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Moneyball - Courtesy of Sony Pictures.

I finally watched Moneyball over the weekend. I’m not a big baseball fan but it held my interest, partly because it was based on a true story and partly because the movie really wasn’t about baseball at all. It was about old thinking vs. new thinking, about industry politics vs. the heresy of innovation, about dinosaurs desperate to hang on to a failing model that sustains their livelihood even when that model is clearly broken, ineffective and no longer relevant.

The scenes in which Oakland As’ general manager Billy Beane (Brad Pitt) locks horns with his cadre of coaches and scouts over how to do more with less, about how to break the cycle of mediocrity plaguing their organization, about how to get results again is brilliant, not because of the writing or the acting but because it is spot on target. How do I know this? Because I have been in that meeting hundreds of times. Well, not that particular meeting, but in others exactly like it. And every week that goes by, I find myself sitting in that meeting again and again and again.

In the US, in Europe, in Asia, the same meeting goes on almost daily. The conference table is always basically the same, the fluorescent lighting too. The players, they’re the same as well, everywhere I go. Only the vocabulary changes, the industry lingo, but the meeting, it’s the same and it goes pretty much like this:


Billy Beane
: Guys, you’re just talking. Talking, “la-la-la-la”, like this is business as usual. It’s not.
Grady Fuson: We’re trying to solve the problem here, Billy.
Billy Beane: Not like this you’re not. You’re not even looking at the problem.
Grady Fuson: We’re very aware of the problem. I mean…
Billy Beane: Okay, good. What’s the problem?
Grady Fuson: Look, Billy, we all understand what the problem is. We have to…
Billy Beane: Okay, good. What’s the problem?
Grady Fuson: The problem is we have to replace three key players in our lineup.
Billy Beane: Nope. What’s the problem?
Pittaro: Same as it’s ever been. We’ve gotta replace these guys with what we have existing.
Billy Beane: Nope. What’s the problem, Barry?
Scout Barry: We need 38 home runs, 120 RBIs and 47 doubles to replace.
Billy Beane: Ehh! [imitates buzzer]

What we see in this scene is a roomful of insiders with a century and a half of industry experience between them, and yet they haven’t figured out that their model is outdated, that their “experience,” is no longer enough to keep moving forward. They carry on day after day, season after season, doing the same thing over and over again, half-expecting a different result, but then again, maybe not. Worst of all, most of them have no idea what the problems plaguing their organizations actually are. A lot of it is just operational myopia. Some of it is also ego: they couldn’t possibly be wrong. All that experience and intuition, the entire industry’s decades-old model… how could things have changed that much, right?

And yet they are wrong, the model isn’t working anymore, and instead of listening to the guy in the room who sees it and knows how to fix it, they treat him like a punk. When he wants to do something about it, they push back. Hard. In Moneyball, he’s their boss. Imagine when he is just a Director or a VP, or even just an account manager. Imagine how quickly he gets overruled then. I’ve seen amazing people get shut down and pushed out of organizations over this sort of thing. I could give you names and dates. I could make you ill with true stories of stupidity and petty politics, of wasted opportunities and complete operational failures that turned what could have been huge wins for companies that needed them (and customers who demanded them) into case studies in wasted potential. And as tragic as  these stories would be, they are no different from the opportunities that will be wasted this week, and the next, and the one after that, always for the same reasons, always because of the exact same thinking and business management dynamics.

I see that scene, that meeting, that discussion being played out almost everywhere I go, especially when it comes to social media and social business: guys sitting around a table, treating social like it is just an extension of the same old traditional digital marketing game they all understand and desperately want to stick to. And so they make strategy decisions based on models that don’t apply at all to the social space, they insist on using measurement schemes that aren’t the least bit relevant to it or the business as a whole, and worst of all, they make hiring decisions that absolutely make no sense at all for the new requirements of social communications. Why? Because even though the game has changed, no one in the room wants to accept that it has. No one in the room wants to adapt. No one in the room wants to look reality in the eye and do what needs to be done to actually win. Talk about it, sure. Use cool new words like earned media and engagement, definitely. But actually change anything and adapt to a new model? Nope. Not happening. The change management piece that comes with social business integration, the piece that is absolutely vital to it actually working, that piece is still DOA.

Here’s another conversation that also goes on “offline” at every company (agency or brand) around the world right now in regards to hiring decisions that touch on social media management. Here it is again, through the filter of Moneyball:

Peter Brand: There is an epidemic failure within the game to understand what is really happening. And this leads people who run Major League Baseball teams to misjudge their players and mismanage their teams. I apologize.
Billy Beane: Go on.
Peter Brand: Okay. People who run ball clubs, they think in terms of buying players. Your goal shouldn’t be to buy players, your goal should be to buy wins. And in order to buy wins, you need to buy runs. You’re trying to replace Johnny Damon. The Boston Red Sox see Johnny Damon and they see a star who’s worth seven and half million dollars a year. When I see Johnny Damon, what I see is… is… an imperfect understanding of where runs come from. The guy’s got a great glove. He’s a decent leadoff hitter. He can steal bases. But is he worth the seven and half million dollars a year that the Boston Red Sox are paying him? No. No. Baseball thinking is medieval. They are asking all the wrong questions. And if I say it to anybody, I’m-I’m ostracized. I’m-I’m-I’m a leper. So that’s why I’m-I’m cagey about this with you. That’s why I… I respect you, Mr. Beane, and if you want full disclosure, I think it’s a good thing that you got Damon off your payroll. I think it opens up all kinds of interesting possibilities.

Every company has a Peter Brand either on staff or sitting in a stack of CVs. Not necessarily in the sense that they are geniuses with statistics  but in the sense that they see the forest from the trees, that they see what needs to be done, but every time they open their mouths, they get shot down. Worse, if they open their mouths too much, they’re gone. And if their CV doesn’t have the bullet points and keywords that hiring managers were trained twenty years ago to find relevant, they don’t even get considered for the position.

If I see one more social media leadership position go by default to candidates with “big agency digital experience” or “big brand digital experience,” I am going to throw my pencil at somebody’s head. There is the medieval thinking in action, right there. There’s the primary reason why almost every social media program on the planet is failing to produce results, why three fourths of companies still can’t figure out how to calculate the ROI of their social media programs, why most brands see less than 1% of engagement from their followers and fans after the first touch, why “content is king” is failing, and why increasingly, “social media” strategy and budgets are shifting to ad buys on social networks. That’s right: For all the talk about earned media and engagement and conversations, social media account roles are starting to go to media buyers now. (Here’s some insight into it.) Everyone loves to talk the talk. Almost no company is willing to actually walk the walk. That sound you’re hearing is the banging of traditional marketing hammers pounding nails into social business’ coffin.

You want to know why most big brand social media programs aren’t gaining real traction? Why they don’t work without a constant influx of ad spending? Why nobody sticks around when the “free iPads for likes” promotions are gone? Start there: no one in the room gets it. No one in the room wants to get it. And when someone in the room does get it, he or she doesn’t keep their job for very long. You think most companies are going to hire, promote and support change agents all on their own?

So the real question is this: Do you want to actually score some real wins or do you just want to spend big marketing budgets and play at being a digital big shot?

It’s a real question. In fact, it’s the most important question you might ask yourself all year. Because the answer to that question will determine whether or not you still have a job in two years. No wait… I misspoke. The answer to that question will determine whether or not you have the job you want in two years, and yes, there’s a difference. A big one.

When you find yourself looking for your next gig (and you will eventually,) do you want to just be the guy who was SVP digital at (insert big brand/agency here) or do you want to be the guy who took (insert big brand/agency here)’s theoretical social media and social business programs, and turned them into the new industry standards, into the business model that everyone will be copying and basing theirs on for the next decade? It’s a real question. Which guy do you want to be? The dinosaur or the pioneer? If the answer is the latter, then are you going to have the huevos to go against the grain? To take chances on whom you hire, what kinds of programs you launch, where and how you invest your budgets? Are you willing to stick your neck out and do it right? Or is it more likely that you’ll just play it safe, hoping that the system will just carry you for another decade or two, that the CEO or CMO you will interview with next won’t notice that your job was basically to spend ad dollars and shuffle digital board pieces for the CEO’s monthly show-and-tell meeting?

Who do you want to be? What do you want to build? Do you want to just wear the jersey or do you want to win? Hold that thought. Here’s another key piece of dialogue from the movie, after Billy Beane’s gamble has paid off, after he has started turning some wheels in a big way. He responds to an invitation from John Henry, owner of the Boston Red Sox, who tells him this:

John Henry: I know you’ve taken it in the teeth out there, but the first guy through the wall. It always gets bloody, always. It’s the threat of not just the way of doing business, but in their minds it’s threatening the game. But really what it’s threatening is their livelihoods, it’s threatening their jobs, it’s threatening the way that they do things. And every time that happens, whether it’s the government or a way of doing business or whatever it is, the people are holding the reins, have their hands on the switch. They go bat shit crazy. I mean, anybody who’s not building a team right and rebuilding it using your model, they’re dinosaurs. They’ll be sitting on their ass on the sofa in October, watching the Boston Red Sox win the World Series.

And a couple of years later, they did.

So let’s talk about our world again for a minute. Let’s talk about what’s coming, about tipping points, about momentum: Ford not only hired the right guy (Scott Monty) a few years back but gave him the authority to build a solid program there. The result: some serious wins on just about every front, from customer perceptions to purchase intent to customer loyalty and recommendations. Even car design was impacted in 2010 by the importance of social communications in the Ford organization. Edelman Digital seems to be doing something similar (I keep running into some pretty solid folks there, notably Michael Brito and David Armano). Want to see something cool? This is one of the things they’re working on. Starbucks caught an early train with that too. So did Dell. What sucks is that in 2012, virtually no one else has even tried to keep up with them. For all the money being spent and all the “case studies” being pushed around the conference circuit, most companies are still fighting it, still refusing to accept that the game has changed – worse, trying to keep playing with old methods, with old thinking, with old, outdated skills and CV bullet points. But there will come a day when someone will be given the authority to build out this new model, when it will blow everyone out of the water, and when the blindfolds will have to come off. That day is coming. What side of change do you want to be on then?

Old thinking will not score wins here. Old tactics, old hiring, old measurement, they’re all wrong for these new marketing, communications and business models. They just don’t work anymore. If you don’t believe me, that’s fine. Keep watching your margins erode. Keep watching your digital dollars go to waste. Keep laying people off and outsourcing every last business function you can’t afford to keep in-house anymore. Keep pretending the world is the same today as it was five years ago, and that what you were doing five years ago will still be relevant five years from now. Whatever makes you feel better. Keep doing the same old thing that used to work, back before people carried smart phones and iPads. Keep thinking that the guy you just hired because he spent ten years managing digital for a fast-food brand knows fuck-all about building capacity and traction for a social media program, let alone produce concrete business results for you. Keep coloring the same old boxes with the same old crayons and see how far you’ll get.

_ Okay good. What’s the problem?

We need to fill a VP Digital role.

_ Nope. What’s the problem?

All right… Whatever. We need to fill a VP social media strategy role.

_ Nope. What’s the problem?

We need to hire someone with proven global digital management experience, Billy. Someone with Disney or Nike on their CV. Someone with serious digital campaign experience.

_ Nope. What’s the problem, Barry?

The problem is, we’re not growing our Facebook community fast enough, and our content isn’t seeing the numbers we want. We need a…

_ Nope. [Imitates buzzer]

Get unstuck. Watch Moneyball and let the light bulb go off in your head. Then go find your Peter Brand and hire the shit out of him before someone else does. If you’re lucky, you’ll save both your career and your company in the process.

*          *          *

Here it is. A whole book on how to make social media work from a business standpoint. ROI is covered, along with a lot of process elements that tie back to it. If your favorite social business “expert” doesn’t seem to get this stuff yet, don’t feel bad about sending them a copy. Knowledge is never a bad gift.

CEO-Read  –  Amazon.com  –  www.smroi.net  –  Barnes & Noble  –  Que

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The 5 basic rules of calculating the value of a Facebook ‘fan’

A question that routinely comes up in social media circles is what is the value of a Facebook fan? (The question also applies to the value of a Twitter follower, Youtube subscriber, email recipient, etc.)

Invariably, whenever the question is asked, some mathematical savant – typically a self-professed digital alchemist – produces a proprietary algorithm that has somehow arrived at answer along the lines of $1.07 (Source: WSJ) or $3.60 (source: Vitrue) or even $136.38 (source: Syncapse), and so begins the race to answer this now quasi-hallowed question of the new digital age. The lure: He who can convince companies that he can calculate the value of a Facebook fan might have a shot at selling them on the notion that fan the more fans they acquire, the more value they generate for their business. (You can imagine the appeal of answering the “what is the ROI” question by explaining to a company that 10,000 net new fans per month x $136.38 = a $1,363,800 value. At a mere $75,000 per month, that’s a bargain, right?

All that is fine and good, except for one thing: Assigning an arbitrary (one might say “cookie-cutter”) value to Facebook fans in general, averaged out over the ENTIRE breadth of the business spectrum, is complete and utter BS.

To illustrate why that is, I give you the 5 basic rules of calculating the value of a Facebook fan:

Rule #1: A Facebook fan’s value is not the same as the cost of that fan’s acquisition.

Many of my friends in the agency world still cling, for example, to the notion that estimated media value or EAV (estimated advertising value), somehow transmutes the cost of reaching x potential customers into the value of these potential customers once reached. Following a media equivalency philosophy, it can be deduced that if the cost of reaching 1,000,000 people is generally $x and you only paid $y, the “value” of your campaign is still $x.

A hypothetical social media agency-client discussion regarding EAV: “Using social media, we generated 1,000,000 impressions that we converted into followers last quarter. At $1.03 per impression/acquired fan, the total cost of the campaign was $1,030,000. The average cost of an impression through traditional media being $3.97, the estimated media value of your campaign was $3,970,000.”

Next thing you know, the client believes 2 things: The first, that the value of each Facebook ‘fan’ is either ($3.97 – $1.03) = $2.94 or simply $3.97 (depending on the agency). The second, that the ROI of the campaign is ($3,970,000 – $1,030,000) = $2,940,000.

So you see what has happened here: Through a common little industry sleight of hand, a cost A vs. cost B comparison has magically produced an arbitrary “value” for something that actually has no tangible value yet. In case you were particularly observant, you may also have noticed how easily some of the authors of the posts I linked to in the intro mixed up costand value. Ooops. So much for expert analysis.

A word about why cost and value cannot be substituted for one another when applied to fans, followers and customers: Cost may be intimately connected to value when you are buying the family car, but the same logic does not apply to customers as a) you don’t really buy them outright, b) they don’t depreciate the way a car does, and c) they tend to generate revenue over time, far in excess (you hope) of what it cost to earn their business.

Even with the cost of acquiring a fan now determined, why has the value of that fan not yet been ascertained? Rule #2 will answer that question.

Rule #2: A Facebook fan’s value is relative to his or her purchasing habits (and/or influence on others’ purchasing habits).

Illustrated, the value of a fan can be calculated thus:

 a)      Direct Value: If a Facebook fan spent $76 on your products and services last month, her value was $76 for that month. If a Facebook fan spent €5697 on your products or services last month, his value was €5697 for the month.

The value of a fan/transacting customer is based on the value of their transaction. It is NOT based on the cost of having acquired them.

Example:

– Cost of acquiring Rick Spazzyfoot as a Facebook fan: €4.08

– Amount Rick Spazzyfoot has spent on our products and services since becoming a fan five months ago: €879.52

Which of the above two € figures represents the value of that fan to the company?

(If you answered €4.08, you answered wrong. Try again.)

 b)     Indirect value: If a fan seems to be influencing other people in his or her network to become transacting customers (or increase their buy rate or yield), then you can factor that value in as well for those specific time-frames. Because measurement tools are not yet sophisticated enough to a) properly measure influence and b) accurately tie it to specific transactions, I wouldn’t agonize over this point a whole lot. As long as you understand the value of word-of-mouth, positive recommendations and the relative influence that community members exert on each other, you will hold some valuable insights into your business ecosystem. Don’t lose sleep trying to calculate them just yet. Too soon.

The point being this: Until a Facebook ‘fan’ has transacted with you (or influenced a transaction), the monetary value of that fan is precisely zero.

One could even say that if each fan cost you, say, an average of $1.03 to acquire, the value of a fan before he or she has been converted into a transacting customer is actually -$1.03.

That’s right: A significant portion of your Facebook fans might actually put you in the negative. Something to think about when someone asks you to calculate the “value” of your “community,” especially if you purchased rather than earned a significant portion of your fans and followers (it happens more than you realize).

Rule #3: Each Facebook fan’s value is unique.

Every fan brings his or her unique individual value to the table. One fan may spend an average of €89 per month with your company. Another fan might spend an average of $3.79 per month with your company. Another yet may spend an average of ₤1,295 per month with your company. Is it reasonable to ignore this simple fact and instead assign them an arbitrary “value” based on an equation thought up by some guy you read about on the interwebs?

Three points:

1. The lifestyles, needs, tastes, budgets, purchasing habits, cultural differences, online engagement patterns and degree of emotional investment in your brand of each ‘fan’ may be completely different. These, compounded, lead to a wide range of behaviors in your fans. These behaviors dictate their value to you as a company.

2.  Many of your fans may only do business with you only on occasion. Because of this, you have to factor in the possibility that a significant percentage of your fans’ value may fluctuate in terms of activity rather than spend. How many of your fans are not regular customers? How many do business with you each day vs. each month? How many do business with you once a quarter vs. once every three years? Are you figuring your on/off customer-fans into your value equation?

 3. Lastly, we come to the final type of Facebook fan: The one that doesn’t fall into the transacting customer category.  They might remain “fans” without ever converting into customers. Do you know what percentage of your fans right now falls into this non-transacting category? Do you really think that their value is $3.97 or $139.73 or whatever amount an agency, guru or consulting firm arbitrarily assigned to them? No. They clicked a button and left. Their value, until proven otherwise, is zero.

 With this kind of fan/customer diversity within your company ecosystem, you come to realize that arbitrary values like “the value of a Facebook fan is $x” can’t be applied to the real world.

Rule #4: A Facebook fan’s value is likely to be elastic.

Because the value of a Facebook fan is a result of specific purchasing habits (and impact on others’ purchasing habits), a fan’s value is likely to be elastic over time. If you aren’t familiar with the term, it simply means “flexible.” As in: the value of a Facebook fan will change. It will fluctuate. It will not always be the same from measurement period to measurement period.

Let me illustrate: A Facebook fan might spend $76 on your products and services one month and $36 the following month. This means that her “value” was $76 one month and $36 the following month. If next month, she spends $290, $290 will become her “value” for that month.

Because transaction behaviors change, the value of a fan is also likely to change.

You can average this out over time (the fan’s value might average out to $97/month over the course of a year, for example), or just total her value per month, quarter, or year, depending on your reporting requirements. That is entirely up to you.

Example 1: “Based on her transactions, the value of Jane Jones, a fan since 2007, was $2,398.91 in 2010. Thanks to our fan engagement (digital customer development) program, Jane’s value increased to $2,911.02 in 2011.”

Example 2: Chris Pringle’s average monthly value in Q2 of 2011 was $290.76. His average monthly value in Q3 of 2012 was $476.21. He is one of 17,636 fans we managed to shift from a basic package to a premium package via our Facebook campaign.”

Note: In order to figure this stuff out, you are going to have to either get creative with the way your CRM solution interacts with your Facebook analytics suite or wait until Social CRM solutions get a little more robust. Some are getting close.

Examples of exceptions (where fan value may be somewhat inelastic):

 – You are a bank and a fan’s only transaction with you is a fixed monthly payment.

– You are a cable company and a fan’s only transaction with you is a monthly cable bill.

– You are a publisher and a fan’s only transaction with you is an annual magazine subscription.

– Your fans don’t transact with you. They clicked a button and left. If their value was $0 a month ago, it is still $0 this month.

If your business charges for a monthly service that tends to not fluctuate a whole lot, chances are that the value of each of your fans will remain rather constant. This compared to a Starbucks, a Target or an H&M.

Rule #5: A Facebook fan’s value varies from brand to brand and from product to product.

If a fan/customer’s value can fluctuate from month to month and that value can vary wildly from individual to individual within the same brand or product umbrella, imagine how much it can vary from brand to brand, and from product to product.

Compare, for example, the average value of a fan/customer for Coca Colaand the average value of a fan/customer for BMW. (Hypothetically of course, since I don’t have access to either company’s sales or CRM data.) What you may find is that a fan’s annual value for Coca Cola might average,say, $1,620 per year, while a fan’s annual value for BMW might average $42,000. Why? Because the products are entirely different. One costs less than $3 per unit and requires no maintenance. The other can cost tens of thousands of dollars per unit and requires maintenance, repairs, not to mention the occasional upgrade.

Moreover, a single strong recommendation from a fan can yield an enormous return for BMW, while a single recommendation from a fan will yield a comparatively smaller return for Coca Cola.

You can see how the notion that the “value” of a Facebook fan can be calculated absent the context of purchasing habits, brand affiliations, fluctuations in buying power, market forces and shifts in interests and even value perceptions is bunk. Unless of course you find yourself being asked to transform cost into value. Less work. Easier to sell.

So why does this happen?  Tune in next week for Part 2 of this post, in which we will talk about why so many “social media gurus,” digital agencies and “industry analysts” still seem to be having trouble with something that should be pretty simple.

I hope this helped. From now on, if anyone seems confused about the topic of fan/follower/subscriber “value,” point them to this post.

Cheers,

Olivier

*          *          *

If you haven’t already, check out Social Media R.O.I.: Managing and Measuring Social Media Efforts in Your Organization. Lots of vital advice in there for anyone working with social media in a business environment. Makes a great gift to employees, bosses, contractors and clients too. You can even read a free chapter here: smroi.net

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I was scheduled to participate in a panel on Social Media and ROI at the #sxswi conference this week. My schedule being what it is, I couldn’t be in two places at once and had to make the painful decision last week of cancelling my trip to Austin altogether. As much as I was looking forward to finally making it to Sx and being on this panel, priorities are priorities. Muchas gracias to the panel’s organizers for having invited me to participate. In spite of what I am about to say here, I am very grateful to them.

Anyway. After days of reading tweet after tweet about how wonderful and fun SxSWi was, how much of a blast everyone was having, seeing pictures of some of my favorite people meeting up and smiling big for the camera, it was with a heavy heart that I logged into Tweetdeck for the #sxsmroi session Monday afternoon, in the hopes of at least being there from a distance. My expectations:  A great discussion, a professional discussion, an intelligent discussion about ROI and Social Media. After all, it’s 2012, right? This should be a mature topic. I released the book last year, the various presentations I put together on the subject have made their way around the globe, my blog posts have been read and read again, shared, retweeted and whatnot. ROI when it comes to social media is devastatingly simple to understand. Right?

I guess not. What I found myself confronted with instead of the intelligent session I expected was… a complete disaster.  I knew we were in trouble when I started seeing eager tweets about ROI being tied to “Return on Efficiency” less than 3 minutes from its start.

Let me give you a taste of some of the brilliant “insights” retweeted from this unfortunate session:

What’s the ROI of NOT engaging in SM? 

Asking if there is ROI for Social Media is like asking if there is an ROI of the telephone or a pencil.

If social is done well it builds trust. if done really well, it is true trust. then 2-way convo: speed and reach. 

There is an answer for CFO – if social has done well, it builds trust.

Seems like the new question is “What’s the ROI on coming up with a formula for ROI?

That’s right: The same nonsense social media “gurus” were selling on their blogs and all up and down the social media “speaking circuit” back in 2008, when social media started being integrated into business models.

So… 2008 goes by.

2009 goes by.

2010 goes by.

2011 goes by.

We are now in 2012. How is it that the same bullshit is still being spewed as “insight” on a #sxswi panel on ROI? How does this happen?

I know I couldn’t be there so I bear some of the responsibility, but I have to ask: Where are the professionals? Surely, we can find 5 people for a panel on Social Media and ROI who know what the hell they are talking about, right? I don’t even mean “experts.” I mean just normal professionals with a fair fluency on the subject, who can speak intelligently about what it is, how it is calculated, and even offer concrete examples to illustrate how companies are determining the ROI of key activities and channels on a specific timeline.

Just 5 or 6 people. That’s all.

No? Too hard? Really?

What happens if I get hit by a car tomorrow? Nobody can handle this topic? I don’t buy that. Where are the professionals? Sound off. Please, for the love of puppies, raise your hands and step forward. This crap needs to stop. Now. Today. And I can’t be the one carrying this flag. (Unless by some miracle, my book finally starts making its way to every single desk in Corporate America, which would be fine too. #NotHappening)

Back to more of the session’s brilliant “insights” on ROI and Social media. Brace yourselves for the worst because it is coming:

Social doesn’t always need to be quantified. Its not a spreadsheet metric only – trust, relationships, advocacy. 

Social extends beyond traditional ROI and you can’t quantify it on a spreadsheet.

You can’t put love and trust into a chart. Why? Because love and trust defies logical reasoning.

Because we lied and told people digital was measurable.

How do you put trust and love into a spreadsheet? silence 

Measuring digital is different because we’re the first generation doing it. 

We’re getting so granular with SM and trying to label it with a quantifiable ROI, that we’re missing the overall impact of it.

You don’t measure activity, you measure results. 

The minute we standardize in #smroi, we will fail.

Innovation is miles ahead of where we are in terms of measuring ROI.

Don’t spend all of your money trying to measure social ROI.

There’s no ROI for measuring ROI – it’s just too difficult

Just because I can measure something doesn’t mean I should.

That was what was being retweeted from a #sxswi panel on ROI. Maybe it should have been called “beating around the bush of #smROI for the fourth year in a row.”

It isn’t surprising then that about twenty minutes into the session, a lot of the back-channel chatter started looking a lot like this:

Did I really just hear someone at #sxsmroi say a lot of data when trying to quantify social ROI is unnecessary? …On to another session…

This panel could benefit by examples of ROI measurement. Some people in this room probably have to report that. #SxSMROI

I am shocked that the #SocialMediaROI panel at #SXSW isn’t giving people the real “How To Measure SM ROI” they came for. #sxsmroi

Have to wonder who the #sxsmroi panel is talking to. Definitely not business owners or people who sign the checks.

I think I’m glad I’m not at #sxsmroi because it’s not a ROI panel. Maybe call it SM Value or SM Efficiency panel, but it’s not a ROI panel.

Sorry #sxsmroi panel, you can’t send people out of the room w message that social isn’t measurable. It is and it’s critical

Disappointing panel at #SXSMROI same song & dance we’ve been hearing for years.

People walking out. You really think they were going to magically tell you how to measure SM ROI? #sxsmroi

In a nutshell.

In case you think that my having been there would have made a difference, think again. I wouldn’t have endured 45 minutes of that. Though I have never walked off during a panel at any conference anywhere, be assured that I would have pulled off my mic and walked out of this one. I would much rather meet up with people outside the session and answer their ROI questions directly (my purpose for attending events like this) than endure almost an hour of complete and utter bullshit that has no place at a conference the scale of #sxswi.

No offense to the couple of pros who were on the panel and whose comments were either not retweeted at all or simply not mentioned in this post. A few solitary bits of general, elementary ROI wisdom did find their way through the barrage of bullshit, but not nearly enough and certainly not driven by either adequate vigor or accompanied by concrete examples. So understand that I am not taking a blowtorch to the entire panel but rather to the balance of its outcome.

Here’s what really disappoints me: A full complement of professionals (with or without me) shouldn’t be that difficult to come up with right?  There shouldn’t have been a single dumbass comment retweeted from this session. Not one. So I ask again: Where are the professionals?

I am appalled.

As for those of you who walked away from that panel thinking it was wonderful, that Social Media ROI is a myth, channel-optional or even elastic enough to mean Return on Engagement, Return on Efficiency or Return on Conversation, do yourselves a favor: Search for every post containing the term ROI (or R.O.I.) on this blog and start there. Once you start to get what #smROI actually is and isn’t, feel free to spend $10 or $15 on the #smROI book (link below). That’s all you need to get started. The rest will come naturally once you start applying what you’ve learned here to the real world.

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Here it is. A whole book on how to make social media work from a business standpoint. ROI is covered, along with a lot of process elements that tie back to it. If your favorite social business “expert” doesn’t seem to get this stuff yet, don’t feel bad about sending them a copy. Knowledge is never a bad gift.

CEO-Read  –  Amazon.com  –  www.smroi.net  –  Barnes & Noble  –  Que

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Let’s jump right in: With all this push for brands to “engage” in the social media space these past few years, the endless brouhaha of so-called Engagement strategies, bizarre measurement schemes like Return On Engagement and even the creation of new roles like Chief Engagement Officers and Engagement Strategists, you would think that engagement would be pretty high on every brand’s priority list by now.

More to the point, you would think that after 3 (and in many cases 4) years of building social media programs and managing online communities on Twitter, Facebook, Youtube, etc., most companies would have this stuff kind of figured out.

We aren’t talking about really complicated stuff here. Being on Facebook isn’t exactly as demanding as conceptualizing then producing a great superbowl ad. There isn’t really a whole lot of complicated R&D involved. All you have to do is keep people interested and… engage them, whatever the hell that means. How hard is it to just listen to people and talk with them? That is what we’re talking about, right? Engagement? Listening, replying, being helpful and interesting? Being relevant? But mostly, it’s about having conversations with people? Helping them find stuff, do stuff, share stuff that matters to them and ultimately benefits both them and the brand? Isn’t engagement about fueling both interest and that precious exchange of attention that is the substance of social interactions?

“Monitor, engage, and be transparent; these have always been the keys to success in the digital space.” – Dallas Lawrence

“Build it, and they will come” only works in the movies.  Social Media is a “build it, nurture it, engage them, and they may come and stay.” – Seth Godin

 Right? We know this, don’t we? Or is there some confusion still about what engagement actually is, how it works, what it looks like?

AdAge this week published this follow-up piece by Matthew Creamer in which data from a study released last month by the Ehrenberg-Bass Institute identifies a gap between engagement theory and engagement execution, primarily on Facebook. Evidently, it is easier to strategize about engaging with customers than it is to actually… do it.

Here is the punchline: According to the study, less than 1% of fans of the biggest brands on Facebook actually engage with these brands online.

How can this be? Don’t these brands have qualified social media directors and SVPs? Don’t the world’s biggest brands have brilliant social media strategies, content strategies and engagement strategies? Don’t they work with digital agencies that specialize in this sort of thing?

You can’t throw a cat on Facebook without hitting some kind of webinar or certification program promising to teach you how to engage with customers via social media. There is a social media #conference somewhere in the world almost every day. Have you looked at how many presentations about engagement and Facebook have been uploaded to Slideshare recently? Have you seen the change in people’s resumes in the last year? Everyone has 5-10 years of social media management experience now. (Yeah… time sure flies when you’re having fun. Magic!)

Again, I have to ask: How hard is it to just listen to people and talk with them? The content piece should be pretty easy: Copy, creative, slap a little photo or video, edit, publish, done. Everything else that isn’t back-of-house (monitoring, measuring, analyzing, correlating activity to outcomes) essentially amounts to the most basic social skills available to human beings: Saying hello. Asking questions. Answering questions. Talking about what people might be interested in. Paying attention. Making people feel like they matter, because in the end, they do.

Only 1% fan engagement. That’s it. Actually… maybe less than that:

To get to these findings, the researchers used one of Facebook’s own metrics, People Talking About This, the awkwardly-named running count of likes, posts, comments, tags, shares and other ways a user of the social network can interact with branded pages. It was unveiled last fall as a way of giving advertisers a sharper look at at the level of activity on their pages.

Researchers for the institute looked at this metric as a proportion of overall fan growth of the top 200 brands on Facebook over a six-week period back in October and they found the percentage of People Talking About This to overall fans to be 1.3%. If you subtract new likes, which only requires a click and in the minds of the researchers are akin to TV ratings, and isolate for more engaged forms of interaction, you’re left within an even smaller number: 0.45%. That means less than half a percent of people who identify themselves as like a brand actually bother to create any content around it.

 Once the “click like for a chance to win a free iPad” campaign is over (or the agency you hired has just out and out purchased your fans from Chinese or Russian fan/follower mills) it’s more like 0.45%.

This begs the question: With Facebook inching towards a billion users worldwide and people spending an obscene amount of time there, billions of dollars of marketing spent to engage them on Facebook is only yielding 0.45% engagement? What the hell is going on?

My first reflex was to look for flaws in the study, and there may be ways of picking apart its findings. Fine. But then it occurred to me that I myself have very little engagement with my favorite brands on Facebook. Let’s go through the list: Apple, Sony, Starbucks, RayBan, G-Shock, Panerai, H&M, VW, BMW, Hyundai (don’t laugh), Nike, Delta Airlines, HBO, Ikea, Moleskine, Smalto, Brooks Brothers, Nestle, Menthos, Trader Joe’s, Pilot, Rudy Project, Specialized, Cervelo, Mizuno, Nutella… Okay, I’ll stop. You get the idea. When was the last time I interacted with any of them on Facebook? I can’t remember. How often am I completely blown off by that “brand” when I do bother to comment on their posts or share their content? Almost 100% of the time.

That sucks.

So I started asking around. Everyone I talked to responded in the same way. In fact, one of the human beings I regularly engage with on Facebook (when I am naturally not engaging with a brand) put it to me in as clear a manner as I could have hoped for. His name is Vincent Ammirato, and this is what he said:

I simply don’t interact with brands through social media. I interact with people. Not one of those top 10 passion brands does anything for me. So sure I’ll buy from them when, for example, I want to surprise the wife with a little blue box. But they aren’t my idols or friends. Their “news feeds” aren’t about issues that I care about. I could easily stop purchasing from any of them and be just fine.

The solution to brands struggling to establish a meaningful, valuable connection through social media channels (Facebook or otherwise) is contained entirely in this reply. Any SVP, Global Digital Engagement Strategery can reverse-engineer this short reply into a model for success in the space. It won’t take five minutes. You won’t even need to waste your time working with $20,000/hr social media experts. It’s all right there.

Simple problem, simple fix:

 1. Own your relationships.

I have said it a hundred hundred zillion times: You cannot effectively outsource relationships. Of all the things brands can outsource to digital agencies and analytics firms, the one thing that cannot be effectively outsourced is the relationship they have with their customers. Social media are not the same as other forms of media. You can send a spokesperson or PR professional to hang out with journalists in your place and no one will find that weird or disingenuous. You cannot ask an agency AE to pretend to be you at a pig roast that you were invited to by your customers. Two different contexts entirely. Expectations of engagement in Social Media fall into the pig roast category. Your agency can hold your hand and stand with you, but you’re going to have to show up to the party yourself or people simply will stop inviting you.

Outsource everything else if you must, but own your relationships. No one can do this for you.

2. Engagement and Marketing aren’t the same thing.

Engagement on social media channels is not just a marketing communications function. Every single brand who has treated it as if it were is now finding out that treating engagement like marketing is yielding – yes, you guessed it: 0.45% actual engagement. Why? Because there is no natural impulse in human beings to interact with marketing day after day after day. As Vincent aptly puts it: I interact with people.

Do you see people hanging out at Starbucks with their favorite coupons? Do you think that changes because you repackaged your marketing to be “social” and pushed it out to Facebook?

Here’s something I need you to think about, uninterrupted, for maybe 90 seconds: Marketing on Facebook is fine. It’s great. But don’t confuse marketing with engagement. The two can go hand in hand when managed properly, but they are not the same thing. We all know that you have a marketing strategy in place for Facebook, but do you actually have an engagement strategy? 0.45% actual engagement means you thought you did but really didn’t. Back to the drawing board.

3. Stop thinking that content is the heart and soul of the attention economy.

In spite of what has been drilled into our collective brains by people who make a living creating content, content is not king.

“By creating compelling content, you can become a celebrity.” Paul Gillin

“Think like a publisher, not a marketer.” David Meerman Scott

No. First, the objective is not to become a celebrity. If becoming a celebrity is your objective, maybe managing a business or a Social Media/Business program for a brand isn’t for you. So cut the personal branding shit. It was already old 4 years ago.

Second, don’t think like a publisher. Or a Marketer, even. Think like a human being. Brands have been focusing on filling their Facebook properties with content and marketing for the last 4 years. What’s the result? 0.45% actual engagement. Think about it for a minute: Do you really think that the answer to the problem is more content or marketing? More publishing, even?

Reminder:

I simply don’t interact with brands through social media. I interact with people.

You aren’t going to out-content your competitors. You aren’t going to create “viral campaigns” every other week. And let’s be honest: You can’t compete against the endless flood of funny memes that drive most of the shares on Facebook unless you fire your entire marketing department and hire weird, slightly insane, socially irreverent interns whose jet fuel is a blend of pop-culure infused sarcasm and… Oh wait… their CVs would never make it past your HR department. They don’t have the requisite social media management experience. Never mind.

An easier way to fix the problem is simply to focus on the missing piece: How human is your brand, really?

4. Stop hiding your humans.

If I don’t know the name and face of the person managing your Facebook page, I am not going to interact with that page on a daily basis. Or maybe ever.

This may be the most important bit of insight I am sharing here today.

Let me illustrate my point: I know that Ford’s Social Media guy is Scott Monty. I know what Scott Monty looks like. Whenever I see his smiling, blue-eyed, bow-tie wearing profile picture in my stream, I look at what he is sharing. A picture of his sandwich? That looks delicious. I’m going to click on that. A picture of him at the Detroit auto show? Cool. I’m going to click on that too. An article about the Ford Mustang winning an award somewhere? Clicked. Read. Commented. Engaged.

The same content published/posted by a faceless account with the Ford logo as its avatar/identity? Ignored.

I have no idea who handles Nutella’s Facebook page. VW? Levi’s? Sony? BMW? Trader Joe’s? H&M? Not a  clue. The result: Zero interaction. Why? Because people come to Facebook to interact with people, not brands or marketing or content or logos. It’s FACEbook. Give people some face, already. You actually need humans to humanize your brand. You can’t engage from behind a digital billboard with faceless account managers who never see the light of day.

You want to know who else is doing it right on Facebook? Mashable. How do I interact with Mashable’s content? Through Pete Cashmore. Same feed. The difference: Peter Cashmore is a human being. With a face and a name I know. With a pretty unique voice too, which I appreciate for its human quality.When Mashable’s content comes to me through him, I pay attention and interact with it. It’s that simple. Who else does this pretty well? Edelman Digital (Armano, Brito, Rubel). Dell (Binhammer). CNN. MSNBC. (Probably Fox News too.) At one time, Comcast (Eliason). Seesmic (Lemeur, for starters). Learn from them.

It bears repeating: If your customers don’t know who your social media “person” (the person they are interacting with) is, if they don’t know his or her name, if they don’t know what they look like, if they can’t see a face on that profile photo, they simply are not going to interact with that account, no matter how many iPads you promise to give away.

Going back to item number 1 on this list: if you outsource your account management, you have no chance of accomplishing this. None. Zero. 0.45% actual engagement is what you can continue to expect moving forward. No amount of marketing spend will change that. 0.45% Engagement is right on par with the level of engagement people have with a wall. If that’s all your Facebook account is – a wall – then don’t be surprised that nobody gives a shit. Invest in a human.

5. Either give a shit or don’t, but you need to decide.

Nobody minds that you are there to sell stuff. It’s understood. Hell, we want to be sold to. Have you seen what people willingly pay for an iPhone or a latte at Starbucks? Our cash is yours if you give us a good reason to part with it. We wouldn’t be clicking that like button if we didn’t acknowledge that we accept that you have something to sell. It’s what that initial handshake is for.

But if all you do is push PR content and marketing offers down our throats all day and don’t actually give a shit about who we are, what we do, what matters to us outside of the next transaction, you’re wasting your time measuring engagement. Just turn your Facebook presence into a store and stop wasting your time pretending to be “social.” You might actually increase conversions going that route. In fact, if that’s what you really want to do, stop wasting time creating boring content nobody cares about and just give us 20% off coupons. If all you are going to do is use Facebook as a marketing channel, you might as well save yourself the trouble and just cut to the chase.

Just remember that being “social” (meaning being genuinely interested in the engagement piece as a relationship-building process) can’t be faked. Don’t even try. It’s insulting and ultimately works against you in the social space. Either commit to it 100% or don’t even try. Nobody just half-cares about their customers or friends. Either be in or out. Either give a shit or don’t.

I can pretty-much guarantee though that if you show that you do truly care every single day, it will pay off in spades: Positive recommendations, customer retention, customer loyalty, more frequent engagement, deeper engagement, increased mindshare, increased wallet share… If you want these things, you can have them. It’s up to you to make it happen.

6. Be helpful.

Do something helpful for someone every day and you’ll have engagement. Publish boring marketing content to fill empty spaces because you probably ought to and you will be hanging out with crickets. Who does your content strategy serve again? Your marketing department or your fans? Real question. What’s the most helpful thing you’ve done on Facebook today? This week? This month? In the last year?

Yeah… That’s what I thought. You can do better than that.

7. Have a purpose.

A strategy without a purpose is kind of like an essay without a topic. Why are you on Facebook again? What’s the value of that to you? What’s the value of that to people you want to engage with there? Give that some thought. The clearer your purpose, the higher the degree of engagement. It’s that simple. 0.45% actual engagement screams “pointless” to me. Like content for the sake of content. Like marketing spend for the sake of not losing your budget next year. Like being on Facebook because… “everyone else is, so we thought we should be there too. We’re still figuring out what we want to do though.”

8. Don’t buy fans, followers, likes and subscribers. Ever.

And don’t encourage your CMO, Social Media Directors and agencies to do so by rewarding them for meeting fan acquisition quotas. We have talked about this. The profit margins on fake fans aren’t rocket science for providers of said “fans”. The horrible mess it causes for brands who end up with tens of thousands of fake followers and fans is terribly costly and in most cases irreversible from a measurement standpoint. These people will never buy from you. They will never recommend you to their friends. They will never contribute in any way to the success of your brand. The only two things they will actually do is guarantee zero engagement and screw up your conversion metrics for the next ten years. Don’t do it. Don’t allow yourself to step into that giant pile of digital marketing poop.

9. If nobody cares about your product, your digital content won’t magically fix that.

This one is kind of self-explanatory. Talk is cheap. Focus on creating real value. If people love your products, they will share that with each other. The SEO magic behind your content is irrelevant if nobody cares about your product. You can publish stuff all day long on Facebook and no one will care.

10. Don’t just think about vertical engagement. Think about lateral engagement.

If your engagement strategy involves responding to every query and mention yourself, you’re missing the point. (Though if only ten people say hi to you every day, you ought to be able to manage that.) A vibrant, healthy community doesn’t depend on the brand’s community manager to drive conversations. The fans should be handling 80% of the comments. They should be talking to each other more than they talk to your brand’s representative. That’s what supports scale in the social space. Think about how you can make that happen. You can’t have significant engagement or drive long-term momentum in the social space without a mechanism in place to support that conversation engine. The platform + content equation alone won’t do it.

This stuff really isn’t that hard. It’s as simple as walking into a crowded room and making friends, then coming back the next day and meeting their friends, and doing it again the next day. If you just listen to them today, you’ll know what to talk to them about tomorrow. Once they start sharing stuff with you, you’ll know what they want you to share with them. Relationship-building 101.  Pretty much everything else you need to know is right here.

It has been all along.

Realistically, you are never going to see 100% engagement. Not even 50%. Shoot for 20% though. The 80/20 rule: 80% of your fans won’t comment. They’ll just watch and listen quietly. But 20% of them should naturally comment, share and participate. That’s what you want.

1% is embarrassing. Find a way to fix that.

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If the Brandbuilder blog isn’t enough, Social Media ROI provides a simple, carry-everywhere real-world 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. Do yourself a favor and check it out at www.smroi.net. Now available at fine bookstores everywhere. Also available in German, Japanese and Korean.

Click here to read a free chapter.

CEO-Read  –  Amazon.com  –  www.smroi.net  –  Barnes & Noble  –  Que

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I told you I would bring back this post regularly. Here it is again, until the day when everyone understands how simple this is. Okay, here we go:

If you are still having trouble explaining or understanding 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?

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?

If you are still stuck on this, you have probably been asking the wrong question.

2. So what is 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. doesn’t magically lose its relevance because social media “is about engagement.” 

If your business is for-profit and you are looking to use social media in any way, shape or form to help your business grow, then all of your questions regarding the R.O.I. of investing in social media activity are relevant. Any social media consultant who tells you otherwise is an idiot.

Concepts like Return on Engagement, Return on Influence, Return on Conversation are all bullshit. Nice exercises in light semantic theory, but utterly devoid of substance. First, they can’t be calculated. Second, they bring absolutely zero insight or value to your business. In fact, they pull your attention away from legitimate outcomes. Third, they are not in any way shape or form substitutes for Return on Investment.

Fact: If a social media “expert” tells you that ROI isn’t important, he (or she) is a hack. Remove them from your organization immediately.

Fact: A social media “expert” who doesn’t know how to calculate ROI properly (or teach you how to do it) might just be an expert at blogging, and not social media program management or social business integration.

Note: Integrating social media and business requires more experience than just making it look like 100,000+ “people” follow you on Twitter. Anyone can become a speaker nowadays. Anyone can publish a book and make themselves look like an expert. Unfortunately, at least 9 out of 10 social media speakers/experts/gurus/authors couldn’t effectively manage a Fortune 500 social media/business practice if you infused their brains with an extra 100 points of IQ and enrolled them in an executive MBA course. Be very careful who you hire, whose blogs you read, and whom you elect to influence your business decisions.

“Digital Influence” does not necessarily reflect competence. Always remember that. Some of the dumbest and most dishonest people in this business have enormous followings on Twitter, blogs and G+, and very high Klout scores to boot. (They spend an enormous amount of time making sure they do.) Conversely, some of the most brilliant, competent, ethical people in this business aren’t all that visible. Why? Because they are too busy doing real work to focus all of their efforts building personal brands and better mouse traps.

There are other litmus tests, but the ROI bit is a pretty solid one: A so-called expert who skirts the issue or fails a simple ROI problem/test from your CFO probably isn’t as qualified to advise you as his or her Klout score might have suggested. 😉

7. … But R.O.I. isn’t relevant to every type of activity.

Having said that, not all social media activity needs to drive ROI. As important as it may be to understand how to calculate it and why, it is equally important to know when ROI isn’t really relevant to a particular activity or objective.

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 likesfollowers, 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.

Knowing when and how ROI matters (or not) will a) help you avoid costly mistakes and will b) hopefully help you make smart decisions when it comes to assigning precious resources and budgets to specific social media/business programs.

*          *          *

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.

CEO-Read  –  Amazon.com  –  www.smroi.net  –  Barnes & Noble  –  Que

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When my parents found out that I was writing a series of books that take place during the first world war (side project), my father started digging around through the family “vault.” The vault, real or figurative, contains oodles of documents, archives, family trees, heirlooms, photographs and other artifacts that touch on the family’s history over the last five centuries or so. Fascinating stuff. Mysterious stuff. At any rate, he went digging and found a canvas wallet filled with letters which he knew dated back from World War I, which his father (the first Olivier Blanchard) fought in. He believed that the letters had been written by grandpa Olivier during his campaign in the Orient as a cavalry officer, and hoped they would provide me with terrific every-day life material for the books. As you can well imagine, I couldn’t wait to get my hands on this stuff.

Earlier this month, taking advantage of a quick trip to Amsterdam, I took a quick detour through France to spend a few days with my parents. I hadn’t been there but ten minutes before my father handed me this treasure-trove of insights which no one had so much as read or touched since 1918.

So here I am, holding in my hands this thick wad of impeccably folded letters and postcards, tucked away in a canvas wallet that – although obviously of a different era, looked as new as if I had just purchased it last week at  H&M. The paper was thin and a little yellow, but not from age. Every word looked as crisp and rich as if the ink had just finished drying. I roughly counted the letters: Somewhere between 60 and 80 letters in all, spanning from a period between February to August of 1918. Every letter was dated, numbered, and organized in chronological order. I glimpsed the handwriting, which was decidedly French and very old school, but decipherable all the same. I knew immediately that I had struck gold, not just in terms of raw research for the project, but also in terms of getting a glimpse at the lives of family members I had not ever gotten to know.

It should be said that by the time I was old enough to know about World War I, my grandfather was already very old. Like many survivors of The Great War, he wasn’t much into talking about it – or talking about much of anything – and especially not with an 8-year old. He and his cousins died when I was in my teens, without ever having told me or anyone outside of their own generation the simple stories of their youth. They passed away, one by one, much of their furniture and private things finding their way to various descendants and godchildren scattered all across Europe. Much of it probably ended up in estate sales and antique swaps. What vague historical significance might have still lingered behind them died outright when they became the property of strangers.

This is how family histories die, by the way: Stories don’t get passed down, and so one day the priceless portrait of an ancestor goes from being a family’s oldest historical artifact to being that weird ugly painting of some random person that Uncle Jack always had up on his wall. Estate sales are full of them: Paintings of strangers. Every single one of these strangers hanging on a wall in a gallery or study or just sitting under a sheet in an old garde-meuble is someone’s ancestor, orphaned either by chance or neglect, and destined never to find its way home. Pocket watches, jewelry, hats, books, pens, tea sets, old papers… sold, thrown away, donated. Before you know it, nothing remains but gravestones and dates. Before long, these too are forgotten.

It didn’t occur to me how much of a tragedy this erosion of every family’s history was until years after my grandfather’s generation passed away, when I became a father. Some part of me started to look for a link to the past, to some sense of continuity and legacy I could pass down to my children. It isn’t about just understanding your blood line’s connection with historical events. I think that knowing where you come from, who your ancestors were, helps shape who you will become in your life. We all look for heroes in our ancestors, people with courage and character, people we hope to find a little of ourselves in. Knowing where you come from matters. If it didn’t, sites like ancestry.com wouldn’t be as popular as they are.

But I digress. The letters: I started reading them. A few minutes into the process, I realized that they were not at all what I thought they were. They were not my grandfather’s letters to his family. They were the letters his father Edmond and mother Elise sent to him. They were letters from home. I have to admit that I was a little disappointed at first. I wanted to find out what it was like for a soldier, being shipped to the front, rotating between the relative safety of billets and the terror and carnage of the front lines. It was him I wanted to understand. It was through his eyes that I wanted to see the war. How could letters from his parents, safely tucked away in Paris, ever compete against that? Two letters into it, I realized how wrong I had been. As interesting as it would have been to read his side of the correspondence, discovering theirs was equally fascinating, if not more. Through their letters, I discovered a world that books and movies about the time period rarely shed a light on: How did the French live in 1918? How did parents deal with having a son fighting a war that was clearly the most devastating corpse factory in history? How did Parisians deal with the threat of defeat and occupation, with the privations of war, with the stress of having the Germans close enough to bomb them almost daily? What were their daily lives like?

I now had 6 months worth of letters promising to answer precisely these questions and more. Bonus: As I sifted through them, I soon realized that my great grandmother and great grandfather had entertained separate correspondences with my grandfather. There were two sets of letters bearing the same dates. I would get to experience the same events from two distinct points of view: A man’s and a woman’s. A father’s and a mother’s.

What did I discover? More than I could have hoped for. The price of things, for starters, as my grandfather never failed to bring up the price he paid for every item he sent to my grandfather in his monthly care-packages. The fact that Paris was experiencing terrifying artillery bombardments by day and air raids by night. I know where the bombs and shells fell, on what dates, at what time, what damage they caused and who was killed or injured. I know what the weather was like. I know what the press was telling and not telling the populace. I know who was ill, who was spending a few days in Versailles or Lion sur mer, who was forced out of Amiens because of the mandatory evacuations. I know whose son was killed or injured in such and such battle and on what date. I know who had a cold and who passed a kidney stone. I know the frequency with which people received and wrote letters, or just called them on the telephone. I discovered a million things that paint the clearest portrait of these young, dynamic, fascinating people I only knew as old, tired, white-haired seniors who played bridge with one another and talked of things I didn’t understand. But more to the point of this blog – which is most certainly not about my side projects or my family history – I learned something about the way people communicated with one another in 1918, and my reaction was essentially one of surprise, even shock: Facebook be damned. Even without what we know today as social media, without the benefit of the web and mobile devices, people seemed infinitely more connected to one another in 1918 – and with a war just a horizon away – than we are today with all of our real-time global communications tools. How could this be?

I could go on my parents’ Facebook wall on any given day and not know a fraction of the things people knew about each other’s days back then. I am not talking about people living down the street from one another either. The family was scattered all around France. The Blanchards, the Bassets, the Clogensons, the Guyons and other families which formed the complex web of cousins by blood and marriage were everywhere: Paris, Brest, Lille, Versailles, Amiens, Lyon and dozens of other cities and towns. Not only that but they were often in flux, spending a few days here, a few weeks there, visiting relatives, airing out houses, locking up apartments, taking the baths, getting away. The telephone was still a new invention. What we now know as “snail mail” was the only mature communications technology of the time. Judging by the fading ink every few lines, dipping your pen into an ink well to commit words to paper was still the norm. Letters had to be painstakingly hand-written, in legible handwriting, then taken to the post office. From there, they reached their destinations by foot, car, train, steam ship, bicycle and horseback. Steam ship schedules were widely known so people sending mail overseas were sure not to miss the narrow windows of opportunities during which their mail could be sent abroad. Miss the ship and your letter would take six rather than three weeks to reach the next continent.

Mail, the telegraph and the telephone: Those were your choices. And yet the connectivity between these people, separated by significant distances without the benefit of social and mobile communications, is to me nothing short of amazing. It puts today’s connectivity between us to shame. I’m not kidding. We’re amateurs compared to these folks who could have never even imagined a thing like Twitter, let alone the internet. They knew everything about one another: where they were, who they were with, what they talked about, what the weather was like there, what they ate and drank, what they were wearing… every last detail. Not with just five or six people in their immediate circles but dozens.

As entertaining as it is to read about gothas blowing up Captain Machin-chose’s pied-à-terre on the Rue de Rivoli and my great-uncle Maurice’s daily dance with whooping cough in March of 1918, seeing how efficient the information network between relatives and social circles was, in spite of the obvious absence of technology, is one of the most fascinating aspects of this discovery process.

My conclusion: We have forgotten more about the nature of social connectivity in the last 96 years than we have learned from every blog post written about Facebook, Twitter, Linkedin, Youtube, blogs, Tumblr, Quora and Pinterest combined (yes, including Mashable). Those of you who still think that all of this is about followers and fans, about platforms, about messaging and content, good luck with that. You’re fishing in the wrong pond with the wrong lure. There is something infinitely more human, simple and honest about what makes this connectivity work, about what feeds it (and how to ultimately tap it properly) than the channels, the technologies, the tools and even the vaunted strategies everyone and their brother is trying to sell you.

Don’t look to engagement and conversations to give meaning to any of it. Don’t look to content either. These things matter, sure, but they are not the core, the pivot, the heart of what makes this all work. There is something else, and until you have figured out what it is, your social media and social business “strategies,” no matter how much money and science you throw at them, will never work the way you want them to.

So take a giant step back. Stop listening to the incessant social media echo chamber for a few days. You owe it to yourself (and perhaps your clients) to get your eye back on the ball when it comes to this. You have been led astray a million times, one millionth of a degree at a time. While you thought you were still on the right track, you were already off course. “Content is king,” engagement strategy, Return on Influence, they are little more than gloss on broken compasses, buzzwords whose meaning, if they ever held any, have now eroded into parodies of legitimate insight. As for the self-important messengers of this so-called social media “thought leadership” movement, these hot air selling imbeciles peddling their pathetic blend of make-believe authenticity and “engagement strategy” day after day after day, blog post after tweet after webinar, all I see there now is the final act in a opera of uninspired parroting whose every note brings them closer to its inexorable denouement. We know where this is headed. We all know it. And not even their Klout scores will save them when the house lights come back on.

Something became painfully clear to me while I was reading these letters and saw the timeless nature of human connectivity so clearly manifested in them. I won’t tell you what it is. It wouldn’t do any good. You have to go look for it yourselves, in your own way, or you will never completely get it. But what I can tell you is this: Until then, learn to tell the difference between self-serving nitwits who have merely memorized the choreography and lyrics of the daily social media sales pitch, and people who understand how all the pieces actually fit. Stop spending time with the former and start filling your ranks with the latter. It will start to pay off right away.

None of this is trivial.

Cheers,

Olivier

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CEO-Read  –  Amazon.com  –  www.smroi.net  –  Barnes & Noble  –  Que

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Source: Guardian UK / Corbis

It’s weird that fortune-tellers tend to work for carnivals rather than Fortune 500 companies. If I were a CEO, I would want to hire people who can see the future. It would save me a lot of heartache and worry. I could focus on the product R&D programs that I know would work and wouldn’t waste resources on projects that won’t. Deciding upon a course for a marketing campaign wouldn’t be such a dilemma: Do we go with the talking monkeys or do we tie our product to the Star Wars franchise?

Okay. Fortune-telling has its creepy disadvantages: Most people don’t want to know when or how they will die. Many of us want to discover what is around the next corner without spoiler-alerts. If you take all the mystery out of life, what’s the point? But there are advantages to having someone around who can see a little further down the line than others: Maybe you re-book your flight. Maybe you buy that lottery ticket. Maybe you start wearing sunscreen at a young age. Maybe you invest early in cool little start-ups like Apple and Nike (just like Forrest Gump did). Maybe you sign an author with promise before she has penned her first draft of her boy-wizard story.

Maybe you get the jump on your competitors every single time you make a move. Think products, services, channels, processes, even hires. Imagine if you could get a 12-18 month head start on everyone else in your industry. Wouldn’t that be nice? Wouldn’t that make a huge difference in how your business runs?

Well, like I said earlier, fortune-tellers don’t work for Fortune 500 companies. But trend-spotters often do, and when it comes down to it, that’s almost as good.

Source: Getty Images

Gentlemen, place your bets!

By trend-spotter, I don’t just mean hipsters who hang out with the cool kids until 4:00am and can tell you what the next hot street fashion is going to be, though for apparel makers and retail buyers, that’s pretty important. These folks prepare their seasons months in advance. If they get the trends wrong, three things will happen: 1. Their sales revenues will tank. 2. They will end up with a ton of inventory they won’t be able to get rid of, even at 70% off. 3. Their brand’s relevance will be put in question. They will lose market share. Ergo: Complete disaster.

Every year, companies place bets on a million things: Products, campaigns, services, technology, programs, media buying, hires, trade shows, agency selection, you name it. When you take a step back, it looks a lot like a giant game of pin the tail on the donkey. Nobody really knows if anything is going to work. For every reason why something might, there are three reason why it might not. Any decision-maker anywhere will tell you the same thing: They are in the business of taking risks. Calculated risks, but risks nonetheless. The philosophy then is this: Big risk have the potential for big rewards, but also costly blunders. Small risks have far less potential for rewards, but don’t sting quite as bad when things don’t work out.

This would be a great time for me to segue into the vital connection that exists between vision, courage and leadership, but that isn’t what this post is about. What we are talking about today is trend-spotting: The function within an organization that helps decision-makers minimize the potential for poor strategic decisions and maximize the potential for good strategic decisions. Every day, the big strategic croupier calls for business leaders’ bets, and every day, that call must be answered. Wouldn’t it be nice for these folks to have a roulette or card-counting savant at their side, whispering in their ear what plays will yield the highest probability of success?

Source: Google.fr

In the apparel industry, that savant’s job might be to attend fashion shows all over the world, hang out at popular night clubs, watch teenagers hang out at the mall or at skate parks, or just take regular trips to Tokyo, Paris, Milan, London or New York.

In the tech industry, that savant’s job might be to attend tech shows, hang out with venture capitalists, talk with a lot of start-ups, read key blogs, take regular visits to Silicon Valley, San Francisco, Boston, New York, Antwerp, and wherever else innovation is taking place.

These folks don’t have a crystal ball, they can’t actually predict the future, but they see what’s happening. They know what people are working on. They can spot innovation and place it on a timeline. They can see trends emerging and can gauge their momentum. They see how all the pieces fit. They don’t just have their eyes open, they also have a nose for it.

How do you think some mutual funds beat the S&P year after year? What do you think makes the difference between a great quarter and a lousy one for most businesses? Luck? Well… okay, there is always an element of luck. But luck strikes where and when it pleases. Industry giants aren’t betting the farm on a rabbit’s foot. Luck has nothing to do with engineering patterns of success. Having the right people onboard whose job it is to not only keep their eyes open but also understand where things are going, does.

 

Bubble Blindness Syndrome

Having worked with a lot of companies over the years, I have come to observe that most organizations tend to fall into one of two categories: Organizations that are connected with the world around them (not just their market), and organizations that operate in a bubble.

Save yourself the trouble of arguing that bubbles come in all sizes. I know. Some bubbles are thinner than others. We are talking about varying degrees of disconnect here. Having said that, bubbles are bubbles. No matter how thick or thin, no matter how permeable or impermeable, bubbles effectively shield companies from the outside world. They aren’t just cultural cocoons; they also create a wall of opacity that makes any kind of trend-spotting impossible. As you can surmise, bubbles are bad.

Would you like to know a few symptoms of bubble-wrapped organizations. Here are a few:

  • They have to hire people from outside the organization to go find out what their customers are saying.
  • They have to hire people from outside the organization to go find out where their customers are playing.
  • They have to hire people from outside the organization to tell them what new technologies they should use.
  • They like to “wait and see” what the market will do and what their competitors will do.
  • They have to hire people from outside the organization to tell them what the market and their competitors are doing.
  • They often operate under the delusion that by virtue of the fact that they have been in business for 50 years, they will still be in business 5 years from now.
  • They believe that having been relevant in the 20th century automatically makes them relevant in the 21st.
  • They rarely hire from outside the industry. Most of their managers and executives have either worked there all of their careers or used to work for their competitors before coming to work for them. In these organizations, seniority and tenure in the industry are prized far above ingenuity and strategic insight.

It is virtually impossible to see what is coming next if you lock yourself up into a windowless room all day long, day after day after day. It is also VERY difficult to score big wins, much less engineer a string of them, if you have disconnected yourself from the field.

One of the first people I always ask to meet with when I begin working with a client is their director of innovation. This all too often draws blank stares. The people in the room with me look at each other and flex their eyebrows at each other, trying to figure out who that might be. Invariably, the question is asked: “How do you mean?”

“I mean who manages innovation for the company?”

Crickets. Then begins the discussion. “Maybe he should talk to Pete in I.T.” “Yeah, or Mike, our COO.” “Maybe Louise in Digital?”

“Okay,” I ask. “Who’s in charge of consumer insights?”

Crickets. “Um… maybe Paula in marketing?” “I think our agencies handle that.” “We work with research firms.”

And you wonder why so many companies adapt to change slowly, why so many CEOs tread lightly when it comes to integrating social media channels into their communications mix, why the ship turns so painfully slowly when it comes to incorporating social business principles across an organization.

Everyone is so task-oriented that companies forget the importance of using qualified spotters and scouts to help with navigation.

It isn’t about Pinterest. But in a way, it is.

I can’t go ten seconds without seeing an article about Pinterest all of a sudden. The company’s name is on everyone’s lips. And naturally, every strategic meeting I go into, Pinterest comes up: “What is this Pinterest thing I keep hearing about? What does it do? is it the new Facebook? Should we be on it? Bob, call Pete in I.T. See if he can join us. He probably needs to hear this.”

Pulling up Pinterest on the big screen and giving them a demo isn’t enough. You also have to give them context, and aside from numbers and demos, here is all the context they need:

“It’s interesting to see how conservative marketers are being with Pinterest. There seems to be a lot of wait-and-see happening and many pokes at how people are planning for action they’ll never take. I’m all over Pinterest and would recommend it as a strategy to many of my clients. I’ve been on Pinterest for about 6 weeks, or so. Just this morning I received the 7th thing I’ve purchased after seeing it on Pinterest and following the link to the main site.” – Sheila Germain

There. Get it? People share stuff because it’s fun. People discover that stuff as a result. Then they buy it. Your socks, your car, your leather gloves, your #2 pencil: The more people post about it, the more mindshare you earn and the more you increase your chances that people will buy it. Why this works doesn’t matter. That it does is what matters.

It’s like advertising without the advertising. It’s word-of-mouth publishing. Compared with the relatively low cost of being there, a platform like Pinterest can yield enormous dividends.

Now here’s the choice: As a company, you can sit around and talk about strategies year after year after year. You can hire consultants and research firms and agencies to tell you what’s hot – or rather what was hot last year. You can scratch your heads at all that newfangled stuff and end up “sticking to Facebook” because you’ve already committed to it this year and it is a known quantity. You can operate under the premise that if Pinterest is still around in three years, it will have probably grown into a legitimate channel that you will want to invest in. Until then… Meh.

Or, you could wrap your mind around the potential that this and other new platforms or products have to offer and see what you can do with them. I don’t mean just task your agency with proposing a campaign that includes Pinterest or whatever next thing comes along (although… knock yourself out). I mean start thinking about ways that new platform and product capabilities fit into what you are trying to do: Sell something. It doesn’t matter of your company makes toothpaste, aluminum foil or ball bearings. It doesn’t even matter if you’re a non-profit or a government agency tasked with promoting good hygiene in the workplace. Use your brain: How could you use this?

But this isn’t about Pinterest. Pinterest is just one platform. There will be others. New ones pop up at regular intervals. So the question bears asking: Who in your organization was the first to bring up and recommend Pinterest? Who was the first to see the angles? For that matter, who first started talking to you about using Facebook and Twitter a few years back?

If no one in your organization saw this coming (or thought to bring it up), you have a serious problem. Your bubble has reached maximum density. You may not see it, you may not even believe it, but aside from a few narrow channels whose relevance is at best limited, you have become completely disconnected from your market and the world at large. Denial won’t help. Accept it and do something about it. Today.

On the flip side, if you are fortunate enough to have someone on staff who noticed Pinterest a few months back, if some of your managers or staffers even suggested that perhaps you should look into it, my question is this: Why didn’t you listen to them? The question is worth a few minutes of your time because at its heart is a key reason why your company is not doing as well as it should be.

The business sense of funding the trend-spotting function

Catching the right wave, not just once but set after set, requires both focus and insight. It also requires a certain instinct, honed over time through trial, error, habit and acclimation. Understanding emerging trends is about far more than crunching numbers and poring over data. The process of becoming good at this sort of thing, with or without the benefit of having a natural talent for it, requires deliberate investigation, long periods of observation, layer upon layer of context and interpretation. Perhaps most important of all, it requires exposure to the environment where the events leading to the trend will take place.

Understanding what comes next by putting all the pieces together isn’t something that can be done via a thirty minute conference call with an industry analyst who also spends most of his or her day sitting in an office, compiling reports.

If you seek to understand a thing, go observe it. Go touch it. Go live as close to it as you can for as long as you can. You aren’t going to ever understand lions by reading statistics and reports about lions. You’re going to have to go out to where the lions are and study them yourself, in their natural habitat. The same is true of consumers, of markets, of people. You can’t anticipate their needs and wants, their shifts in preference and taste from inside a corporate cocoon. You have to go out there. You have to talk to them, listen to them, hang out with them. In other words, you need people inside your organization whose focus is not a computer monitor and a set of spreadsheets, who don’t spend every minute of their day being pulled into pointless meetings or replying to email threads or entering data into a system.

In the best of worlds, you would create a business ecosystem that would allow most employees to become trend-spotters too – managers and staffers alike. Ideas and insights can come from anywhere, and so it makes sense to increase your potential for good ideas in this way. That is one of the promises of social business, by the way.

But the reality of most organizations is that people are simply too busy with a mountain of daily tasks to be able to effectively serve this function. (At least for now. Today.) They can participate in it, they can occasionally make game-changing contributions to it, but they just can’t be counted on to manage that function on a daily basis.

And yet, someone has to.

Let me say it again: Someone has to. Without this function, your organization is pretty-much flying blind. For all the bravado of many a self-important manager who “just knows” he is right about something he will gladly admit he knows very little about, for all the wishful thinking in the world, rare is the company that hits all the right notes quarter after quarter that doesn’t have a function like this in place, staffed by the right kind of people. Whether you are Gucci, Ford, the Obama campaign, Edelman Digital or Apple, this function is deliberately fed, fostered, and put to obvious good use. Most organizations, unfortunately, are not so forward-thinking in the way they operate.

The alternative is this: To be strategically, tactically, operationally disconnected from a changing world – an ever-evolving world – that doesn’t give a damn that you have been in business for 20 years, or 50, or 100, a world that only cares about two things: Do you provide the most value for my money or attention today? Will you provide the most value for my money or attention tomorrow? You can go with wishful thinking and the hope that “things will turn around” all on their own and see where that takes you.

Some quick and simple advice:

Don’t focus too much on Pinterest. Like every digital/social platform, it will have its rise and its fall. Right now, Pinterest is hot. Chances are that it will remain so for some time (long enough to be worth making a few plays with). But as we have seen time and time again, whether Pinterest sticks or fades into fad country, new platforms will come to compete against it for our collective attention the same way new technologies will disrupt the way we shop and do business, and new fashions will disrupt the way we dress. The question is this: What are you doing about it?

Before I go back to my croissants, I want to leave you with three simple points:

1. Assess your ability to spot trends: If you didn’t see Pinterest coming, your organization doesn’t have an adequate trend-spotting function in place. Either you don’t have one at all, or you thought you did but it failed pretty miserably. Whichever one it is doesn’t matter; the result is the same. Let that be your litmus test for this quarter. Unless you are growing at a double-digit rate and whooping your competitors, I would make that an item of immediate concern. Fix it. Learn from the winners. They get there first for a reason.

2. Think short-term and long-term: Some technologies and trends are slow to mature. I remember being shown technologies and devices 6 years ago that are only now entering the mainstream and will take another half decade to really change the way businesses operate. That’s okay as long as you understand the timetable. It’s as important to know what is coming 5, 10, 15 years from now as it is to know what will be hot in 6 months. Why? So you can start thinking about your company’s path beyond next quarter or next year. Being able to see the changes on the distant horizon is probably the most important factor in any organization’s ability to effectively adapt to BIG change, if not lead that change outright.

Short term focus is also pretty important. Some products just come out of nowhere and take markets by storm. Their development might be stealthy, or just completely out of the way until a journalist at Gizmodo, Mashable or Elle discovers it and turns it into a massive success. Look for those short tickets too. If a horse you have never heard of looks really good two weeks going into a race, pay attention. You don’t always have to score massive wins to roll on ahead. A series of well paced small wins can have the same effect and create excellent growth momentum.

Keep an eye out for anything that will help your long game and your short game.

And remember: The sooner you spot an opportunity, the more time you have to leverage the hell out of it.

3. Be operationally nimble: When a platform like Pinterest pops up on your radar, be ready to seize upon the opportunities it has to offer. If you are a chocolate maker, a flower shop or a jeweler and you only just found out about something like Pinterest a month before Valentine’s Day, don’t put yourself in a position where your company can’t bridge the gap between potential and experiment in that month-long window. You can’t afford to wait until next year to give it a shot. Everyone else will be using Pinterest next year and your first-mover advantage will be gone. Make sure your organization is nimble enough to change course (or test a new channel, product or technology) quickly. If you suddenly realize that the hot new fashion accessory in Tokyo is fingerless gloves but you just received an order for 10,000 pairs of full-fingered gloves, be ready to invest in a bunch of Kai scissors and retool a bit as needed. Today. Not two months from now when you have to sell your entire stock at 70% off.

The faster you can move on an opportunity, the more likely it is that you will score a win (or avoid a catastrophe). Works every time. Spot. Scout. Keep your eyes open.

Cheers,

Olivier

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Yesterday, Michael Wagner pointed me to this piece from Cindy Au (@Shinee_au on the twitternets) on the Matter Anti-Matter blog. It focuses on an interesting little incident that happened between Pinterest, a user, and the Mitt Romney campaign. You should go read it in all its glory here. Below are several of the good parts. Here’s how Cindy sets up the initial problem:

Recently, Pinterest was asked by officials from Mitt Romney’s campaign to change the name on the account of a user who had created a satirical board poking fun at Romney’s, how shall we say, epicurean tastes. 

While it’s clear the Pinterest team appreciated the commentary and creativity that Eric’s board brought to their site, when it comes to setting a precedent for the rest of Pinterest’s community, things like fake accounts and impersonation swing both ways. It’s not long before you have more fake accounts pinning items and proliferating ideologies that may not be so easy to stomach. 

In fact, Pinterest’s terms of service clearly prohibit impersonations. Here is the exact section. If the link doesn’t work for you, here it is:

General Prohibitions (Things you agree not to do): 

(…)

– Impersonate or misrepresent your affiliation with any person or entity

There it is in clear black and white Anglo.

So… it would have been easy for Pinterest to deactivate the account outright. It wouldn’t be the first time that a social network shut someone down for the slightest infraction, no matter how benign or accidental. (Facebook, I am talking to you.) Pinterest would have been well within its rights to drop the hammer on the evil little user who dared spit in the eye of their TOS. But they didn’t. Instead, Enid Hwang, Pinterest’s community manager, sent Eric this message:

From: Enid Hwang
Date: Fri, Feb 10, 2012 at 9:51 AM PST
Subject: Pinterest: “MittRomneyGOP” username
To: Eric Spiegelman

Hi Eric,

I’m Enid, the Community Manager at Pinterest. As you might have guessed, I’m writing regarding your username “MittRomneyGOP.” We were recently contacted by officials from Mitt Romney’s campaign because they feel it’s very misleading and they’re requesting that it be changed to “fakemittromney.”

We actually really appreciate political commentary on Pinterest – and I know your account is clearly satirical – but we’re a young company so we don’t have a feature/process in place for “verified accounts” (such as Twitter) which would make the purpose of your account immediately obvious to any user on the site.

If you don’t mind changing your username, let me know. Or, you can just go ahead and make the switch yourself at: https://pinterest.com/settings. We’ve been brainstorming alternatives and unfortunately we feel changing your profile picture or adding a byline on your “bio” section on Pinterest may not be sufficient because that information isn’t included with all pins that propagate through the site.

We’re also really open to discussing the issue more with you, so you can reach me directly at [REDACTED] if you have any questions.

I’m sorry for the trouble and again, don’t hesitate to call if you’re concerned about this!

Enid

One word: Human.

Here are several others: Mature. Respectful. Professional. Kind, even.

So what happened? Eric Spiegelman responded (somewhat nervously) with a plea to Pinterest. Here:

Hi Enid,

Obviously I understand your concern. And I can imagine as a new company (one that’s really doing a great job), you’d prefer not to have hassles like this. But at the same time, you’re a publishing entity that’s more or less open to the public, and I can’t in good conscience change my parody at the request of the subject of that parody. It should be obvious to the Romney campaign that nobody sees this as official, and that I am exercising my Free Speech rights in making fun of Gov. Romney’s utter tone-deafness when it comes to matters of privilege and class inequality.

That being said, I understand that you are well within your rights to delete my account. But I really hope you choose not to.

You have a wonderful service in Pinterest, and I wish your team all the best, however you proceed with this.

Best,
Eric

No expletives. No anger. No “you suck” and “how dare you” indignation.

Lesson 1: Enid’s tone in the initial message set the tone for Eric’s response.

Lesson 2: Initiative matters.

Now check out how Enid responded to Eric’s plea.

Hi Eric,

Thanks for getting back to me so quickly: We have no intention of deleting your account. It’s satire and it should stay! We’ll change the username (this doesn’t affect your boards, pins, or anything else about your profile settings) and we feel that’s sufficient. Once we institute verified accounts this, and any future issues, will be taken care of universally. That’s our responsibility so sorry again for having you caught in the middle of it.

I really appreciate your note (and compliments!) and thanks so much for your understanding,

Enid

Note that Enid struck right to the heart of Enid’s central concern: “We have no intention of deleting your account.” Perfect.

He then offers a compromise, which… may not have been ideal for Eric, but solves the problem for everyone (Mitt Romney’s epicurean tastes notwithstanding).

The first remark I want to make is this: The way Pinterest handled this violation of its TOS shines in sharp contrast against the way Facebook handles its TOS business. This is the proper way to handle TOS infractions of this sort. This is the proper way for a company to treat its customers, users and fans: With kindness and respect rather than with a stick, a whip, or a hammer.

The second remark is more of an outline, really. How to handle customer care & community management responses in instances like this:

1. Identify the problem.

2. Understand the problem.

3. Understand the ramifications of the problem for all parties involved.

4. Outline several solutions/compromises.

5. Reach out to the individual responsible for the problem in a non-confrontational, non-threatening way. Stiff corporate tones here probably won’t have the desired effect. Be human. Be relaxed. Be professional but somewhat informal.

6. Politely and kindly explain what the problem is and why it is a problem.

7. Appeal to the individual’s sense of community and fair play. This is important.

8. Offer one or several compromise(s) so the individual feels empowered to make a choice. This steers him/her in the right direction without any strong-arming.

9. Address whatever fears or apprehensions the individual has. Recognize that this is stressful. Make him/her feel at ease.

10. Apologize for the inconvenience. Empathize.

11. Thank the individual for his/her understanding, patience and sense of fair play. Be appreciative of his/her support. Bond.

12. Throughout the entire process, remember that just because you have the power to be an asshole doesn’t mean you should. Treat people well. Treat people well. Treat people well. Repeat this as many times as it takes. Human beings deserve kindness and respect, whether your product is free or not. You want to know the secret to loyalty and positive word of mouth? The first half: Great products at a fair price. The second half: This. It’s that simple.

Or… you could just hide behind the usual excuse (“we don’t have the manpower to deal with every case in this way”), suspend account after account without explanation, make a point of being as impersonal as possible, and build an army of haters.

Where there’s a will, there’s a way. Excuses have an effective range of about zero meters. We all build the companies we want to build.

At least for now, it looks like Pinterest is on the right track. Everyone should take note.

*        *        *

CEO-Read  –  Amazon.com  –  www.smroi.net  –  Barnes & Noble  –  Que

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Since I am bouncing around Europe this week, (come say hi at #tsc12 if you can), now is a good time to republish this list from a few months ago. It is still as relevant today as it was then:

1. “Social” is something you are, not something you doIf 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 effectively outsource customer relationships to an agency. 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 effectively outsourced. Not unless your agency partner embeds a team with you for a few months and you are both committed to a long term program, anyway.

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 on social media channels. 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/business 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 wantto 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 Sales41% 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. Use social technologies to learn how to better serve your customers and become a better company, and you’ll be good to go. Pertinent data can be turned into valuable insights. Valuable insights can be used to make better business decisions (strategic and tactical, short term and long term). That’s the real value. Pushing content all day long and measuring likes and impressions won’t get you very far. Remember: If your communications serve your marketing department more than they serve your customers or your business on the whole, you are probably 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 2012.”

*        *        *

CEO-Read  –  Amazon.com  –  www.smroi.net  –  Barnes & Noble  –  Que

– #smROI is now available in English, German, Korean and Japanese.

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We’re going to talk about a few things today: The relationship between ad spend and sales, the importance of focusing on the right metrics in order to make smart budget decisions, the problem with using impressions as a unit of campaign success, and how easily die-hard habits can trip us up.

Hat tip to Chris Young for pointing me to this story in Business Insider. Pay attention to how the story begins:

Reality appears to have finally arrived at Procter & Gamble, the world’s largest marketer, whose $10 billion annual ad budget has hurt the company’s margins.

P&G said it would lay off 1,600 staffers, including marketers, as part of a cost-cutting exercise. More interestingly, CEO Robert McDonald finally seems to have woken up to the fact that he cannot keep increasing P&G’s ad budget forever, regardless of what happens to its sales.

Read it again.

The piece de resistance in that little insight dinner you just treated yourself to isn’t the part about P&G’s $10B ad budget or that P&G is the world’s largest marketer. It isn’t even that it shrank its workforce by 1,600 (which is really unfortunate) and it isn’t even that Jim Edwards chose to characterize P&G CEO Robert McDonald’s fork in the road moment as an awakening. No, the really interesting thing in this story is this:

CEO Robert McDonald finally seems to have woken up to the fact that he cannot keep increasing P&G’s ad budget forever, regardless of what happens to its sales.

That’s right: Ad budgets vs. sales. The company’s $10B investment in advertising & marketing vs. return on investment measured in… wait for it: sales.

Finally. Not likes, not followers, not retweets or follows or shares.

Sales.

But hang on… we aren’t out of the woods yet.

1. Advertising vs. Sales: In search of symbiotic balance.

On a call with Wall Street analysts, Mr. McDonald illustrated the relationship between spend and revenue by explaining how P&G’s  advertising budgets are determined in relation to sales numbers:

As we’ve said historically, the 9% to 11% range [for advertising as a percentage of sales] has been what we have spent. Actually, I believe that over time, we will see the increase in the cost of advertising moderate. There are just so many different media available today and we’re quickly moving more and more of our businesses into digital. And in that space, there are lots of different avenues available.

So far so good, right? Here we find that advertising spend roughly amounts to 10% of sales revenue. This is an important point as it illustrates three important insights:

1. Advertising and sales are not independent of each other. They are in fact intimately connected. (If not, your company has a problem.)

2. The former (advertising) is meant to influence the latter (sales). We know this. That is generally advertising’s purpose.

3. There exists for every company a sweet spot in regards to the ratio of ad/marketing spend vs. the sales revenue it helps generate. Companies that measure the impact of advertising on their sales have a 100% better chance of finding it than companies that don’t.

If there’s a concrete lesson here, it is this: Not tying your advertising and marketing dollars to sales is a lot like landing a 747 with a blindfold on. Actually… it’s harder. A 747 has elaborate navigation systems and can pretty much fly and land by itself. Your business can’t really do that. So… if you think that landing a 747 blindfolded is a bad idea, not measuring the impact that your ad spend has on sales is an even worse one.

The difficulty is that with a $10B ad budget like P&G’s – that encompasses thousands of campaigns in a broad range of markets – identifying what works and what doesn’t requires some measure of diligence, accountability (and competence) from every campaign and product manager across the organization. 1,600 staffers on P&G’s payroll lost their jobs over this simple point.

Here’s the warning shot fired by Mr. McDonald across the bow of every single professional in a marketing management role today: It doesn’t take a whole lot of skill or savvy to spend a company’s money. Anyone can gamble a budget on a campaign or an ad buy and cruise by, quarter after quarter, by virtue of the fact that they generated impressions or dialed up brand mentions. It used to be that the guy with the biggest chunk of money to spend was the most powerful guy in the room. Well… that simply isn’t good enough anymore. Accountability might just have been called back to the table.

As every CEO on the planet watches and learns from P&G’s course direction this year, expect this sort of organizational adjustment to become far more commonplace. Not the laying off, mind you: The focus on real results and accountability.

One can hope.

2. Ad spend and the new media landscape.

Under Mr. McDonald’s stewardship, P&G’s ad budgets are reported to have grown by 24% in the last two years. The theory behind the increase was probably pretty simple: Spend more, sell more. And to be fair, it isn’t entirely without merit.

The same theory was put into practice this month in Florida by the Mitt Romney Campaign and its allies. In an effort to decimate his principal opponent (Newt Gingrich) in the GOP’s Florida primary, the Romney camp took no chances: According to a study by Politico, the Romney campaign and its super PAC allies outspent Gingrich by a ratio of almost 5 to 1. (Ad spend breakdown: $15.3 million for Romney and Restore Our Future vs. about $3.4 million for Gingrich and Winning Our Future.)

The result: 12,768 ads supporting Mitt Romney. Only 210 ads supporting Newt Gingrich. (Sources: USA Today; Wesleyan Media Project)

The outcome: A 14-point lead for Romney going into the Florida primary. (The 14-point lead held to the end of the contest: Romney ended up with 46% of the vote vs. Gingrich’s 32%.)

The first lesson here is this: In a world of traditional media, ad spend does matter. If you are willing to erode your margins or if you have money to burn, spend more, sell more can still work pretty well, at least in short intense bursts.

The second lesson, however is this: The world has evolved. More importantly, the media landscape has evolved. That kind of wholesale ad spend is quickly losing its appeal for the folks footing the bill. Reach can be achieved at much lower costs now. Compare traditional media buys vs. the cost of engagement via social networks, for instance and you will see a radically different set of numbers.

Another aspect of the old vs. new media discussion is that we are learning that the stickiness of a message varies from channel to channel. There is mounting evidence that content shared by trusted and like-minded peers holds more power than the exact same content simply blasted over traditional media outlets. This raises a question about the validity of “impressions” as a relevant (see neutral) unit of measure (or KPI) for campaign success, at least moving forward. Not only do impressions only measure reach (rather than consumer behavior – like actually buying stuff rather than just watching an ad), it is now clear that impressions are not created equal. The notion that an impression via a television spot bears the same weight as an impression resulting from a trusted peer sharing the same spot on Facebook, for instance finds itself on increasingly shaky ground.

Is this another nail in the coffin of traditional media measurement? Maybe. (Hopefully.) Why am I even bringing this up? You will find out in a few minutes.

Back to the main vein of our discussion: Political campaigns and the business world would do well to catch up to the times unless they want to continue to spend hundreds of millions of dollars (if not billions) on bandwidths which may no longer provide the most bang for their buck. P&G’s Robert McDonald appears to have come to this realization.

Here he is again in the same call to Wall Street analysts:

I believe that over time, we will see the increase in the cost of advertising moderate. There are just so many different media available today and we’re quickly moving more and more of our businesses into digital. And in that space, there are lots of different avenues available.

In the digital space, with things like Facebook and Google and others, we find that the return on investment of the advertising, when properly designed, when the big idea is there, can be much more efficient.

There.

This is a radical change of perspective from a CEO who increased ad spend by 24% in just two years. Why the sudden change of heart? What happened? Three things:

1. A 24% increase in ad spend resulted in just 6% growth in sales for the same period. The numbers don’t lie: Spend more, sell more no longer works the way it used to twenty years ago. Not with the advent of the social web. Not in the new media landscape. The two year experiment was worth a shot but it failed. No sense continuing on the wrong path. As any good CEO would, Mr. McDonald looked at the facts, assessed the damage, and made a course correction. That’s how it’s supposed to work.

2. Communications channels have changed. The technologies have changed. Consumers and their expectations have changed. Search, mobile, location, social networks, community management and advertainment have pushed the old ad spend models a few feet closer to the edge of the big pit of irrelevance. Marketing has been fundamentally altered in the last few years. With a richer media mix today than ever before, and with a brand new palette of far more cost-effective (and stickier) options than traditional media, P&G finds itself in a position to adapt and explore new possibilities and models. That has to be exciting for Mr. McDonald and his team.

3. One of P&G’s experiments with new media was pretty successful already. Remember Old Spice? That was them. Mr. McDonald surely took a closer look at the little phenom and saw in it a template for a smarter, more effective hybrid model of traditional advertising, consumer engagement and potentially viral, WOM-driven advertainment. Case in point:

One example is our Old Spice campaign, where we had 1.8 billion free impressions and there are many other examples I can cite from all over the world. So while there may be pressure on advertising, particularly in the United States, for example, during the year of a presidential election, there are mitigating factors like the plethora of media available.

And here we come to another fork in the road. Remember that thing about impressions I brought up earlier? We’re getting to it.

3. Relevant success metrics vs. everything else.

We know that advertising’s purpose – at least for consumer products companies – is ultimately to drive sales.

We also know that one of the principal reasons why P&G CEO Robert McDonald is now shifting his attention (and budgets) away from traditional advertising models to a more diverse model of traditional and interactive/social types of media was brought about by the realization that more ad spend did not have the desired impact on sales.

It  stands to reason then that the principal success metric for P&G’s investment in advertising should be sales: The campaigns which most effectively drive sales win. Following the same logic, the campaigns which manage to most effectively drive sales while minimizing costs will be even bigger wins. Right?

Imagine you’re a CEO. Looking back on two key campaigns in the last year, you are asked to choose which one was most effective at selling one of your top products. Here they are:

Campaign A (Traditional advertising) – Cost: $2,000,000. Revenue: $20,000,000.

Campaign B (Social Media program) – Cost: $50,000. Revenue: $20,000,000.

Both campaigns resulted in the same volume of sales for the product but one cost 40 times less than the other. Which one was the most effective? That one. Campaign B. Same result at a fraction of the cost.

So the ultimate yard stick of success for a campaign is twofold: 1. The campaign drove (and grew) sales. 2. The campaign also minimized costs.

Now read Mr. McDonald’s words again:

One example is our Old Spice campaign, where we had 1.8 billion free impressions and there are many other examples I can cite from all over the world. So while there may be pressure on advertising, particularly in the United States, for example, during the year of a presidential election, there are mitigating factors like the plethora of media available.

Alas, when pressed to illustrate a key success metric for P&G’s Old Spice campaign, Mr. McDonald didn’t refer to increases in product sales or the relative cost of shifting a portion of his media spend to social channels. Instead, he introduced a completely different metric: Impressions.

Doh! How did this happen? How did we go from Mr. McDonald “waking up” to the connection between ad spend and sales back to “impressions?” Where did that even come from? *sigh* We were doing so well.

Let’s go over this again:

1. Impressions are an intermediate metric. They measure reach. Eyeballs, if you will. They don’t take into account kind of important things like conversions to sales, for instance.

If a campaign is clever and entertaining but ineffective at prompting consumers to buy a product, it will still be shared via social networks. It might even “go viral” and enjoy 1.8 billion impressions, likes and shares. But free or not, those 1.8 billion impressions could result in exactly $0 in net new sales.

Impressions are not transactions. Sharing content isn’t buying. It’s just sharing. Be very careful not to stop there, even on a call to Wall Street analysts. Stick to numbers that matter: Spend and sales. Close the loop. No matter how good the intermediate numbers look, remember to track the impact of your campaigns all the way to their ultimate goal: Driving sales of a product.

2. Those 1.8 billion impressions were not free. Not by a long shot. The amplification effect of social networks and viral sharing may have been free, but the campaign itself wasn’t. The strategists and creatives who designed, built and managed the campaign didn’t work for free. The actors, production staff and editors who put the spots together didn’t work for free. There were production costs involved. Digital folks wrote code and built apps and websites to make the content not only work online but spread properly to gain its initial momentum. A small army of talented and very well trained professionals made those 1.8 billion impressions possible, then nurtured that process.

Not to mention that the Old Spice campaign had major traditional media components. The campaign included ad spend for TV, print and web. The social components (YouTube, Facebook, etc.) were just one part of a greater whole. The two reinforced one another very well, but… we are a far cry from 1.8 billion “free” impressions.

Now you see how easily focusing on the wrong success metrics can lead companies astray. In three seconds flat, we were right back where we started: Instead of focusing on driving sales we shifted to driving impressions.

Note that as soon as the conversation shifted back to the old media notion that “impressions” also serve as a success metric for marketing activity, bad assumptions immediately entered the picture:

1. The assumption that 1.8 billion impressions necessarily impact sales.

2. The assumption that impressions are free because they take place on social networks.

That is how fragile business focus is these days: The introduction of just one bad metric can shift your perspective enough to send you and your media spend into the ditch in a matter of seconds. With hundreds of potential success metrics and digital statistics being thrown at decision makers all day long, it is easy to lose sight of what matters, of what works and what doesn’t.

In case you’ve lost track as well, here’s a reminder:

CEO Robert McDonald finally seems to have woken up to the fact that he cannot keep increasing P&G’s ad budget forever, regardless of what happens to its sales.

The article does not say CEO Robert McDonald finally seems to have woken up to the fact that he cannot keep increasing P&G’s ad budget forever, regardless of what happens to its likes. … or followers. … or shares. … or retweets. … or impressions.

It says sales and there’s a good reason for that.

One last illustration to bring it home: Remember our two examples from earlier?

Campaign A (Traditional advertising) – Cost: $2,000,000. Revenue: $20,000,000.

Campaign B (Social Media program 1) – Cost: $50,000. Revenue: $20,000,000.

Now let’s add a third campaign:

Campaign C (Social Media program 2) – Cost: $50,000. Impressions: 100,000,000 (estimated) Revenue: unknown.

Let me ask you something: Given the choice, which of these three campaigns would you rather be responsible for come reporting time? Which one would you feel most comfortable presenting to Mr. McDonald? Which one would you want to stake your career on?

Here’s to keeping your eye on the ball.

Cheers,

Olivier

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As valuable as it may be to peel back the layers of a poorly put-together list of social business ROI examples, let’s now talk about how to do it right. Below is a quick 5-step guide in case you ever want to publish your own report or list of social business ROI examples:

1. Do your research.

This means talking directly with the company or agency involved with the campaign or program, not just bookmarking Mashable  articles and collecting a few white papers. Actually talk with the program or campaign lead. Have a discussion about what worked and what didn’t, what was done and why, etc. Obtain financial data, not just digital and marketing metrics. Without this data, you will not be able to add this campaign or program to your list.

2. Know the difference between writing a list of social business case studies and a list of social business ROI examples.

– Case studies may focus on a breadth of criteria for success or failure. Some may focus on the impact a campaign had on consumer perceptions while others may focus on customer acquisition or nipping a PR crisis or any number of things.

Case studies can focus on ROI but they don’t have to.

Case studies tend to be written in sections: Objective/problem to solve, theory, strategy/plan, tactics/execution, what happened, what we learned. The formula isn’t rigid but for a case study to be written properly, it has to actually study a case, hence the name. It has to have a beginning, a middle and an end. It has to show the connection between intent and outcomes.

Case studies can’t only be about what worked. They also have to be about what didn’t work. There’s value to that as well. Report on both.

– A list of social business ROI examples focuses on just one thing: Listing social business programs or activities with quantifiable ROI.

There are three parts to a social business ROI report: An explanation of the activity’s purpose and nature, the cost of that activity, and the ultimate financial benefit to the company.

The focus here is much more specific than that of a case study.

3. Format your reporting properly. 

Here is an example of how not to format an example of social business ROI:

Electronic Arts. EA was 2nd UK brand to use promoted tweets and trends to promote FIFA 12 video game. Trend engagement level was 11%, well above Twitter’s average ‘benchmark’ for trends, of 3% to 6%. Promoted tweet engagement averaged 8.3% over two-week campaign vs. Twitter benchmark of 1.5%. (Marketing Magazine, 2011) Source: Peter Kim.

Note that in spite of the short formatting the above example does not  include any ROI data whatsoever. It focuses instead on trend engagement levels and promoted tweet engagement. This not what you want your ROI reporting to look like.

Here is an example of how to properly format an example of social business ROI:

Joe’s Pie Factory. JPF wanted to increase QoQ sales of carrot cakes by 25% by the end of Q4-2011. Leveraging its Facebook page, Twitter account, Youtube channel and blog, JPF launched an awareness campaign for its carrot cakes at the start of Q4-2011. Total cost of campaign: $27,391 (for video production and content & community management). Outcome: A 23% boost in QoQ sales resulting in $59,782 in net new revenue. (Add link to case study in case readers want to learn more.)

Note that this example focuses on campaign objectives and includes both cost and net revenue data for the activity. These are the three ingredients needed to properly qualify an example for a social business ROI list or report. (See item 4.)

You could stop there or you could do the math for your readers:

Joe’s Pie Factory. JPF wanted to increase QoQ sales of carrot cakes by 25% by the end of Q4-2011. Leveraging its Facebook page, Twitter account, Youtube channel and blog, JPF launched an awareness campaign for its carrot cakes at the start of Q4-2011. Total cost of campaign: $27,391 (for video production and content & community management). Outcome: A 23% boost in QoQ sales resulting in $59,782 in net new revenue. ROI of campaign: 118%. (Add link to case study in case readers want to learn more.)

4. Make sure that all of your social business ROI examples always contain these four pieces of information:

  1. A brief synopsis of the campaign or program.
  2. The cost of that program.
  3. The financial outcome of that program.
  4. A link to the case study / your source for the ROI data.

Anything other than those three pieces of information is unnecessary. Remember that you are writing a list of social business ROI examples and not a list of social business case studies.

Failure to include all four of these pieces of information will result in incomplete reporting.

5. Make sure that your documentation is in order.

Do not rely on anecdotal information to compile your list or report. Ever.

This means: do not assume that because a social business program was in place during a period of lift in sales revenue, the social media program was the cause of that lift. Don’t assume that if a digital marketing manager tells you that he knows customers responded positively to a campaign, they actually did. In fact, don’t assume anything. Back up every hypothesis and assertion with data. Disprove alternative cause-and-effect relationships where they may exist. Make sure you aren’t being sold a big fat lie.

If you cannot prove that a company’s social business program or campaign resulted in positive ROI, do not include that program or campaign in your list or report. Period.

Just to be sure, always document the source of your data so the rest of us can check it for potential errors or foul play.

Three more tips:

Don’t worry about gimmicks. If your list only gets to 23 examples, then that’s fine. Don’t try to stretch it to 25 or 75 or 101 just to have a catchy number that will score good SEO. Just stick to the facts. Everyone would much rather have 23 solid examples of social business ROI than 101 bad ones. Substance before flash. Always.

If you don’t understand how ROI and social business fit, you might not be the best person to compile and publish reports on the subject. If that’s the case, don’t feel bad. Life goes on. Publish stuff you actually understand for now. Someday, when the ROI thing isn’t such a mystery anymore, you can come back to it and give it another shot. Until then, just do yourself (and all of us a favor) and do your homework. Come prepared. Lead with what you know.

If you want to get better at this though, here is a primer on how to calculate ROI in 4 easy steps:

What you’ll need:

  • Campaign cost data and financial outcome data.
  • The ROI equation.

Here is the ROI equation in its most user-friendly format:

ROI = [(Financial outcome of program – Cost of program) ÷ Cost of program] x 100

Step 1: Calculate the financial outcome of the program – the cost of program.

Step 2: Divide that number by the cost of the program/campaign.

Step 3: Multiply that number by 100.

Step 4: Add a % at the end.

That’s it. So simple an 8-year-old at a lemonade stand can do it.

Now go forth and be a force for good and credible business reporting in the world.

Cheers,

Olivier

*          *          *

In case you haven’t yet, you might want to pick up a copy of #smROI. 300 pages worth of stuff like this in there. A full pound of knowledge.

And if your favorite social business “expert” doesn’t seem to get this stuff yet, don’t feel bad about sending them a copy. Knowledge is never a bad gift.

CEO-Read  –  Amazon.com  –  www.smroi.net  –  Barnes & Noble  –  Que

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How do I write this piece without making Peter Kim hate me? I guess I’m just going to have to give it a shot and hope for the best. It’s important to remember that this post isn’t about him. It’s about a piece of content.

None of this is personal. I even think I like the guy. (We’ve never met in the real world, so I don’t know for sure.) I have a lot of respect for him and for what I think he does. (We’ve never worked together so I don’t know for sure either.) But I have to be honest, the 101 Examples of Social Media ROI list he published this week is crap seriously flawed. Here’s why: Most of these 101 “examples” don’t show ROI at all, “social” or otherwise. Either the title is wrong or the list is wrong for that title. One or the other.

Before I get into specific examples and illustrations of where I think the list fails, let me give you four basic problems I have with it as it stands today:

1. Many of the examples on it could potentially show positive ROI but – as presented – only reference selective gains from social activity and not actual, factual, empirical ROI. If that made no sense, that’s okay. Let me explain:

For something to be ROI, you need two ingredients: The cost of the activity and the gain from that activity. (That cost is the investment. The gain is either revenue or cost savings.) It’s math. Really really really simple math. ROI is an equation and it generally looks like this:

($ Gain – $ Cost) ÷ $ Cost = ROI

or

($ Revenue – $ Investment) ÷ $ Investment = ROI

(You can also multiply the result by 100 to get yourself out of the decimals, but that’s a personal choice. You can do that in your head.)

Anything that isn’t the result of the ROI equation is not ROI.

Note that a gain is just a gain,like cost is just a cost. Neither gain nor cost is ROI on its own. Ever. Not in any known universe.

Put another way, bread and ham  may individually be part of the ham sandwich equation but ham alone is not a ham sandwich. Ham is just ham. The problem we face today: This list pretty much mistakes ham for a ham sandwich. Good thing it was free or we would all be asking for a refund (or a word with the chef).

Take this example:

61. Paramount Pictures. #Super8Secret Promoted Trend created a tremendous spike in conversations: Tweets of the hashtag reached nearly nine million impressions in less than 24 hours and mentions of the movie skyrocketed to more than 150 per minute. Receipts for the sneak preview exceeded $1 million, and Paramount said weekend box office surpassed expectations by 52%. (Twitter, 2011)

Cool story, bro. What was the cost of the campaign?

Yes, this is an example of a successful use of social media (through a “promoted trend” media buy). Awesome. But where’s the bit that compares the $gain and the $cost? That would be an ROI example. This isn’t.

What’s sad is that there is probably an ROI piece hiding in the background but instead of focusing on that, the example dishes out a healthy helping of random gain data: Impressions. Mentions. Tweets. Retweets. Sales too, which is nice but no cost data… so thanks for playing but no. Without the cost piece, you don’t have an ROI example.

Your example needs to include this information or it doesn’t belong on that list:

($ Gain – $ Cost) ÷ $ Cost = ROI

Tip: If you can’t measure ROI or adequately prove it in this instance, that’s okay. Just don’t add it to a list of ROI examples.

(Speaking of proving cause & effect, let’s not forget that Super8 was a well anticipated $50M summer fare from director J.J.Abrams and producer Steven Spielberg. Not exactly a grass-roots indie phenom that would have flopped without a promoted trend on Twitter. Let’s not go crazy over the role that social media really played in opening weekend ticket sales. A little perspective goes a long way.)

More examples of this disappointing absence of actual ROI metrics later. In fact… almost the entire list suffers from this single basic flaw. But hey, at least this type of example makes the effort of including at least a portion of the data that goes into an ROI discussion. Not all examples on the list do.

2. Many of the examples on the list don’t even reference financial gain at all, let alone ROI. I list more later in the post but these will get things started:

“68% of respondents said they were “much” or “somewhat” more likely to purchase post-project.” (Subaru. 80.)

“32,000 video views, 25% regular return visits to the site, and average of almost seven minutes spent on the site per visit.” (UPS. 96.)

Community drove a +20 NPS increase.” (Sage Software. 69.)

“58% higher engagement rate than people coming in from other channels.” (TurboTax. 91.)

These are very cool little successes, great things to celebrate and be happy about, but as valuable as they may be they are not ROI. Not one part of any of those numbers even fit in the ROI discussion. At least other examples on the list make an effort to list one element of ROI: Money saved or money earned. These don’t. Sorry but that’s a little perplexing.

Here’s an example of my own to illustrate how far these examples are from ROI: I love carrot cake and when people compliment me on my impeccable taste in carrot cake, that isn’t ROI either, no matter how much of those interactions happen online.  I could call it ROI and score the number 102 spot on the list, thus:

102. Olivier Blanchard. Increased engagement with carrot cake enthusiast community by 37%. (The BrandBuilder Blog, 2012)

Except… no. It doesn’t work that way. Just because something is a success doesn’t mean it qualifies as ROI. Did my example mention that I even sold carrot cakes? Did I factor in the cost of making them or selling them online? Did I save money in any way by talking about carrot cakes with my twitter friends? Nope, I didn’t think so either.

Again, your example needs to include this information or it doesn’t belong on a list of ROI examples:

($ Gain – $ Cost) ÷ $ Cost = ROI

3. Some of the examples could have been bunched into one but legitimate examples were somehow omitted. Case in point: Cerner’s three examples (15, 16 and 17) are really one program / one example, but IKEA somehow didn’t make the list. (For more details on that particular program, click here.)  Maybe scratching Giffgaff (32.) and replacing it with IKEA would have made sense?  But okay, I’ll back off from this particular point. Lists tend to be incomplete. Someone always gets left out and sometimes you have to stretch yourself a little thin to get to the magic number. It’s no big deal.

4. Because of the source (Peter is well respected in this industry as far as I can tell), a lot of people will naturally accept this list as fact. It will become a template to be shared and passed around and referenced for the next couple of years. When marketing execs and digital agencies look for examples of ROI in social business, they will pull this thing from the Googlenets and use it as a resource for all sorts of things: Training of new social business recruits, client pitches, presentations at conferences, etc. They will do so without questioning the validity of the information they are not only ingesting but also sharing because they trust that Peter vetted the list before publishing it. That’s the unspoken contract of being a respected leader in the social business world.

Except… what if this one time, the information wasn’t properly vetted? What if much of it wasn’t even properly presented (using the right metrics, for instance)? Or what if the title is so wrong for the actual list that you end up confusing “value” with ROI for another 3 years as a result? Then what? No thanks. We can do better.

If you have 10 minutes to really get into it, read on. If not, you get the idea. (By the way, the list isn’t all bad.) Feel free to skip ahead to the end all the same. 😉

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Let’s look at a few of these examples a little more closely.

We’ll get to more obvious cases of “no, this isn’t ROI at all” a bit later. I want to start with some of the more subtle “maybe this could be ROI” examples first because a) they’re tricky and b) they illustrate pretty well some of the common traps people fall into when trying to establish ROI too quickly:

1. Aflac. Community drove online payments increase of 3% led to $95,000 in savings. (Lithium Technologies, 2011)

Q: What’s the problem with this one, Olivier? It looks legit to me. What’s your deal?

A: Yes it does look legit. And it might be. But do we know anything about other activity from Aflac that might have contributed to that 3% increase in online payments?

Could a concurrent email or advertising campaign have triggered a significant portion of that shift? Could the addition of a flyer in the mail to existing customers prompting them to make online payments have been the real cause of the shift? We can’t attribute the success of “the community” until we have ruled those out. If we know for a fact that this was 100% the result of community engagement, great. Roll on. If not, we need to find out before we high-five the community management team.

Lesson #1: Assumptions are dangerous and attribution is tricky. If you are going to present an ROI example, make sure it is rock solid. Don’t assume that social business was the biggest (or sole) cause of your success.

A better way of presenting this one would have been to maybe connect the 3% lift in online payments to the $95,000 in processing costs (context here would be nice so we know how the two might be connected). Tying these metrics to a specific campaign or activity on social channels wouldn’t be a bad thing too. Connect the dots a little bit: +3% in online payments isn’t ROI unless it results in $x savings. None of it is an outcome of social business unless you also show how “the community” helped you get there.

Not saying this isn’t a potential ROI win, but as presented, we can’t know for sure. Not yet. We’ll give that a cautious MAYBE. Just watch those assumptions though.

*          *          *

2. Alberta Common Wealth Credit Union. Blog, YouTube, Facebook – 2 million impressions, 2,300 new accounts, and $4 million Canadian in new deposits. (Forrester, 2008)

First, scratch the 2 million impressions bit. It’s a distracting metric and not super reliable (or even relevant to this discussion).

$4 million in new deposits sounds like a great outcome for the program though. Here are the three problems with that:

Assumptions again: How do we know that these 2,300 new accounts and resulting $4 million in new deposits were tied to the social media program (Blog, Youtube, Facebook) and not a combination of social and other factors (traditional marketing, advertising, PR, etc.). Can ACWCU realistically assign the 2,300 new accounts and $4M in net new deposits to the social media program?

If the answer is yes, great. They’re on the right track. Time to back that up. Show me how that happened.

If the answer is no, then we have a problem right off the bat. Remember that thing about assumptions.

– What about costs? What was the cost of the program? This example (and many others) don’t mention cost at all. They only mention gains. The ROI equation also factors in costs.

Here’s why this is kind of important in an “ROI examples” discussion: if the program or campaign cost $4,000,001 and the net new deposits amounted to $4,000,000, then your ROI was actually negative. Just sharing the gain from the campaign or program doesn’t give us any idea of what the ROI actually was.

Lesson #2: Don’t confuse ROI with gain. ROI is the ham sandwich, not just the ham. (Google the ROI equation, print it and tape it to your office wall. Before you tag something as ROI, make sure it fits the definition of ROI.)

– No benchmarking: What the example doesn’t tell us is what the time period for this gain was, and how the credit union normally trends for similar time periods. What if ACWCU usually sees the same amount of new accounts and deposits for the same time period even without social media? Say that ACWCU saw 2,300 new accounts for the exact same period preceding the start of their social media program? Wouldn’t that mean that the social media program might have had no impact at all? You have to factor in time frames and set up benchmarks before you can weigh gains before and after the launch of a program.

Result: As presented, we have no way of knowing if the program perpetuated a trend or brought in new business above and beyond normal performance trending.

Lesson #3: Without adequate benchmarking, your ROI “reporting” is incomplete and doesn’t stand up to scrutiny.

File that one under MAYBE. (As presented: An incomplete report of gain but not an example of ROI.)

Way too many of this kind of anecdotal “example” on this list to make me comfortable with it. Sorry.

*          *          *

8. Blendtec. Viral videos increased company sales +700%. (Barnraisers, 2010)

That one actually does stand up to scrutiny. BlendTec’s hilarious videos (and live demos at trade shows) a) became such a hit and b) demonstrated the effectiveness of the blenders so well that orders for the blender increased almost overnight.

The reporting here is still pretty incomplete though: 700% over what time period? What else could have caused the increase? That’s a gain but not an ROI figure: What was the cost of the program vs. that 700% net gain in sales?

File that one under YES: ROI but with reservations. (As presented: another report of a successful gain but not an example of ROI.)

I really wish the legitimate ROI examples on this list actually focused on ROI instead of using disjointed metrics.

*          *         *

10. Bonobos. Exclusive sale on Twitter generated 1,200% ROI in 24 hours on promoted tweet. (Twitter, 2011)

First, proceed with caution if the list is about Social Business and you are just talking about a one-time media buy on a social channel. Social business is a little more elaborate than buying the odd promoted tweet for a one-day promotion.

Second, we have absolutely no idea how that 1,200% ROI figure comes from. What is it based on? Could the figure erroneously reference a 1,200% increase in sales rather than ROI? As presented, we don’t really know. Red flag.

Third (and perhaps most important) we have no idea what the cost of that promoted tweet was in relation to the gain in net sales.

Knowing nothing about this one, I want to give it the benefit of the doubt. Filing it under MAYBE. (I can’t believe I am being so nice. This would never pass muster during a legitimate business audit.)

*         *         *

13. Burger King. Subservient Chicken video increased chicken sandwich sales 9% per week a month after launch. (Adweek, 2005)

Again: At a cost of…?

If the 9% increase in chicken sandwich sales amounted to less revenue than the cost of the campaign or program, then the ROI was negative. This example (like most on the list) mentions gain without factoring in cost. This is the list’s biggest problem.

Footnote: Subservient chicken wasn’t just a social media campaign. Subservient chicken was an advertising campaign with interactive digital components. This is very different from a business like Best Buy or Ford engaging with people via social channels to grow mindshare, improve the brand’s image and ultimately increase preference in the minds of x% of car buyers. When looking at this type of hybrid model of social and traditional media, you cannot legitimately talk about the ROI of “social”.

Lesson #4: When a campaign (note my choice of the term campaign and not program) is as much social marketing as it is traditional marketing, you cannot attribute its success to “social media” or even “social business.” An advertising campaign, even with social channel components is still an advertising campaign.

Effective, sure, but still just advertising.

File that one under a cautious and suspicious MAYBE. (As presented though: No ROI was actually demonstrated here. Value: yes. ROI: nope. Again.)

Let’s move further down the list.

*         *        *

Let’s leave the gray area of “maybe” for a minute and look at a few examples that don’t fall anywhere near ROI (as presented):

15. Cerner. Community resulted in 13% fewer customer support issues logged. (Jive Software, 2011)

16. Cerner. Community resulted in 70% decrease in internal HR issues logged. (Jive Software, 2011)

17. Cerner. Community resulted in shorter approval cycles for writing technical documentation, from 2-6 weeks to hours or days. (Jive Software, 2011)

19. Charles Schwab. Online community drives 56% increase in Gen X customer base versus year ago. (Communispace, 2007)

20. Cisco. Community deflects 120,000 support cases each month. (Lithium Technologies, 2011)

24. Electronic Arts. EA was 2nd UK brand to use promoted tweets and trends to promote FIFA 12 video game. Trend engagement level was 11%, well above Twitter’s average ‘benchmark’ for trends, of 3% to 6%. Promoted tweet engagement averaged 8.3% over two-week campaign vs. Twitter benchmark of 1.5%. (Marketing Magazine, 2011)

25. Elsevier. Wiki drives 80% reduction in interdepartmental e-mail volume. (Socialtext, unkn)

28. FICO. Community: 850k customers served, resulting in 10% improvement in call deflections annually. (Lithium Technologies, 2011)

30. FONA International. Wiki eliminated almost 50,000 e-mails a year from one specific process. (Socialtext, unkn)

32. giffgaff. 100% of questions answered by community members in average time of 93 seconds. (Lithium Technologies, 2011)

34. Hershey’s. House party: 10,000 parties, reached 129,000 people, and say their campaign was seen by 7 million people. (Forrester, 2008)

35. Honda. Friending Honda campaign increased Facebook fans from 15k to 422k, generated over 3,500 dealer quote requests. (RPA, 2010)

36. HP. More than 4.6 people have told HP that the forum solved their support issues which HP says makes customer happier and saves the company millions in support costs. (Forrester, 2010)

42. Intuit Quickbooks. Business owners engaged with rated ProAdvisors 555% more often than unrated counterparts. (ratings and reviews). (Bazaarvoice, 2011)

No ROI in any of those examples whatsoever. There are more but I will let you find them all on your own.

Lesson #5: If it isn’t a $cost vs. $gain equation (or whatever currency you need it to be), it isn’t ROI. Customer base, leads, referrals, links, clicks, retweets, HR issues logged, email volume, estimates of future sales, deltas in NPS, quote requests, parties reached, impressions, engagement, etc. = not ROI.

Note: Too bad HP (36.) didn’t lead with the “saves company millions in support costs.” That looked like a legitimate ROI example. (Right company, wrong metrics to illustrate the ROI piece.) It matters that 4.6… wait. 4.6 people?

Maybe it was 4.6 million? Or 4 out of 6?

Anyway, whatever the number is, it matters but it is irrelevant to the ROI discussion. What would have been relevant would be how many millions in savings HP enjoyed as a result: The cost of implementing and managing the program vs. the $x million savings would have been a perfect way to illustrate ROI here. Missed opportunity #36 on the list so far.

Speaking of how to properly present ROI “examples,” here are a few quick tips on how to turn these examples into legitimate ROI stories:

It would have been great for the three Cerner examples to talk about actual cost reductions from the drop in customer service and HR issues, for instance, but they didn’t The metrics used had nothing to do with ROI. Financial gains (either via revenue or cost savings) were never mentioned. The cost of implementing and managing the program(s) was also never mentioned. Why? Those are far more relevant metrics than the ones presented.

Same with Elsevier: An 80% reduction in email is great but what is the impact on operational costs? That would be a potential ROI story.

Honda (35.) would have a great ROI story to tell if it could show the net number of sales from those 3,500 dealer quote requests and then scrubbed from that list every buyer who was going to buy a Honda anyway, regardless of the company’s social media activity. Presenting the example with “likes” and “dealer quotes” as the two principal KPIs (key performance indicators) instead of net sales (for example) puts the example squarely outside of a legitimate ROI discussion.

Intuit is another example of a company listed here with a legitimate ROI story to tell, but the description references a KPI that has nothing to do with ROI whatsoever. “555% more engagement resulting in net new $… versus a cost of $…” would have scored a bullseye. “555% more engagement” alone doesn’t.

Is it too much to ask for a list of ROI examples to actually use cost vs. gain numbers? As in… the actual ROI equation? Because that would be simple, clear and nice… and relevant. Instead of…

19. Charles Schwab. Online community drives 56% increase in Gen X customer base versus year ago.

… try this:

19. Charles Schwab. Online community cost: $X. 56% YoY increase in Gen X customer base attributable to online community resulted in net new revenue of $Y FY2011. ROI: $Z.

Simple. That’s how it’s done.

Perhaps there is an ROI story hiding somewhere in the background of every single example here. In fact, there probably is. But these examples, as presented, don’t talk about ROI at all. They reference non-financial gains without establishing any link whatsoever to ROI. So… Sorry, that’s a big zero on all of those.

Filing these under: NO ROI ANYWHERE (except for the vague afterthought in number 36).

My thinking: Far too many of these on this list as well.

*          *          *

Okay… I’m starting to feel bad about this so let’s look at a legitimate example on the list. #22: Dell.

22. Dell. @DellOutlet on Twitter generated $2 million direct sales, influenced $1 million addt’l (2007 – 2009). (Direct2Dell Blog, 2009)

Yes. Tweets linked to offers were tracked and a direct path of tweet-to-purchase was clearly established. Empirically.

File that one under YES: ROI. (But it would have been nice to see it as an ROI example and not as just another example of gain.)

Cost of program vs. $ in net sales from the program. Simple. Another missed opportunity to demonstrate ROI properly.

Moving on…

*         *        *

27. Epson. Reviews drove 98% higher revenue per visitor for Epson. (Bazaarvoice, 2011)

First, I have absolutely no idea how one leads to the other. How do we know that “reviews” drove higher revenue per visitor? Show me how you came up with that figure.

Second, what does that have to do with ROI? (Gain from reviews – Cost of reviews) ÷ Gain from reviews = … oh wait. What was the cost of those reviews again? #Fail. Value: Yes. Correlation between A and B: Maybe. ROI: Nope.

Sorry but I have to file this one under NO. Interesting but not ROI.

*          *          *

Dancing back into ROI territory now. (I still feel guilty about pointing out the problems with this list.)

See? It isn’t all bad.

37. IBM. developerWorks community saves $100 million annually from people who use this resource instead of contacting IBM support. (Forrester, 2010)

38. IBM. Crowd-sourcing identified 10 best incubator businesses, funded for $100 million, generatiung $100 billion in total revenue for a 10-to-1 ROI with a 44.1% gross profit margin. (Barnraisers, 2010)

Now we’re talking. ROI can come from cost savings, not just net new revenue. Well done, IBM.

Filed under YES: ROI.

*          *          *

45. Jewelry TV. Customer reviews boost mobile sales by 30% (ratings and reviews). (Bazaarvoice, 2011)

Aside from the obvious problems already encountered with previous examples, this one introduces us to a new one: The 30% boost in mobile sales. Is this 30% net new sales or simply a shift from non-mobile sales to mobile sales? Whether someone buys from a mobile device or their land line, is there really a difference? Does it have anything to do with ROI?

53. Mattel. Despite product recalls, online community helped support Q4 2007 sales increase of 6%. (Forrester, 2008)

How do we know that the online community helped support a Q4 2007  sales increase of 6%? isn’t it more likely that back in 2007, advertising, product placement and good PR might have been more responsible for that 6% increase than an online community?

Also, 6% versus what? Is this YoY or QoQ? Was it normal for Mattel to expect 6% growth in Q4 of 2007 with or without an online community?

Too many unanswered questions = too many assumptions.

Filing these and others like them under NOT SURE WHAT THAT WAS. MAYBE.

Another reason why benchmarking matters. Just throwing numbers around without establishing a context for them doesn’t really tell you anything. Data can be manipulated to tell wonderful stories when no one is there to ask hard questions like “prove it.”

*         *        *

I want to end on a positive note, so here are several examples that either have potential or are clear examples of ROI (in no particular order):

11. Bupa. Community drove £190,000 savings through collaboration, online events. (Jive Software, 2011)

100. Vistaprint. Community tracked $30,000 in social revenue in 2009. (Lithium Technologies, 2011)

23. Domino’s Pizza. Foursquare drove 29% pre-tax profit through promotions. (Barnraisers, 2010)

71. SAP. Community drive 5% increase in partner sales. (Jive Software, 2011)

57. National Instruments. Community resulted in 46% of all support questions answered by peers instead of support. (Jive Software, 2011)

84. TomTom. In one month, community handled 20,000 cases resulting in $150k of savings. (Lithium Technologies, 2011)

65. Precyse Technologies. $250,000 savings in crowdsourcing new product design. (InnoCentive, 2010)

92. TVG. Community members spend 36% more than average. (Lithium Technologies, 2011)

67. Rhapsody. 50% decrease in support costs and 53% decrease in weekly support contacts via sCRM solution. (GetSatisfaction, unkn)

60. Orange. Listening: saved a few million euros in support costs and helped avoid several potential PR problems. (Forrester, 2010)

75. Secret. Among women viewing the video, 57% said their impression of the Secret brand improved and purchase intent among women who participated on Facebook went up by 11% (33% for teens). Clinical sales increased 8% despite a 70% decrease in TV support. (Forrester, 2010)

85. Toshiba. Saved $213,000 by adding online component to 5 events, doubling attendance. (Jive Software, 2011)

95. University of London. Internal social network allows students to collaborate remotely, expected to deliver future savings in the region of £300,000 per year in print, courier and administration costs alone. (IBM, 2008)

While examples like Secret (75.) and SAS (71.) require you to make leaps of faith (as presented) and don’t actually give us ROI data (not just gain but relative cost of the new activity vs. traditional spend), you can see an ROI story forming in the background. It’s still vague but you can tell it’s there.

Let’s file those in the “PROBABLY ROI (if we dig a little more)” folder.

Examples like Orange (60.), Precyse Technologies (65.) and TomTom (84.), on the other hand, are cut and dry: The cost savings are empirical. You can tie the cost of the activity to the financial gain to the company.

We’ll file those in the “YES: ROI” folder.

Special mention for actually listing both gain and cost:

88. TransUnion. Estimated $2.5 million in savings in less than five months while spending about $50,000 on a social networking platform. (Socialtext, 2009)

If only all 101 had done that.

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(If you skipped ahead, pick up the post here. You’re almost done.)

Conclusion:

If you look at the list from the perspective of “these are 101 examples of where social business has benefited or added value to a company” then it is solid. Kudos to Peter and his team. Great title, lots of value there, please share with the world. Just make sure you scratch out the title or petition Peter to change it.

If you look at the list as a collection of “101 examples of social business ROI,” then the list is almost entirely wrong. Back to the drawing board. Sorry. It doesn’t work.

I don’t want to just point out the flaws without offering Peter a way to fix it, so here are the only two options:

1. Change the title to something along the lines of “101 examples of successful Social Business campaigns”. (Remove the ROI bit from it if you aren’t actually going to focus on ROI.)

2. Include actual ROI numbers for each of the 101 examples. (Those can just be the cost and the gain from activity figures. Real simple.) Even if some of those ROI numbers turn out to be less than impressive, the list will still be factual and valuable.

Oh, and 3. Include IKEA. It deserves a nod.

*         *        *

I almost forgot…

Lesson #6: Ask the hard questions. Don’t assume that information (or insight) from anyone in any industry that touches marketing in any way is accurate. Not even mine. Put everything through your own stink test. Use your noggin’. Challenge everything that raises a red flag. Learn the definition of business terms too. They matter. Worth keeping in mind next time a list like this pops up (and there will be more like it).

Or your could just Google “R.O.I. calculation” for crying outloud. Every kid with a lemonade stand grasps that math. Why can’t social media gurus? It boggles the mind.

Cheers,

Olivier

CEO-Read     –     Amazon.com    –     www.smroi.net    –     Barnes & Noble    –    Que

PS: Everything in this book could also be dead wrong. It could all be pure BS. Scrutinize it as well. I’m not immune to the occasional wrong conclusion either. You never know. 😉

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The problem with assumptions is that they always come with blind spots.

The friendlier and human a company is, the more potential for success it will have. This goes back to the theory that the company with the least amount of assholes wins. I think it goes without saying that unfriendly, emotionally disconnected, self-interested employees (and managers) always act as hurdles to internal collaboration, process improvement and the adoption of new ideas. They build walls. They create silos. They are agents of “no.”

Friendly companies are created by friendly employees and friendly management. Great customer experiences (whether they come in the form of great customer service or simply pleasant shopping adventures) begin with a culture of “we give a shit.” These customer-centric companies understand the need for fluid internal collaboration and the continuous improvement of process that affect, somewhere down the line, consumers’ perception of the brand.

But is that enough?

Consider the following two lists, and ask yourself which company you would rather buy your products from:

Company A:

  • It’s a great place to work.
  • I read an article about how cross-functional teams brainstorm to develop new products.
  • They offer trainees $5,000 to quit their first week. No one ever takes the money.
  • They have awesome customer service.
  • Returns are never a problem. They treat you so nicely.
  • I love shopping there.
  • Their CMO seems like a really cool guy on Twitter.

Company B:

  • I’ve heard it’s kind of a revolving door there.
  • Made in China, I think.
  • They have horrible customer service.
  • Have fun getting them to send you a replacement.
  • The lines at their stores are a pain.
  • I have no idea who their CMO is. He sure isn’t on Twitter.

Obviously, Company A probably has a market advantage, right?

Maybe. What if Company B makes much cooler products?

What if Company B’s products are equal in every way to Company A’s but at a much lower price?

That changes the equation a bit, doesn’t it? Now, Company B might become far more competitive (and successful) in spite of all of the negatives listed above.

Now let me throw in a twist: What if, against all logic, Company B’s process actually requires an antisocial environment in order to produce cooler products? What if it requires a quasi-tyrannical leadership and hermetically-sealed silos in order to be successful? What if becoming a “social business” actually ended up hurting it?

Under Steve and Walt, Apple and Disney weren’t exactly examples of what a “social business” should be, and yet they became, in spite of many of the things that the social business model preaches, enormous successes. They changed technology. They changed entertainment. They changed culture. They changed the world for the better.

How can this be?

Would Apple and Disney have been better off with a stable of bloggers and community managers on their payroll? Twitter accounts? Facebook pages? Youtube channels? Foursquare promotions? Would they have been better off if Steve and Walt had been avid proponents of “social business” ideals, flat organizations and cowdsource-driven product design? Really?

I want you to think about that for a minute, before you go back to reading blog post after blog post about the coming “social business” revolution and all the good it will bring to the world. It just isn’t that simple. Becoming a social business doesn’t necessarily help a businesses create more value for anyone or become better at what it does.

Becoming a more social company is not the same as becoming a better company.

I am not at all suggesting that companies are better off ignoring the social space. I wouldn’t dream of ever advising a company to stay off Twitter and Facebook. It would be irresponsible of me to drive a wedge between an organization and the amazing potential that social media has in store for them. BUT, it would be equally irresponsible of me to suggest that trying to become a “social business” is always going to be  in their best interest.

If you are a CEO, ask yourself why you really want your business to become “more social.” Is it because you really love your customers? Is it because you are looking for better, faster, cheaper ways to gather consumer insights? Is it because becoming “more social” allows you to increase your reach into social channels? Is it because industry experts told you it’s the thing to do this year? Why are you really focusing on this?

Here’s a better idea for you: Focus on building a better company, not just a more social one. Identify key areas of potential improvement and make those your focus. If social media can help you in this endeavor, then by all means find out how and do it:

Use social technologies to improve your customer service and reduce purchasing barriers.

Use social networks to help more people discover your great products or recommend wonderful employees.

Use social platforms to give your customers a reason to be loyal and act as good will ambassadors for you everywhere they go.

Improve internal collaboration and organizational efficiency.

Infuse your product management groups with insights and ideas from followers and fans.

Use social monitoring tools to identify new opportunities and spot potential threats.

The sky is the limit when it comes to how social media can help you become a better company.

But “being more social” doesn’t, in and of itself, amount to a whole lot. What does that even mean in a business context? Paying someone to hang out on Twitter all day and push out links to marketing content? Write formulaic blog posts to hopefully attract visitors to your website? Hire an agency to manage a Facebook page for you so you appear to be “more social?” Hire a ghost blogger to pretend that your CEO is committed to the social web? What’s the point of any of that? Why waste so much time and energy on pointless bullshit that isn’t benefiting anyone?

Now consider these two questions:

1. Will adopting a “social business” model really help patent-driven, data security conscious companies like Michelin, 3M and Pfizer become more competitive, more successful, and better at what they do?

2. Would adopting a “social business” model have helped Apple and Disney accomplish what they did? Or might it have gotten in the way by creating too much of a distraction or altering internal focus? Might an effort to become more “social” instead of generating brilliant products have worked against Apple and Disney?

Before you answer, consider this: The value of social media adoption and social process integration comes in degrees. Because every company is unique, every company will become more or less “social” based on its needs, capabilities and the dynamics of their internal cultures. Each of them will decide to what extent, and in the service of the improvement of what function, “social” will become part of its process. And guess what: There is absolutely nothing wrong with that.

So again…

Question: Should Michelin, 3M and Pfizer, Disney and Apple become more “social?”

Answer: Only to the extent to which they and their customers will benefit from it. That could be a little, a lot, or not at all.

There’s a why question hidden in that Q&A, and a how question as well. You need to help companies answer both if you really want to help them.

Recap.

1. The “social business” ideal doesn’t apply to every business. That’s the problem with ideals: Ideally, they’re great. In reality, the world is messy. Things don’t always work the way we wish they would. “The road to hell,” as they say, “is paved with good intentions.” The road to epic screw-ups is as well. Proceed with clear purpose, and caution will mostly take care of itself.

2. Beware the salesmen of utopia. Selling ideals is one thing. Adapting them to your company’s needs is another entirely. Good consultants should be able to successfully put their advice into practice, not just suggest unrealistic goals and then watch you fumble at an impossible play.

3. If you focus less on “being social” and more on becoming a better company, you will be much better off by the end of the coming fiscal year. If social platforms can help you become that better company, great! Get working on it. If not, don’t sweat it. Focus on what matters, not on the flavor of the moment, no matter how many consultants and tech bloggers come to you carrying buckets of freshly brewed Koolaid.

Now stop reading blogs and go kick ass. Cheers.

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This week, I had the pleasure of being interviewed on #mmchat (episode 68). We talked about social media (social business) integration, which is a pretty crucial topic. Pushing content through social media channels and setting up monitoring practices is the easy part. Making it all work and flow across an organization is where the real difficulties arise.

For almost every company adopting social media, the biggest challenge is not a lack of great ideas or social media expertise, but rather a lack of change management planning and execution. (Theory, presentations and case studies are great, but making someone else’s stories actually work for a business, that’s where the rubber really meets the road – or doesn’t, for the most part.)

Here were the questions:

Q1: So our topic tonight is on Social Media Alignment in organizations, can you describe your view on what this means?

Q2: [In reference to social media] what are some of the negative consequences experienced by organizations that are not aligned?

Q3: How should organizations begin when it comes to aligning their social media efforts with the rest of the business? Who should lead this initiative and how?

Q4: Are there specific steps required to align social networking within organizations?

Q5: Once alignment is achieved, can it be easily scaled or are there suggestions you can male to facilitate this process?

Q6: Are there different challenges & solutions for trying to align around the world in global organizations?

Q7: How does a company know when they have succeeded in the alignment quest? What are some of the major signs and benefits?

Because of the short amount of time allotted to the chat and the limited 140-character format, my answers and ensuing discussion don’t get super in-depth, but that comes with an advantage: They are VERY accessible. Even if you are still unsure how to effectively plug social media into a company so it doesn’t end up being just a marketing add-on, you will understand the fundamental principles covered here.

To access the chat’s full transcript, click here.

For a far more in-depth look into how to actually plug social media into a business (large or small), grab yourself a copy of Social Media ROI: Managing and Measuring Social Media Efforts in Your Organization (Que/Pearson).

It isn’t a “social media” book. It is a management book that focuses on social media for business. Big difference. If you aren’t sure that it is for you, download a free chapter here, then make up your mind.

Very special thanks to @thesocialcmo and @karimacatherine for hosting the #chat.

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The danger of content-centric strategies in Social Business:

Let me preface this short post with the catalyst behind it – this article by Sarah Shearman for Marketing.co.uk: “Content key to marketing in social media says P&G exec.” Let me throw a few bits and pieces of the article your way, and we’ll get started.

Content is the best currency in social media, according to Usama Al-Qassab, e-commerce marketing and digital innovation team leader at Procter & Gamble.

Speaking at a panel debate at the Social Media World Forum today (29 March) on the role of social media in traditional marketing strategy, Al-Qassab said: “There is a lot of talk about social commerce, but the average person is not yet there yet. On sites such as Facebook, the majority of people do not go there to purchase and still prefer their traditional online retailers. In order to monetise social media, it should not be seen in isolation and needs to be integrated into the wider marketing mix. But unless you have content, there is no point. The content you deliver and the investment behind that is key, much bigger than straight media dollars.”

And this (edited for brevity):

“To grab people’s attention in social media, you need to do something amazing and to do this, [what] you need is a function of how good your product is and how human you appear. The less good your product is and the less human you appear, the more spectacular, giving and generous the thing you do as an organisation needs to be.” – John Willshire, head of innovation at PHD

“There is so much content out there that is great and excellent, [but that] does not mean anyone will be able to even see it. The only way you can get people to see things and talk about things is by giving them a big push. Everything, whether it be business cards, letterheads, the website, the TV advertising, should all drive to one specific thing you want people to do. People don’t talk about things because they think they are great, they talk about them because they think they ought to, or because other people talk about them. Popular things get more popular, as a result of being in the public eye. It is about driving the content and hoping to get additional benefits, when people start getting involved.” – Nick Butcher, global head of social media and digital innovation at ZenithOptimedia.

First, let me begin by saying that I have absolutely no problem with what is now called creative/content, or even a proper focus on it. Content is important. It helps communicate to consumers the value and advantages of buying a product or service. It makes consumers discover, desire, crave, and develop a preference for a product. Now more than ever, content is easy to share, which ads to its value and power. Content also pulls people to websites, which is pretty damn important if you are trying to keep consumers interested and/or primed to visit websites and click on buttons. For these reasons, content is at the core of all things digital marketing, and great content is worth its weight in gold. You will get absolutely no argument from me there. All of this is true.

But here is where experienced marketing executives around the world – including pretty brilliant guys like John, Nick and Usama – fall into a common trap: Mistaking social media channels for marketing channels.

The problem is simple: Marketing professionals see the marketing opportunity in these powerful new channels – as well they should. Their reflex is to do what they know, which is to adapt their marketing thinking to the social space: shift some of their communications, strategies,creative and content to the Facebooks, Twitters and Youtubes of the moment. It’s their job after all. It’s what they know. “Push” has always worked everywhere else, therefore it will work in the social space as well. (And in spite of what social media purists claim, “push” does work quite well on social channels. Ask Dell and Old Spice, for starters.) The problem, however, is that digital social channels are not solely marketing channels. In fact, they are mostly not marketing channels. They are social channels (hence the nomenclature). As such, they favor dialog rather than monologue, which is to say actual conversations rather than messaging.

Publishing content and creative might be seen as a conversation starter, but it is not in any way, shape or form a dialog. It is a monologue through and through. And there is the rub.

At the root of the confusion between social marketing and social business are two distinct operational world views:

The easiest way to illustrate the problem is – as always – with a silly picture of old white dudes in suits sitting around a table.

Below is the functional view of social media channels as perceived (and expressed) by marketing professionals like John, Nick, Usama and thousands upon thousands of others around the world, including the majority of CMOs:

The problem with a unilateral functional view of SM channels

This begins a chain reaction of tactical thinking in which “content” – whose importance to the marketing function (on and off the web) is without question – becomes the core component of marketing-driven social media programs: If “content is king” for marketing on and off the web, then content must also be king for marketing in social media channels.

Logical, right?

If you have ever wondered why “content” was such a recurring theme and point of focus in the social space – when it clearly doesn’t need to be, this is why. What you are looking at in the above image, and what you are hearing from John, Nick, Usama and their peers isn’t representative of either social business or a social media program for business. What it illustrates is limited to social media marketing: The traditional marketing function adapted and applied to social media channels. This world view reflects a belief that social media management is primarily a marketing function.

This view point is of course a little too limited to work super well in a social medium, where people value non-marketing interactions at least as much (if not a lot more) than marketing-related ones.

Since social media channels and the social space are not inherently marketing-focused channels, the correct approach for a business looking to see both short and long term results, is one that is NOT primarily marketing-centric, and therefore NOT primarily content-centric. Here is what that more integrated social business model looks like:

Social Business favors multi-functional adoption across the org

The above image reflects the nature of social business. This multi-functional approach to social media, marked by the adoption of social channels by all functions and departments across an organization, stands a much better chance of yielding results in a space that is not inherently marketing-focused (and can be, at times, openly hostile to overtly marketing-focused exploitation by companies that haven’t yet thought things through).

This model does not focus on “content” as the key component of its social media program “strategy.” Instead, the model focuses on creating new types of value for consumers and stakeholders:

1. Pragmatically this is done to gain a competitive advantage, or – because the more value an organization creates for its customers, the more win becomes associated with its reputation.

2. From the consumer side, as long as the organization driving such a program seems to be genuinely interested in improving the lives or the experience of people it comes in contact with, as long as it seems to want to foster a relationship with them that isn’t automated, that is as truly human and genuine as an old fashioned handshake or a kiss on the cheek or a warm and honest hello, this business socialization activity won’t come across as one-sided and self-serving. This is important.

Sometimes, the best marketing isn’t marketing at all. It grows out of the personal connections that happen between the impression and the purchase, the thousand little personal interactions that happen between the purchase and the coffee shop, and the bonds consumers form with human beings around them. These human beings can be fellow customers of Brand x or employees or Brand x, or perhaps future customers of Brand x. For the purposes of this piece, let’s just focus on employees of Brand x.

Thus, having your marketing department push content all day long via Facebook pages and Twitter accounts and Youtube channels basically amounts to executing a simple social media marketing strategy. It doesn’t build anything. It doesn’t stick either. It’s just marketing spend at a lower cost and with a higher content velocity. Not bad, but that won’t get you very far in the social space.

Moving beyond “social media marketing” – A short list of business functions in social media that do not require content to create value and yield results:

We have seen how Marketing, advertising and PR all tend to focus on content in and out of social channels and why. (And again, there is nothing wrong with that.) Now, let us briefly look at a few other functions that can find a profitable home in the social space that require zero content creation, publication or curation.

  • Digital Customer Service
  • Business Intelligence
  • Digital market research
  • Consumer Insights Management
  • Online Reputation Management
  • Digital keyword and sentiment monitoring
  • Digital campaign or program measurement
  • Digital crisis management
  • Community management
  • Digital technical support
  • Digital concierge services

There are more, but you get the idea. None of these are particularly “content” driven functions, are they. Yet… “content” is supposed to be at the core of social media programs, right?

An emphasis on “content” in social media and social communications is simply code for “we think of social media primarily as a marketing channel.” It clearly needs to be treated as far more than that.

Organizations whose executives come to believe that “content” is key or central to social media success, equity or potential are making a grave mistake: Content doesn’t in fact drive engagement, traction or success in social media. “Content” drives marketing and responses to marketing in social media. As important as that is, we all have to be realistic about the limits of this kind of approach.

Realistically, content doesn’t drive customer service, crisis management, reputation management or market research in social media, nor does it drive conversations about customer service, crisis management, reputation, market research or even shopping experiences about a brand in social media. Since these and other key business function are principal building blocks of every successful social media program (for business), you see how an emphasis on content can hobble an organization’s social media program right from the start if its importance is mistakenly overstated.

Content’s relation to old vs. new forms of media:

Old media was 100% about messaging and distribution. Marketing was a monologue, primarily because the media used by marketing didn’t give consumers a voice. Viewers didn’t talk back to brands through their TV. Listeners didn’t talk back to brands through their radio. Billboards, print ads, posters, point of sale displays, coupons and even Web 1.0 websites functioned the same way: You created the message and pushed it out. The channels were basically one-way pipelines with marketers at one end and consumers at the other, the latter being the receiving end.

Social media channels are very different. Dialog rules in the social space. Marketing is at best suspect, and tolerated only if it doesn’t come across as exploitation of the channel by a company. Moreover, marketing in social media is permission-based: Too much marketing, or the wrong kind, and social media denizens will disengage from an offending brand. The wrong approach in these social channels can even do more harm than good for a company that forgets to treat consumers like individual human beings.

Though occasional monologues and messaging can find their place in the social space within a healthy mix of engagement activity, an operational emphasis on any kind of marketing monologue doesn’t work. Put simply, companies need to stop shoving “content” through social media channels like sh*t through a goose for ten seconds, take a step back, and start placing as much – if not more – emphasis on listening to consumers in order to then respond to them and begin a process of socialization. That is at the core of true engagement, and the fuel that will drive companies’ loyalty engines in the social space. The recent emphasis on content creation and publishing isn’t helping companies engage better. Instead, it is creating a wedge between brands and consumers. A wall of noise, even. It has become terribly counterproductive.

Two more things to think about:

1. Engagement and buzz are not the same thing. Pushing content through social media channels to generate buzz is perfectly fine and it can work very well. But don’t kid yourselves: Generating buzz around content or a campaign isn’t engagement. Not by a long shot. So next time someone tries to tell you that content and engagement go hand in hand, ask them to explain the difference between engagement and buzz. Chances are that they have the two mixed up. (Beware: That kind of confusion can send organizations down the wrong road fast.)

2. Saying hello or thank you doesn’t qualify as content. By the same token, having a conversation with someone is not content creation or curation. Responding to customer service requests via twitter is not content either. In fact, the more your communications resemble a conversation or dialogue, the less your communications qualify as “content.” The flip side of this is that the more focused an organization is on content when it comes to its social media presence, the more anti-social it will appear to be.

Strike for a balance. Always. The social space is far too complex and filled with opportunities to put all of your operational eggs in one basket – even the one tagged “content.”

Cheers,

Olivier

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For more in-depth insights into how to properly build a social media program for your company, department or organization, pick up a copy of Social Media ROI: Managing and Measuring Social Media Efforts in Your Organization (Que / Pearson), the definitive business guide to social media program management.

(Click here for a sample chapter.)

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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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Some things actually are black and white.

A conversation with a good friend in the agency world the other day (and particularly her horrified reaction to what I shared with her) prompted me to finally write this post. If your company is working with an agency on building or managing a social media program, you probably need to read this. And if you work for an agency that works with social media, you definitely need to read this.

Here’s the skinny: I work with agencies around the world, and more importantly, I have friends in a lot of places, both on the brand side and the agency side. Every chance we get, we talk shop. When someone does something cool, we talk about it. When someone does something not so cool, we talk about it too. And when we start noticing things that bother us, especially when those things touch on ethics, we most certainly talk about it. Over the last few months, one conversation has dominated all others, and it is this: The existence of two prevailing agency models when it comes to building and managing social media programs for clients. One is primarily client-focused and good, and the other… well, not so much. And yet, the latter seems to be gaining traction in the agency world, and that isn’t good.

Here is what these two models look like:

Model #1: The proper, working model.

In this model, the agency identifies the client’s business objectives and uses its capabilities to support them. Note that in this model, the agency doesn’t simply pitch a campaign or provide a cookie-cutter service. It identifies the client’s goals. It clarifies them, even, if not for themselves, for the client (as this is sometimes needed).

For example, if the client comes into a meeting and says “we need a social media program” or “we want 100,000 new Twitter followers by Christmas,” the agency doesn’t simply nod and set to work building a social media program or acquiring 100,000 new followers. What it does first is dig a little deeper: It finds out why the client wants a social media program or why 100,000 new twitter followers is a significant number for them. It finds out what the social media program is there to accomplish. Is it to attract new customers? Is it to capture more relevant data from existing customers? Is it to improve conversion rates or facilitate positive word-of-mouth? Is it to build the foundations of a consumer insights program? Is it merely to monitor brand mentions for a while, until the executive team has a better idea what they want to do?

Whatever the client’s ultimate goal (or series of goals) is, that becomes the basis for the program or campaign. That complex of end goals becomes the driving force behind the ideas, the mechanisms and the activities that will become the core of the pitch.

Why? Because a social media program that blends customer acquisition and increased buy-rate with facilitating WOM and activating hobbyist communities looks VERY different from a social media program whose objective is merely to “build and fill.” (The self-serving process by which an empty space is built only to be filled by a budget.)

What comes out of this type of model is a social media program that blends into a client’s overall business ecosystem. It deliberately supports its marketing efforts, its PR efforts, its customer service efforts, its sales efforts, and so on. Success is measured not only in social media metrics (net new likes/fans/subscribers/followers, net mentions, sentiment deltas and estimated advertising value) but in business-relevant metrics as well: Net new customers, Net growth in sales, increased buy-rates, net positive customer recommendations, improvements in loyalty metrics, increased market share, faster customer service ticket resolutions, improvements in PR crisis resolution, greater operational efficiency in x, etc.

In this model, the agency works with the client as an integrated partner, not just an outsourced service provider, and the results are concrete. In fact, the question of R.O.I. pretty much answers itself. It is never in question. Whether in a support role or a leadership role, the agency and the client act in tandem from start to finish.

This is the proper model for agency involvement in Social Media with a client. The ideal model, if you will.

Model #2 : The improper, unethical model.

In spite of the amazing breadth of potential for agencies in the social media space in terms of impact, revenues and success, many unfortunately choose to just cut corners and go for the fast, easy money. In this model, an agency knowingly sells what essentially amounts to bullshit to unsuspecting clients.

Let me give you two examples:

1. “We need to be in social media.”

Client comes to agency thinking they need a social media program. Their competitors all have one now, and after years of resisting, it looks like they are just going to have to get into that social media “business.” They don’t know much and they don’t know what they want, so they are relying on the agency to provide them with whatever help they need.

What the agency comes up with is a package that includes the development of an official Facebook page, several customized Twitter accounts, a YouTube channel, some internal training, and a content package to go along with it all. If the client has the funds, some campaigns will be thrown into the fray, maybe a contest or two.

Enter the “win an iPad 2 for liking our new Facebook page or following us on Twitter” discussions.

Enter the 5 tweets per day and 3 Facebook updates per day content packages.

In this model, nothing actually happens that directly impacts the business. Nothing is done to support a particular business objective or outcome. The model is simply this: To create billable social media “activity,” bill the client, and generate metrics that seem to indicate that the social media activity is a success. (We will come back to that in a minute.)

What the client ends up with is noise. Ask the client about his social media program, and he will proudly tell you how wonderful it is. Ask him what it is doing for his company, however, and the answers begin to sound less concrete. “Well, we’re attracting a lot of comments and likes. Like, 30 or 40 per week now.”

Yeah? That’s wonderful. But what is it doing for your business?

2. “We need 100,000 followers asap.”

Client comes to agency with an urgent need to grow its social media reach from 7,359 likes/fans or followers to 100,000 by Christmas. Why? Could be anything: Because the CEO said so. Because their closest competitor is there already and it’s embarrassing to be that far behind. Because the digital manager just came back from a conference during which a social media guru told them that 100,000 followers was a minimum benchmark for a brand.

What the agency comes up with is a simple package based on “the value of a fan” or “the value of a follower.” From this subjective metric, the agency quotes the client on a price: “We can get you your 100,000 followers before Christmas, but it will cost $x.” Negotiations ensue. A price is agreed upon.  The agency throws in a little hat trick: “If we get you to 120,000 followers by Christmas, how about a 5% bonus?”  The answer: No, but if you get us to 100,000 by December 1st, you’ll have your extra 5%.

This is a real situation, by the way. A real conversation.

From the client’s perspective, this is an awesome deal:

1. Internally, nothing is required except signing checks, signing off on activity, and keeping track of the agency’s progress. If the agency fails, no one is really to blame internally. The agency can be fired and replaced. But if they succeed, there will be enough glory to go around.

2. It would cost 5x more to reach potential customers in more traditional ways, even email. Social media really is cheaper!

3. We have a social media program! How cool is that?!

4. The client thinks it could have never gotten 100,000 followers on his own by Christmas. God bless that agency and its amazing social media savoir-faire!

From the agency’s perspective, this is an even better deal:

1. The client hasn’t figured out that social media activity is there to support business objectives. He is so focused on hitting that follower goal that nothing else really matters. All the agency will be goaled on is its ability to reach that number by Christmas December 1st. Nothing else matters. Not conversions, not positive WOM, not FRY, nothing. Just get those 100,000 followers.

2. The client is clueless about social media, and there is no reason to change that. The less they know, the more they rely on the agency to deal with their needs. This is very good for the agency, as we will see in a moment.

3. The agency, like an increasing number of its “competitors” around the world, has been recently and repeatedly pitched by companies out of China, India, South America and Eastern Europe that offer followers, fans, likes, clicks and other digital traffic à la carte. It can, like any other agency with the funding to do it, pay for all the new followers and fans it wants. You can buy all the positive mentions you want too.

Let me explain how this works: Money changes hands. Somewhere in a country where the client has no business presence, 25,000 people either create accounts or use existing ones via proxies and simply click “like” or “subscribe” or “follow.” These people will NEVER become customers, but to the client who doesn’t know, they have just become his 25,000 new followers on Twitter.

The only two details for the agency to worry about at that point are a) making sure to cover their tracks, and b) figure out the optimal markup.

This, boys and girls, is how it’s done, and we aren’t just talking about small fly-by-night outfits. Think bigger. Much bigger. And it doesn’t stop there.

4. The agency doesn’t need to have experienced professionals on their social media integration/management team anymore. Why waste money on that when you can just buy fans and followers?

Agencies opting for this model have two options:

A) Hire someone with an influential blog on Social media and put them on staff as a sort of social media mantle piece. These folks will be there to woo the client and help pitch them. They’ll charm them and do some internal trainings for them. They’ll create content for the agency blog, put a face to the agency’s social media capabilities, speak at events (always pitching the agency’s “case studies,” of course), and serve as a “thought leader” but will never actually work on building anything for clients.

B) Hire or promote someone with zero experience in social media integration and build them up as “experts” anyway. Any intern will do, but someone with a few years of experience in any “digital” field will look better. If you’ve ever wondered how some of these people you have never heard of become “experts” almost overnight, wonder no more.

Think about it: Why bother staffing up with expensive talent when you can just buy your followers and fans? The page builds can be outsourced to developers. The content can be outsourced to any number of content farms. The structure is already in place. If the agency is already working on a campaign, its content can be easily adapted to social media channels. (Add revenue line items here, here, and here.)

5. Once the followers have been purchased and the campaign or program seems to be gaining traction, start beating your own drum. Convince the client that their success could make a great case study, then build it up. In a few months, wouldn’t it be great to present at conferences around the world how “engagement” and “content” took Brand A from 7,000 followers to 100,000 in just a few months? Oh, the white papers. Oh the slide decks. Oh the positive press in Mashable and ZDnet. Oh the blog posts. Oh the awards.

Get on the phone with the PR team pronto.

Meanwhile, those 100,000 followers provide nothing for the business. Sure, it looks good when people check out the account’s profile page. It looks like the company and its agency are doing something right. The stats are easy to graph too. Empirical data, right? Is anyone ever going to go back and check where all of those “fans” came from?

Unfortunately, that number is a smoke screen. The vast majority of those followers will never become customers. They will never recommend the company (unless paid to do so). They’re paid extras, pretending to like your company, nothing more. Chances are, they had never heard of it before an email notification with a Paypal link told them to.

Meanwhile, the agency looks like a superstar. In the next few months, other brands will visit them and these words will fill their conference room time and time again:

“Can you do for us what you did for [Brand A]?”

The answer will always be yes.

6. Do not pass Go. Collect that 5% bonus for spending the client’s money faster than the original timetable called for.

In this type of model, KPIs (key performance indicators) will tend to focus on digital measurement only:

Net new follows.

Net new likes.

Net new subscribers.

Net new & volume of mentions.

Click-throughs.

EAV/EMV (Estimated Advertising/Media Value)

Reports will include fascinating graphs measuring “engagement” and “social equity.” Middle-managers will have exciting (albeit somewhat complicated) reports to present to their bosses that clearly indicate that the agency is kicking ass, doing its job, earning its pay. And yet, nothing concrete will come out of it. No actual new customers. No increases in loyalty. No preparedness for the next PR crisis. No improvements anywhere, except for all that “activity” in social media, except for all that noise.

I’ve been in the room when deals like this were discussed. I’ve had drinks with agency professionals who confirmed, disgusted, that it was becoming standard operating procedures at their firms. I’ve worked with clients who had no idea the extent to which they had been screwed by their own agencies in precisely this manner until they started digging under the surface of easy “social” metrics and “R.O.I. is not really applicable to social business” discussions.

This is happening in your market right now. It doesn’t matter if you’re in New York or Paris, Atlanta or Brussels, San Francisco or Hong Kong. This model is gaining traction because it’s easy, it’s cheap, it generates revenue and accolades for agencies, and the clients don’t know enough to make a stink. (Not that making their disappointment public would be to their advantage anyway.)

Where your choices lead:

Fortunately, because the second model is now so widespread, it won’t remain a dirty little secret much longer. Before long, clients will start figuring it out, other witnesses to it will start talking about it, and the agencies they work(ed) for will be exposed. Careers will be tossed down the proverbial drain, and the higher the pay grade, the harder the fall. Don’t kid yourselves: It is as inevitable as the fall of Enron.

Take a step back and ask yourself: What will clients do when they find out? How many new clients will these agencies attract once the curtain falls away? Who will want to go work for that kind of organization? What kind of professional will they attract (and more importantly, retain)? What future can this sort of organization really hope for?

To use a cycling analogy, do you really want to be remembered as the guy who won the Tour de France only to be stripped of the honor for blood doping a year later?

Cheating to win sucks. Cheating to get paid or to get ahead sucks. And no one gets away with it. No one. Not anymore. What side of the ax do you want to be on when it finally falls? That’s your call.

The agencies who opt for real results, on the other hand, who truly want to be the best in the business, whose relationship with clients is not predatory or parasitic, will stand out and attract solid talent, the people with insights and ideas and the ability to win and help them grow. Their success in recruiting the best talent in the world and use it properly will get around. This will gradually score them bigger clients. Meanwhile, the idiots who ripped off their clients with purchased “success” will just vanish from the scene altogether.

I know this because Tyler knows this. And also because I also know that reputation is everything. People talk. People always talk. And they always remember too.

As I begin to transition from being just an independent consultant (where my impact is often far too limited for my taste) to joining a larger organization (where I will be able to do a lot more), I realize how difficult the next few months will be. Sorting through potential new ‘homes’ for me won’t be as easy as just agreeing on a figure anymore. Now I have this stuff to deal with too, and the big famous name on the door doesn’t mean what it used to back in the day. As sad as that is, it’s the sad reality of where the marketing world stands in 2011. The vetting process on my end will have to be more thorough than it ever has been, adding a whole new layer of scrutiny in my search for #thenextgig.

This should be interesting.

PS: If you are an agency that falls into the first category (the proper model), let’s talk. If you fall into the second, let’s not.

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If you haven’t already, learn how to properly build, manage and measure social media programs at your own pace. Social Media ROI: Managing and Measuring Social Media Efforts in Your Organization will help you avoid common pitfalls of  most bogus social media program pitches and help you develop your own business-focused framework instead. Think of it as a 300-page blueprint for anyone looking to build a proper social media program. Download a free chapter here and find out for yourself if it is worth the paper it is printed on. You can also check it out on amazon.com or pick it up at just about any bookstore.

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