and donors.
Government also has customers. They’re called taxpayers, and they are also the people being served by the agency. Social media has a huge informational component with those folks.
To say that Government and non-profits don’t have customers is to ignore a huge audience that can benefit from a vast array of communications strategies and tactics.
Good post, Olivier, agree with your comments on the non-profit foundation scenario. You may not recall, but you and I actually had an email conversation about this very scenario last year when I questioned how a “Bill Gates” type of organization could really measure ROI in $ (or why they would even want to). Thanks! You do great work!
Jenifer @jenajean
Nicely articulated sir. I remember way back in the old days when “cell” phones first came out you had to make a business case to get one. The organization powers that be just didn’t understand the multiple uses for a cell phone then and were convinced it was needed to accomplish the business goals. This would never happen today because business leadership understands what a smart phone can do and how it can help goals to be accomplished. It helps that senior leadership is using smartphones themselves today.
I think we are kinda in the same place with social. Senior leadership doesn’t necessarily understand the power of social because it’s new to them and often they aren’t using it themselves. This will take time and posts like this will help them along this path. I totally agree with you that it’s all about the business goals and social is just one way, and often a great way, to get things done. I predict (and hope) that in 5 years we’ll look back on the present situation and reminisce how it was so similar to the debate we had about cell phones and that a social approach to everyone’s role is just a natural option.
Cheers.
@davidalston
Agreed 100%. Cell phones, e-mail, fax machines, the telex, even the telephone itself. Whenever some new evolution in communications comes along, we go through a rough patch during which simple confusion, fear of the unknown, and a healthy dose of snake oil turn a simple business justification discussion into a mess. We’re emerging from that a little this year, I think. It’s funny to look back and see how this happens EVERY time, pretty much in the same way. 😀
Thanks for commenting, David. 🙂 Cheers.
Yes, totally agree. And I agree this is the year we will start to see things emerging. Cheers. David
Olivier, I’m revisiting this post after a quite some time; this is one of the most cogent pieces I’ve read (when it was originally posted or since) on what social media ROI actually is. That you’ve articulated that it can, really, be whatever a company/brand needs it to be is much appreciated; so many are so boxed in by their thinking that they can’t get beyond how it’ll boost their profit margins.
So, a year later, thank you. 🙂