Okay… A few very smart peeps are still having trouble with my pragmatic approach to talking about Social Media R.O.I. this week, and I want to reassure everyone that I haven’t suddenly turned into a soul-less corporate monkey. (Thanks for the concern though. You guys rock.)
Fact: The value of having brands use Social Media to engage with their customers, build relationships, connect with communities, and participate in open dialogue is immeasurable. Let’s just say it outright. You simply can’t put a dollar value on friendship, and this is the same thing. The relationships that brands can build using some of these communications tools cannot be measured in dollars. Relationships are far too complex and important to trivialize (cheapen, even) by equating them to sales metrics. I get that. Heck, I have been writing about it for years on this blog – long before “social media” was a term. None of that has changed. I am still one of the good guys.
But there is another side to the equation that needs to be talked about: I’ve explained this in my previous two posts – In order to get buy-in from decision-makers mostly concerned with their P&L, you just can’t get around the issue of real world (dollars and sense) R.O.I.. You simply have to be ready and able to convey the value of Social Media to their organization in terms that they can relate to.
This should help clarify the dichotomy of this discussion a little better:
(If it doesn’t load, click here.)
Think about the value of Social Media to a business like you would two sides of a coin: Polar opposite but inseparable – On one side, you have value to the brand: The soft value of relationships, engagement, loyalty, Word-Of-Mouth, etc. On the other, you have value to the organization: The measurable value of increased sales.
Welcome to the Yin and Yang of Social Media.
I want to make sure that everyone is clear on the relationship between the two and the importance of addressing both in your discussions with decision-makers.
So don’t be alarmed: I am only bringing sales-focused R.O.I. into the discussion to help balance the equation for you a little bit. I haven’t shifted my stance on what makes Social Media valuable.
Sorry if I had a few of you worried. ;D
Tomorrow, we’ll go over another cool metric: Yield. (Good stuff.)
Brand Building and Online Marketing Blog 
I can’t believe one person would have a problem with you introducing ROI into social media marketing conversations, because it should not only be “important” it should remain a key driver for our experiments and explorations.
Do I wish I got paid to just sit around or shop and tweet all day? Sure! But that’s not going to happen, unless I can convince a brilliant, forward-thinking Giant Brand to pay me to do so. Our conversations, touchpoints, the content we pump out… this VIDEO has an underlying driver which is that we need to earn money to keep doing what we’re doing. Yes, it can be fun and yes, it can be life-enriching to interact with people we are not directly earning money from. But the point of all of this, as Garyvee so bluntly stated in his Big Omaha keynote, is business. That we get to know people and do business with folks we like, have come to trust, and are familiar with via social channels is icing on the cake.
Your messages about “Real ROI” are, pardon the pun, right on the money, and part of a wake-up call social media consultants and marketers need to hear. Some people are selling themselves as social media consultants simply because they have methods of getting followers for you on Twitter or Facebook. Where is the ROI in that? How is that valuable, without it being part of an overall business strategy? I applaud you for saying these things, and greedy little biz-oriented gal that I am, want more videos, a book on this, more visibility for your message, etc.
Thanks, Olivier! I seriously think you rock and are one of the marketing industries (as yet) somewhat undiscovered truth-tellers and visionary thinkers.
I keep running into very frustrated SM consultants who can’t figure out why their clients or potential clients still don’t “get it”. They talk about measurement, they say they “measure” everything… But it’s obvious that what they measure is not what their ROI-savvy clients want them to be measuring.
I think the problem stems from the fact that most SM “consultants” come from agency backgrounds. They have never been responsible for tracking and measuring sales across product lines, categories, demos, etc. Agencies basically measure two things: Exposure/eyeballs and response. Those are great things to measure, but it isn’t enough for companies whose relationship with ROI is much more sales & revenue oriented.
I come from the client side, so I have an advantage in that regard. In a way, Kristi, I am a bit of an anomaly in the industry because of my unusual background. Had I spent the last decade working at Edelman, Crayon and CP+B instead of working for manufacturers and distributors, I would be missing that half of the equation as well. 🙂
By the way, this methodology applies to all media, not just SM. So… tracking the effectiveness of PR, advertising, product launches, events, etc. works in exactly the same way. Cool, huh? 😀
I agree with Kris. For the individual, Social Media has it’s obvious benefits, entertainment & networking, plus a few more that are particular to each individual (we make SM become what we want). For the business, though, the benefits are less obvious and if you want to consider launching into something that takes time to utilize well, you’ve got to assess the cost/benefit ratio because, as we all know, time equals money. Granted, you could just tinker with social media as a business but you can see countless examples of that ruining a small business’ online reputation. We’re talking about delving into Social Media and harnessing it for your business’ benefit, not just a employing it as a time waster or a tinkerer.
Since business has to be about the bottom line, that is it’s natural approach to Social Media. Much is yet to be discovered and only time will tell us how Social Media chooses to evolve (or rather, how WE choose for it to evolve!) – but at this point, I believe that Olivier’s frequency equation from previous posts may be the best view for a business-minded approach to SM.
Something else to consider – if your business isn’t built around repeat customers, you should consider changing your goals to include brand loyalists. I believe the 80/20 rule applies even within Social Media but I am very curious to see how the current marketing power shift to customers will affect certain business model “givens” and how Social Media will play into that…
Keep the posts coming, Olivier. This is a discussion that needs some good minds contributing (in order to balance out contributors like me). 😛
Chandler, you’re right about the repeat-customer / loyalty-driving culture. If that isn’t baked into your DNA, you’re going to have a tough time these days. Wait ’till you see the Yield equation tomorrow. You may like that one as well. 🙂
Oh, and you’re exactly the kind of person we need in this discussion.
I like me some disruption, carryon!
Great post Olivier. Your insightful approach of “both sides of the coin” has been something I’ve been struggling with for a while. I look forward to reading/watching your other posts on this area.
Olivier,
I really appreciate these posts. My pitch right now is really focused on the human/relational side of the equation. The other side is important from a business perspective, and it will help, as you say, the skeptical decision-makers get off the fence about the all’round value of not just social media, but nurturing customer relationships in general. That was a really long sentence.
Thanks again!
I’m thrilled that you address this. I love social media, being a very social person, and I see the long-term benefits of using social media as a brand-builder (ha!). I do Facebook, Twitter, blogging, I contribute to various industry websites, etc. I do a lot of this stuff, more than most in my industry (though not nearly as much as the guys who are really good at it).
My problem is that I have to eat in the meantime. I run an exceedingly small company and my sales run the engine. If I don’t sell, we starve. But I cannot use Facebook or Twitter to pitch things – it seems to me fundamentally wrong. Those tools and others like them are about conversations, not sales pitches. Some of those conversations will get around to mortgage finance, and some won’t. That’s fine. I discover thousands of interesting things about what others are doing because I’m not trying to tell them what I do. Social media makes my life better.
But it also has to make my business better. I struggle with that, and Olivier is right on with this topic. Selling it to the C-level guys? Heck, I’m not sure I can explain the ROI to myself, let alone my staff of 4.
I know, right in the DNA of my soul, that we have to be engaged in this and we have to use all the tools we can pick up. But until this section of topics, I never found anyone that was making a serious effort to help me explain why. Other than that it’s fun, of course. Unfortunately most fun things reduce our income, instead of augmenting it. I know social media can improve my bottom line. I just need help figuring out – and explaining – how.
Blessings on your head for this topic, Olivier.
Chris, what a wonderful comment. Thank you. 🙂
First of all let me comment that I think you are doing a great job trying to close the gap between SCRM/social media advocates/consultants and business (money) owners.
I also fully agree with Kris C’s “back to the real world” comment: it is about business and money talks.
One additional part of the ROI of Social media / social CRM could be (or will be) Social Customer Services and Social Experiences. We all know that Customer Experiences matter. In these tough times Customer Service even matters more (unfortunately, it should always matter most, said with my passion for cs).
A good starting point for explaining the ROI for SCRM should be conducting a research to what your customers expect and want: do they expect that you have Webcare/Social media service teams? If so, what do they expect from those teams/activities? Do they expect or desire that they can interact with fellow customers on their experiences with the product/service you sell. Do they want to participate? And do not forget to ask them how important this would be for them (compared to other experiences).
If customers say they want it or need it or even expect it and also say it is important to them, you have another part of your ROI.
If they don’t: do not be angry at the “money”-side. It makes business sense not to invest.
Well put. I agree 100%.
The tough gig with CS and Social Media is 2 years down the road, when a manager trying to cut cost out of her P&L decides to cut corners and outsources her SM-based customer service to an offshore call center revamped to serve SM clients.
We’re getting away from the ROI discussion a bit here, but since you brought up CS…
Definitely though, as a secondary layer of measurement, tracking the impact of a company’s SM presence on customer satisfaction (or better yet, customer love) is a pretty solid addition to the conversation.
Thanks for the insightful comment, Wim. 🙂
Wow.. your quick.. (do you ever sleep? my time is 08.30 am yours 02.30 am I believe).
One addition to this:
Do not only ask what value SCRM can bring to you or your company. Ask what value it brings to your customer too.. Only if there is a win-win (company – customer) there is true value creation..
Olivier –
Good reality check! We are repeating EXACTLY what happened when the Web became “cool” back in the late nineties. Brands, agencies and individuals were enthralled with the “flaming logo” and “flashy pages” they could create. But the bottom line was the same – if those pages did not help a customer do business with you (learn, shop, get support, etc.) in a way that generates revenue or saves costs/time, then they failed to do their job.
The effort, whether its social media, traditional media or the in-store experience must all be accountable – both to the business and as Wim stated to the customer.
Enjoying your series – look forward to more!
Michelle Batten
@iMWConnect
I don’t think you are selling out – but…
I have been finding lately that most of my customers and relationships in the business world are backing away from ROI in exchange for wanting to see case studies and real-life examples of someone similar to them.
Why? well, as you already mentioned before, ROI is useless in the sense that calculations for ROI tend to be very conservative in costs and very generous with benefits.
A couple of the most advanced people I talk to also said that ROI sounds good, but usually nobody gets held responsible for failing to deliver on ROI – as long as some benefit came out of it, they claim that some of the costs could not be known before launching. Hogwash.
In addition, with the shortened time to deploy we are experiencing these days where projects must come out quickly to ensure we remain competitive – who has the time to do a proper calculation for ROI? If you are just going t take the vendor’s model for ROI or do a shoddy job then why bother, right?
Finally, and let’s be honest here, the cost of deploying some of these new models and technologies are so low that for some of the larger companies are not even a rounding error. Seriously, do you need to get an ROI on an investment of 100K or even 300K for a company with revenues of hundreds of millions or even billions? Sure, if you are a smaller size company you can say yes – but guess what? that is no where near your cost. The same concept applies — your cost is going to so low (compared to previous enterprise-wide deployments) that you can manage to do it without an ROI.
As the large enterprise deals are disappearing in favor or piece-meal implementations, flawed ROI calculations (i.e. all of them) should go with them.
Just look for benefits in someone similar to you, or figure out if it fits with your strategy and goals. It it does, chances are that it will take you less time to deploy and get a benefit than to properly calculate an ROI.
That’s a really interesting argument. Let me respond briefly. (Yes I can.)
1. The day I “sell out,” expect Hell to freeze over. So no worries there. If I were the type, I would have done it long ago, and I would be sitting pretty in a nice office making big bank to do little more than play golf. 😉
2. Just because people aren’t generally held accountable for Marketing and business development success and failure doesn’t mean they shouldn’t.
3. The cost of having a social media practice is greater than you realize. One of the biggest scams surrounding Social Media is that it’s “low cost.” That is incorrect. Is SM lower cost than mass market advertising? Yes. But a company still has to hire someone to manage these programs, do training, manage the IT portions of it, etc. At the very least, that’s one full-time position, and we aren’t talking about paying an intern or junior guy to do this correctly on their own. Believe it or not, just one more Head Count – for an organization that looks at it that way and is focused on their P&L – is a huge deal, even if they generate $Billions. ROI has to justify that position or it will get cut (or it won’t happen at all).
The thing about it is those HUGE organizations are broken down into departments and divisions that have BUDGETS, with managers and VPs whose compensation is tied to a P&L. While $100K salary (or even a $40K salary) may not seem like a lot to a company that generates $7B in revenue per year, to that manager looking at basis points (not even percentage points) to determine whether or not they’ll be able to afford that next Mercedes coupe, the addition of just one more person is a HUGE deal. Unless you can convince them that their investment in a program – no matter how small – that they have to finance themselves is going to yield real ROI ($), they simply won’t take a chance on it.
4. Any organization that commits any resources to a project or strategy and doesn’t look at ROI is basically setting themselves up to throw money (and a lot of it) out the window. In the months and years ahead, I doubt that you’ll see a lot of that.
Remember that I am a BIG advocate of injecting passion, truth, purpose, transparency, real brand-building, and open dialogue between companies and their customers. I LOVE this stuff. I want it to work. I want this to become the normal way of doing business for every company – not just the 2009 marketing fad. So when I talk about ROI, when I talk about impacting sales, when I talk about getting bean counters and old school business managers onboard, it isn’t because I am selling-out. It’s because the conversation about ROI touching on measuring “impressions” is missing the mark by miles. If we don’t fix this, if we don’t reframe the conversation to a realistic measure and understanding of ROI, most company execs won’t buy into what basically looks like an anecdotal pile of bullshit, and the companies they work for will miss out on what could be the biggest game-changing strategy of their careers. I can’t have that.
Either we get P&L-focused managers onboard and make Social Media actually work for brands (and prove it) by getting serious about looking at SM from a real ROI standpoint, or companies will continue to spend their resources on the same old tired crap that we know doesn’t work anymore.
Or worse yet, they will blindly fall into the trap of devising SM programs based on old media thinking – and FAIL again. From a professional standpoint, I can’t let that happen. Not when I see the problem and know how to fix it.
The FRY methodology isn’t perfect, but it focuses on simple metrics that are easy and quick to measure. You may need 6 months to develop a trend, but you can start seeing results fast.
Looking to solely to Google analytics, Digg, and other exposure and traffic measurement tools to measure the ROI of anything is complete nonsense. Do the measurements tell you something? Yes. Is it valuable? Sure. But measuring exposure has never and will never constitute ROI unless you happen to be selling advertising space. “Eyeballs” and “impressions” are a bullshit ROI model that only scratches the surface. Business managers want revenue-based ROI. “return On Investment = $$$$, baby – not eyeballs). 😉
I’m not sure who these “most advanced people” are, but feel free to put me in a room with them. I’m pretty sure they’ll walk away feeling a lot better about this whole thing.
Thanks for the comment, but if you’re looking for a sellout, you are looking in the wrong place, my friend. 😉
And here, I thought I would have a peaceful weekend roasting some dead animals or such (actually, some dead plants more like it).
I don’t think you are selling out. Actually, you are serving an incredible purpose and well needed for this market. We went through this “Growing Up” stages in the past with CRM and ERP and just about anything I remember. We had to move from the “cute and works” stage to the “business necessity” stage. The move required, as you well point out, ROI. ROI is the thing that makes managers move, what makes them decide whether or not to do something – I agree with you there. However, ROI has three fatal flaws:
1. As I pointed out before, usually ends up being a CYA elements in a business case. It is there because it is a necessity, not because someone took the time to do it right. That was probably the most important point i was trying to drive before (which I obviously did not succeed in).
2. ROI over-emphasizes the current momentum in doing calculations. If a tech or tool is hot, which is usually when mgmt requires an ROI calc, then the momentum of the same obviates a more rigorous analysis of the ROI. Some mistakes and assumptions are ignored or bypassed to move things along. This is at the point when critical mass (which we used to say it was 30% or so adoption rate) begins and hastiness ensues. This is also what Gartner calls the beginning of the decline into the Trough of Disillusionment – when results don’t match ROI and orgs begin to become disillusioned with their implemented solution.
3. Most people, and I do mean in the 96% plus level, don’t know how to calculate ROI well. Sure, it is as simple as benefits – costs, but ends up being a very complex financial calculation on future return on investment. Actually, I would even say that ROI is the wrong term or metric to use. We should just call it benefits – costs. It is exactly what it should be. Forget financial considerations of future vale of money, lost opportunity costs, etc. Sure, the CFO is happy when she sees those – but no one ever uses them to make the decision. Seriously, if the benefits are there but we could make 4% more with the money by putting into a CD — would we? We are still getting benefits… right.
Anyways, to be as brief as you were… Three more things.
1. I said before that these implementations (actually most implementation today) are happening in piecemeal. that means we can justify using an existing resource to start the work and then use real data from real experiences to provide a benefits – cost analysis. That ha proven to work better than assumptions-riddled ROI calculations.
2. ROI, as I said above, is the wrong metric anyways. We should focus the metrics on the specific goals for the org. Are we trying to reduce the costs of customer acquisition? then we should focus the benefits – costs calculation on how implementing SM can achieve that. If it cant’ the decision is then made.
3. This is all parts of the growing pains for new-and-cool techs. It is great to have someone like you taking the role of leading the effort into making SM more palatable by orgs.
You are doing a good job. And, I never said you are a sellout… not that I recall anyways.
Agreed that ROI is an incomplete metric.
As I see it, ROI is only a small part of the “benefits” story. I couldn’t agree with you more there.
What’s key here is this: I created these posts to address a very specific type of conversation with a very specific type of executive or decision-maker. 😉
You and I agree on all this stuff. I just want to shine a light on a very specific, overlooked and misunderstood element of the benefit equation.
To say that ROI is the wrong metric is valid to an extent – and I follow your logic 100% – but it is the ONLY valid metric in the minds of many execs whose responsibilities, training and experience fall into the category I have described. In order to teach them how to “evolve” as business leaders, we have to start on their level and educate them one success at a time. In other words, with these folks, you start with ROI if that’s all they care about, and build up their understanding of business/brand “benefits” over time. 🙂
Quick question, Esteban: Any advice on how I might explain this differently (as in better)? I know this is hard to grasp for lots of people, and I am sure that there is a better way of making this clearer. What should I do differently? What’s still missing?
Some great points you make Oliver, especially “By the way, this methodology applies to all media, not just SM.” In my humble opinion, Social Media, in due time, will become part of the marketing mix, another communications outlet if you will. One no different then PR, TV & Print, Direct Marketing, CRM, etc. Something many self-acclaimed Social Media Experts are not wanting to hear, after all, they do not want to give up what they feel is their baby, and claim to fame. Remember when the first web sites hit? This too was hard for marketers to grasp in the beginning because of the technical mumbo jumbo. Do away with the technical jargon and marketers will soon embrace this as another communication outlet. Please don’t get me wrong, I do believe Social Media has many strengths that other forms of media do not have.
Although @chandlervdw makes some great observations, I do believe Social Media can be a beneficial to add directly to a business bottom-line. Think driving customer service to a new level by allowing customers to leave a tweet with their phone number, DM of course, only to have customer service call you back. No more time waisted on the phone trying to reach customer service, but conveniently being called back. This makes for great satisfaction and possibly word of mouth. And we all know it’s much more cost efficient to keep an existing customer, vs. getting a new customer. Or gaining greater and more in-depth consumer insight tapping into your social media engaged consumers to measure the pre-success of a product launch, its price point, distribution channel and go-to-market readiness. Something my agency has successfully done and saved one of our clients $3M in just the first year. Not to mention the brand and dealer damage that could have followed and now was saved.
I do agree that ROI is an important, if not a crucial, element of measuring success. But so is impact, relationships and eyeballs. The disconnect lies there where CEO’s and CFO’s think ROI as finance, and many marketers and agencies see ROI as impact and eyeball exposure. Both are valid and both need to be taken into account. Unfortunately both parties speak a different language, think left vs. right brain, and have a hard time understanding each other. And I don’t believe that this is a matter of marketing adjusting their lingo to the CEO and CFO’s of the world, as many bad decisions have been made by these leaders that no marketing and budget could have solved (think Clear Coke). Never the less, this is nothing that can’t be solved by a healthy dialogue. I’d say, let’s start talking. Great article Oliver, I’m looking forward to tomorrows post.
“The disconnect lies there where CEO’s and CFO’s think ROI as finance, and many marketers and agencies see ROI as impact and eyeball exposure. Both are valid and both need to be taken into account. Unfortunately both parties speak a different language, think left vs. right brain, and have a hard time understanding each other.”
Maikel, you just hit the nail on the head, brother. Thank you. That is exactly it. Fantastic comment.
Sorry it has taken me this time to answer your question. Been thinking how to answer it better.
As to how to do this better / differently. I think that evangelizing the message as you do is the right way, there is no better way to do it better. As far as differently – there are two things that could help.
First, actual step-by-step to what metrics to select, how to measure them, how to relate them to other events (i.e. sales, service calls, etc.). I know that there is not one single solution, but a case study is worth about 5 posts on it. If you can find the right people to tell the right story (including true ROI calculations or something similar), then your job becomes a lot easier. It is the old “listen to this” vs “watch this” conundrum. You get better results when you can put an example of what you are talking about.
Second, there is a gap between what you are talking about and what the Sr. Management people you are reaching are talking about. They don’t understand what you mean. Yes, they know what SM is, and what it does, and that their kids / grandkids use it. Yes, they know they are doing something about it somewhere in their organization. Yes, they know all this and what you are saying somewhat makes sense. But they don’t know how to bridge that gap. That is your golden moment. If you can, refer to the previous paragraph, show them how they go from today to tomorrow, how that will look, how will that meet their goals, how that will make them filthy rich and give them great bonuses – then you are having the right conversation with the right people. They do care about ROI, but only because they have bonus goals tied to the BL. Don’t over-preach on ROI – show them how that ROI can take them to the promised land (a bigger bonus).
One final thing, don’t make SM too different from what they are doing. If it sounds too radical, few people will be willing to commit to it due to fear. I approach it as just another channel in a CEM discipline. It allows us to get the ball rolling and then we can see how to calculate ROI and present it better. But at least they already have the experience of deploying other channels, so they can relate to that.
Yeah, I know. Easier said than done. I did this for CRM and am doing some of it for these new channels (SM). It is not easy, but smart and passionate people like you usually get the upper hand in this conversations.
Thanks for doing this.
Thanks. Digesting all this now. You rock. 🙂