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Archive for October, 2011

A few months ago, I shared with you the 5 basic rules of calculating the value of a Facebook fan (or like, tweet, share, follower, etc.). If you missed it, check it out here. This week, I bring you a little more on that topic.

Above (click on the image) is a short video that touches on many of the same topics:

- The $ value of a fan (or follower, subscriber, etc.) is based on transactions, either from that individual or from someone whose transaction behavior they can be shown to have influenced.

- These transactions are usually reflected in one of three ways: Net new transactions (new/recently acquired customer), increased buy-rate/frequency (existing customer starts buying more often), and increased yield (existing customer starts spending more, on average, per transaction).

- The $ value of a fan is therefore variable.

- The value of a fan changes from fan to fan.

- The value of a fan changes from company to company (or brand to brand).

- The value of a fan often changes over time. (Insight: This change is what your social media activities are supposed to be influencing.)

- Social media activity that is expressly intended to be connected to actual ROI should, as a principal aim, focus on increasing the $ value of the brand’s fans, followers and subscribers – either by converting them into new transacting customers, increasing their yield and/or buy rate, and/or having the same effect on peers within their circle of influence.

The video also brings up the danger of cookie-cutter equations or “values” for fans and followers, and the danger of mistaking costs for value (media equivalency equations).

If the video doesn’t play for you, go watch it here.

Production notes: The video was shot in London in July of 2011. I dug it out of the vault just for you guys. The background noise is a little high. Sorry.

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As always, if you want to dive a little deeper into this and other social media program / social business topics, pick up a copy of Social Media R.O.I.: Managing and Measuring Social Media Efforts in Your Organization (Que/Pearson) at your local boostore (or just order it online through Amazon, B&N, etc.)

The book is a must-have for any manager or executive involved, directly or not with the development, integration, management and measurement of social media activities in their organizations.

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click image to watch video

Too bad I can’t record every conversation I have about performance measurement and analysis, especially as they relate to social media and social business, and post them here. Granted, we’ve had some pretty solid ones on the #measuremob podcast (see archive here), but this time around, the discussion is a) accompanied by some video (which is nice) and b) not between people who fundamentally agree with each other.

In episode 83 of the Beer Diplomacy podcast, I discuss the differences between web metrics and business metrics with Marshall Sponder, author of Social Media Analytics (Mc Graw Hill).

What you will get out of this discussion:

- The limitations of looking solely to web/social metrics to determine the effectiveness of social media campaigns and programs.

- Why web/social metrics are merely intermediate data that help connect the dots between digital activity and measurable business outcomes.

- What measurable business outcomes are, vs. web/social metrics.

- How to think about business measurement when it comes to the effectiveness of social media.

- R.O.I. is not calculated in “likes” and “follows”.  It is calculated in hard dollars (or pounds or euros or yens – the same currency used in the investment part of the return-on-investment equation, in other words).

- The measurement biopsy: A simple method that any business – no matter how small or technologically-challenged – can use to test the R.O.I. of each and every marketing channel it invests in, social, digital, analog, and otherwise. This can be done as a one-time test or to monitor the effectiveness of activities and channels over time.

If clicking on the image above doesn’t take you to the video, go ahead and click here.

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And as always, if you want to learn more about how to…

 – properly build a social media program for your company

- develop a social business practice for your organization

- integrate social media across all relevant departments

- establish a social business structure for your department

- manage and integrate social media activity within an organization

- coordinate social activities with outside agencies and marketing partners

- connect social communications activity to business outcomes

- properly report your metrics and analysis to the CEO, CFO and other executives

- avoid traps and hurdles common to social media / social business in the first 2-3 years of integration

… then make sure you grab a copy of Social Media ROI: Managing and Measuring Social Media Activities in Your Organization (Que/Pearson) – the definitive social business guidebook for managers and executives.

Click here for the smroi.net site (where you can download a chapter for free and choose where you want to buy it).

Click here to buy the book straight from Amazon.com

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Translation: "don't drink the water"

If I were to start a social media blog today, I would call it simply “Stating The Obvious.” The types of topics we would cover would fall along the lines of:

1. “Social” is something you are, not something you do. If your company culture doesn’t focus on building relationships with your customers, then chances are that you won’t use social media to do it either. The “media” doesn’t dictate how social a company is or isn’t. It simply enhances its ability to be a social business – if in fact it is – or illustrates the extent to which it isn’t.

2. You cannot outsource customer relationships to an agency. Can you outsource your presence at Thanksgiving dinner to an agency? Do you send your PR team to social events and parties when you have better things to do than attend? Social media isn’t any different. Why? Because it is “social media,” not “delegation media” or “pretend media”. Research and intelligence, sure. That can be outsourced. Creative? That too. Implementing technologies and helping you with strategy? You bet. Marketing, PR and advertising? Of course. But the relationship part: Shaking hands, being there when customers ask your for help, participating in conversations, making them feel at home when they do business with you, none of these can be outsourced.

3. A blog is just a blog. It isn’t a magical trust and influence publishing converter for the web. Publishing propaganda or marketing content is just that, regardless of the publishing platform. Just because you publish marketing content on a blog doesn’t mean it magically morphs into something “authentic” that “engaged customers” will spread through “word of mouth.”

4. Marketing on social media channels isn’t “social.” It is just marketing. Just as publishing marketing content on a blog doesn’t make marketing content any less manufactured and biased, publishing content on social media channels isn’t “social.” Every time I hear a company proudly state that they have a social media program when in fact, all they have is a marketing program that uses social media channels, I feel sorry for its stakeholders and customers. This is one of two things: Delusion or spin. And by “spin,” I mean a lie. If you are a professional in this space, either build a real social media program – one that is actually social – or get out of the way because those of us on a mission to do it right are coming in hot.

5. Transparency isn’t just a word. If you don’t intend to practice it, don’t preach it. Transparency isn’t a flag you get to wave around only when it is convenient. Disclosure also shouldn’t be something your legal department needs to brief you about. You already know what’s right. And by “right,” I don’t just mean “ethical” or what you can get away with. I mean “right.” Do that. Treat your customers with respect and treat your program on foundations of integrity and professional pride.

6. Change management, not social media tools and platforms, is at the crux of social media program development. Because social is something you are, not something you do, most organizations cannot succeed in the social space by changing what they do and not who they are. A Director of Social Media can only do so much. “Social” speaks at least as much to your company’s DNA as it does to its business practices. If you don’t really care about your customers, social media won’t magically transform you into someone who does. You have to want to become this type of individual, and for your organization as a whole to follow suit, in order for the socialization of your business to be successful.

7. People are more important than technology. Hire people who care about other people. If you hire and promote assholes, your company will be full of assholes. It doesn’t matter how much Twitter and Facebook you add to your company’s communications or how many awesome monitoring dashboards you buy if you are a company of assholes.  Guess what: An asshole on social media is still an asshole. Start with your people, not your tools. They are what makes social either work or fail.

8. Social media should not be managed by Marketing anymore than your phones should be managed by Sales. 41% of social media directors are marketing professionals while only 1% are customer service professionals. Would you care to guess as to why it is that only 1% of social media programs seem to be yielding actual results (and I mean business measurables, not just web measurables)  while the rest are just making noise and turning anecdotal BS into “case studies?” (See item 9 for further insights into this.)

9. Shut up and listen. Everywhere I look, I see companies spending a good deal of their time (and budgets) focusing on producing content, blog posts, social media press releases, tweets, updates, events, and looking to “content strategy” to make sure it all fits smoothly together. That’s nice. Too bad they don’t spend at least as much time thinking about their listening strategy. Maybe they would actually get somewhere if they did. Listen to your customers. Listen to your competitors’ customers. Everything companies need to know is passing them by because they are too busy talking. Shut up, already. Nobody really cares what you have to say, and if they do, they don’t need to hear it all day long. Really. Just make great products, consistently create exceptional experiences for customers, and focus every bit of energy in making sure no customer of yours is ever disappointed, and you’ll be good to go. If your communications serve your marketing department more than they serve your customers, you are doing it wrong.

10. Any consultant, “thought leader,” agency or partner who doesn’t tell you these things isn’t fit to be consulted on the subject. Do big promises, miracle cures and fairy tales sound like reality to you? “If you buy X, your business will suddenly grow and improve?” Really? Does “we have the best secret formula” sound legitimate to you? It doesn’t matter where your new “advisors” have worked, who they have worked with or how many people follow them on Twitter.  Of course they are all going to have great stories to tell. It’s called “marketing.” Ever heard of it?

Or maybe I would call that blog “The Emperor’s New Clothes: Alive and well in 2011.”

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Chances are that you’ve already bought a copy of Social Media ROI: Managing and Measuring Social Media Efforts in Your Organization (Que/Pearson), but what about your boss? Have your clients discovered it yet? Have you shared it with your employees and coworkers? (It makes a great gift, and it will make your organization stronger.)

Get yours here or here.

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If you are still having trouble explaining or understanding the intricacies of social media R.O.I., chances are that…

1. You are asking the wrong question.

Do you want to know what one of the worst questions dealing with the digital world is right now? This:

What is the ROI of Social Media?

I know. Coming from me, the guy who literally wrote the book on “Social Media R.O.I.” this might seem like a strange thing to say. But hear me out. It will all make sense in a few minutes.

It isn’t that the idea behind the question is wrong. It comes from the right place. It aims to answer 2 basic business questions: Why should I invest in this, (or rather, why should I invest in this rather than the other thing?), and what kind of financial benefit can I expect from it?

The problem is that the question can’t be answered as asked: Social media in and of itself has no cookie-cutter ROI. The social space is an amalgam of channels, platforms and activities that can produce a broad range of returns (and often none at all). When you ask “what is the social media or ROI,” do you mean to have Facebook’s profit margins figure in the answer? Twitter’s? Youtube’s? Every affiliate marketing blog’s ROI thrown in as well?

The question is too broad. Too general. It is like asking what the ROI of email is. Or the ROI of digital marketing. What is the ROI of social media? I don’t know… what is the ROI of television?

You’ve been asking the wrong question.

2. To get the right answer, ask the right question.

The question, then, is not what is the ROI of social media, but rather what is the ROI of [insert activity here] in social media?

To ask the question properly, you have to also define the timeframe. Here’s an example:

What was the ROI of [insert activity here] in social media for Q3 2011?

That is a legitimate ROI question that relates to social media. Here are a few more:

What was the ROI of shifting 20% of our customer service resources from a traditional call center to twitter this past year?

What was the ROI of shifting 40% of our digital budget from traditional web to social media in 2011?

What was the ROI of our social media-driven raspberry gum awareness campaign in Q1?

These are proper ROI questions.

3. The unfortunate effect of asking the question incorrectly.

What is the ROI of social media? asks nothing and everything at once. It begs a response in the interrogative: Just how do you mean? In instances where either educational gaps or a lack of discipline prevail, the vagueness of the question leads to an interpretation of the term R.O.I., which has already led many a social media “expert” down a shady path of improvisation.

This is how ROI went from being a simple financial calculation of investment vs. gain from investment to becoming any number of made-up equations mixing unrelated metrics into a mess of nonsense like this:

Social media ROI = [(tweets – followers) ÷ (comments x average monthly posts)] ÷ (Facebook shares x facebook likes) ÷ (mentions x channels used) x engagement

Huh?!

Equations like this are everywhere. Companies large and small have paid good money for the privilege of glimpsing them. Unfortunately, they are complete and utter bullshit. They measure nothing. Their aim is to confuse and extract legal tender from unsuspecting clients, nothing more. Don’t fall for it.

4. Pay attention and all the social media R.O.I. BS you have heard until now will evaporate in the next 90 seconds.

In case you missed it earlier, don’t think of ROI as being medium-specific. Think of it as activity-specific.

Are you using social media to increase sales of your latest product? Then measure the ROI of that. How much are you spending on that activity? What KPIs apply to the outcomes being driven by that activity? What is the ratio of cost to gain for that activity? This, you can measure. Stop here. Take it all in. Grab a pencil and a sheet of paper and work it out.

Once you grasp this, try something bigger. If you want to measure the ROI of specific activities across all media, do that. If you would rather focus only on your social media activity, go for it. It doesn’t really matter where you measure your cost to gain equation. Email, TV, print, mobile, social… it’s all the same. ROI is media-agnostic. Once you realize that your measurement should focus on the relationship between the activity and the outcome(s), the medium becomes a detail. ROI is ROI, regardless of the channel or the technology or the platform.

That’s the basic principle. To scale that model and determine the ROI of the sum of an organization’s social media activities, take your ROI calculations for each desired outcome, each campaign driving these outcomes, and each particular type of activity within their scope, then add them all up. Can measuring all of that be complex? You bet. Does it require a lot of work? Yes. It’s up to you to figure out if it is worth the time and resources.

If you have limited resources, you may decide to calculate the ROI of certain activities and not others. You’re the boss. But if you want to get a glimpse of what the process looks like, that’s it in its most basic form.

5. R.O.I. isn’t an afterthought.

Guess what: Acquiring Twitter followers and Facebook likes won’t drive a whole lot of anything unless you have a plan. In other words, if your social media activity doesn’t deliberately drive ROI, it probably won’t accidentally result in any.

This is pretty key. Don’t just measure a bunch of crap after the fact to see if any metrics jumped during the last measurement period. Think about what you will want to measure ahead of time, what metrics you will be looking to influence. Think more along the lines of business-relevant metrics than social media metrics like “likes” and “follows,” which don’t really tell you a whole lot.

6. R.O.I. isn’t always relevant.

Repeat after me: Not all social media activity needs to drive ROI.

Technical support, accounts receivable, digital reputation management, digital crisis management, R&D, customer service… These types of functions are not always tied directly to financial KPIs. Don’t force them into that box.

This is an important point because it reveals something about the nature of the operational integration of social media within organizations: Social media isn’t simply a “community management” function or a “content” play. Its value to an organization isn’t measured primarily in the obvious and overplayed likes, followers, retweets and clickthroughs, or even in impressions or estimated media value. Social media’s value to an organization, whether translated into financial terms (ROI) or not, is determined by its ability to influence specific outcomes. This could be anything from the acquisition of new transacting customers to an increase in positive recommendations, from an increase in buy rate for product x to a positive shift in sentiment for product y, or from a boost in customer satisfaction after a contact with a CSR to the attenuation of a PR crisis.

In other words, for an organization, the value of social media depends on two factors:

1. The manner in which social media can be used to pursue a specific business objective.

2. The degree to which specific social media activity helped drive that objective.

In instances where financial investment and financial gain are relevant KPIs, this can turn into ROI. In instances where financial gain is not a relevant outcome, ROI might not matter one bit.

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By the way, Social Media ROI – the book – doesn’t just talk about measurement and KPIs. It provides a simple framework with which businesses of all sizes can develop, build and manage social media programs in partnership with digital agencies or all on their own. Check it out at www.smroi.net, or look for it at fine bookstores everywhere.

Click here to read a free chapter.

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