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.
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:
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.