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Measuring ROI in Social media marketing
Abstract of my presentation at "Next generation social media strategy" panel, Ad:tech online marketing conference together with Peter Applebaum of TickYes.
Sydney, March 9th, 2010

Ad:tech online marketing conference, Sydney, March 2011 - Panel: Next Social media strategy

Measuring the ROI of social media marketing is just as simple as with any ordinary marketing campaign, you just need to have clear objectives and well-defined targets.

Can ROI be measured in social media marketing?

One of the most asked questions about social media is "how do I measure the ROI of my campaigns?" Some marketers who are not able to answer this question invent new metrics like ROE (return on engagement), but this only results in not being able to tell if you did increase your sales or not. The answer to the question is actually very simple, although it might be hard to see the first time around. Like with all marketing campaigns you need to write a sound plan; define clear objectives and with those objectives set unambiguous targets. If you have clear objectives, the targets and thus the ability to measure the ROI will follow straightforward.

The inherent conflict of Social media ROI
What a lot of people do not understand immediately, is that social media is about communication between people and thus a social action, while ROI is pure financial. As you cannot compare apples to pears, it is not possible to determine a financial ROI from a social engagement. In the long term you will be able to detect a correlation between your social media marketing and your sales, thus establishing a likely ROI, but in general the management of a company needs to see an immediate ROI to approve certain campaigns, so you will need to be able to determine the ROI on the short term as well.

Social media is different
Social media marketing is of course completely different from how we have been marketing brands the last decades. The customer is in full control now and marketers can no longer determine what they talk about. Marketers will have to listen to their customers and react to what they are talking about. Marketers can no longer push their brands, but have to build emotional bonds with the consumer and thus create loyal customers. Branding is still part of the game, but secondary to delivering a good (online) service to the customer.

So how to start with Social media marketing?
What marketers have to realize is that you cannot just do a social media campaign. That is how social media has changed business as well. Social media marketing is an ongoing business and not only for marketing. The whole company will have to go social or not and not just the marketing department. A lot of the other departments will be involved as well, like legal, PR and customer services. And thus when a company starts with social media it should best be done in small steps. The waters need to be tested and the amount of resources needed have to be evaluated. Who is going to monitor online activities and comments? Who will answer those? What happens if a comment is negative? How are crises in social media handled? By implementing social media marketing in steps you will be able to handle resource problems and online crises effectively. You will also be able to use the feedback from each step to improve both your online engagement with your customer, your brand and your services. Social media is the perfect medium for feedback, as every engagement with a consumer will create more feedback.

How do I decide the metrics for Social media marketing?
When looking at social interactions, do not make the mistakes to go for followers, fans or likes. What is a thousand "likes" on Facebook really worth? How many of the people that "just" clicked the like button are interested in your brand and how many just liked that one statement you made, or a discount you gave? And even if they really "like" your brand, does that mean they will buy it? To click the like button does not take any commitment or even serious thought. Therefore, measure actions that take an investment from your customer; measure actions that take time and thought, like comments and re-tweets, where people write positively about your brand. These are customers that might become loyal followers of your brand and even brand advocates over time and these are the people you need to invest in.

And these metrics will enable you to determine your ROI. It might be difficult to envision with your first encounter with social media marketing, but by setting clear objectives and targets, you will be able to link those social interactions directly to your targets. This will be different for each project, but as soon as you have written your plan and described the strategies and channels to reach your objectives, you will see that the link to measuring that ROI will follow almost automatically.
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Some of my personal remarks and opinion on books related to social media marketing:

"Socialnomics" How Social Media Transforms the Way We Live and Do Business, by Erik Qualman


"New rules of PR & Marketing" How to Use Social Media, Blogs, News Releases, Online Video, and Viral Marketing to Reach Buyers Directly, by David Meerman Scott

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