There is currently much debate about the measurement of marketing performance. Marketers are under increasing pressure to address marketing accountability and justify their expenditure and activities. One of the delicate areas in marketing is the need to understand how marketing can drive company performance – there is currently not a set of standardized set of techniques that can be used to measure marketing performance, unlike accounting. It is for this reason that the importance of marketing in organizations tends to be relegated to a lower level which results in the department trying to survive on limited budgets. This has led to fear for the continued existence of marketing in firms as it suffers from a heightened lack of credibility.
Introducing Social Media
As we all know, one of the most defining features of the last decade has been the emergence and popularity of Social Media due to the proliferation of technology and new demographics & values. Basically, Social Media is everywhere today. The term Social Media started to gain popularity in the first decade of the 21st century as a result of the introductions of MySpace and Facebook. High-speed networks, increased mobile Internet access and the rise of Web 2.0 have contributed to the popularity in Social Media.
The advent of Social Media has provided numerous opportunities for companies to interact with customers on another level. Companies can use Social Media to reach large audiences in a really cost-effective way. Social media marketing is effectively electronic word of mouth where valuable content is shared and discussed to generate awareness and response. However, while it has benefits, social media marketing has suffered from the same problems as traditional marketing, in that there is growing concern about the return on investment. CEOs and CFOs are largely unsatisfied with the answers to their question on the ROI of social media and are demanding more evidence of potential ROI before setting the marketing budget, even with the availability of dozens of marketing metrics.
What is the ROI of your mother?
Let’s just say you have engaged in social media marketing for a period of time and you’re quite skilled at it. You don’t just push promotions on to people’s news feeds, you effectively engage with and listen to users as well. You see a rise in sales but how much is attributable to your social media efforts? You know your costs, you know your sales – your task is to find out the incremental effect social media marketing has on your recent growth (the in-between).
The reality is the ROI of social media is very complex to measure – it’s hard to put on paper. As stated by MDG Advertising, because each business has different objectives, there is no standard measurement for ROI for social media marketing. Another and an eccentric way to answer this question brings us to Gary Vaynerchuk. CEO, entrepreneur, video blogger, author, public speaker, Vaynerchuk responds to ‘what is the ROI of social media?’ with ‘what is the ROI of your mother?’. Here, Gary explains that the way his mother raised him and injected him with confidence was the reason he has become the success he is today. What is the ROI of his mother? The answer is it cannot be tracked so easily…but it’s invaluable. He goes on to say that social is much closer than traditional marketing at measuring the ROI because it has better metrics.
Not only does social have better metrics than traditional marketing, it also has more. Only 5 years ago, Media Post released an article that gave 100 ways to measure social media such as number of fans, number of interactions and page views. However, with the sheer amount of social media metrics, there is a danger of selecting simple ones that can mislead marketing efforts and harm company prospects. To avoid this, companies should place an emphasis on the quality of metrics used rather than the quantity but at the same time, have several layers of metrics to ensure efficient insight. The focus of your metrics should be on user acquisition – the most efficient means to acquire a customer.
A useful framework to think about this is the purchase funnel which illustrates the journey a person takes to becoming a customer, as displayed below. The graph presents techniques that can be used at each stage of the framework which can be contextualized for any buying situation.
The marketer needs to ask him or herself 5 questions to get an in-depth understanding of customers:
- Who is important in the buying decision?
- How do they buy?
- What are their choice criteria?
- Where do they buy?
- When do they buy?
Understanding how users behave in each stage is critical and a prerequisite for any successful social media marketing initiative (that’s another article). This knowledge influences target market selection and the techniques employed to communicate with them. From here, marketers should measure their efforts through previously implemented KPIs. As Vaynerchuk says in his performance (I call it that because he’s brilliantly animated), measuring the ROI of Social Media is impossible to track but we’re getting close. For now, ROI must be measured in terms of customer investment, not money. Or at least that’s how I would like to approach. It’s your turn now….what’s your view?
Here at Instant E-Training, we have some great training videos from industry experts that tackle this issue further. Check out this video from Marshall Sponder, CEO of WebMetrics Inc. and author of Social Media Analytics. For a more comprehensive outlook on all of the burning questions associated with social media, check out our Social Media Certification Program where you can become a certified Social Media Strategist!
