There’s a terrific new white paper published by Forrester Research that addresses the frustrating task of marketers to validate and measure their investment in social media http://bit.ly/bh2VlW. Do not, I repeat, do not be put off by the title: “The ROI Of Social Media Marketing” . This is not Professor Erwin Corey double speak.
The author, Augie Ray, delivers a succinct, insightful and refreshing methodology that considers the broad range of benefits that social media affords businesses. He warns marketers to avoid narrow ROI based performance measures, but rather develop a “Balanced Scorecard” that fully captures the value delivered by social media programs and tools.
Ray states: “A balanced social media marketing scorecard will consider and monitor effects across four perspectives that balance the short term and long term and the directly financial with the indirectly financial outcomes.” The four perspectives are:
- Financial. Has revenue or profit increased or costs decreased?
- Digital. Has the company enhanced its owned and digital assets?
- Brand. Have consumer attitude around the brand improved?
- Risk Management: Is the organization better prepared to note and respond to attacks or problems that affect reputation?
The author discusses each perspective with concrete business examples and adds his own insights about the rapid movement of social media out of the experimentation stage and into mainstream marketing strategies. He warns marketers not to use the term “ROI” unless specifically referring to financial returns:
"ROI has an established and understood meaning — it is a financial measure, not a synonym for the word “results.” Marketers who promise ROI may be setting expectations that cannot be delivered by social measures.”
Ray warns marketers to avoid assigning financial value to nonfinancial metrics such as followers, retweets, blog comments, and positive reviews. For example, some businesses assign a value to a Facebook fan. This is problematic because it’s what businesses do with their followers that count, not the fact that they merely have them. He states:
“A mass of followers that “like” the brand but never return to the fan page is far less valuable than a handful of followers who frequently share brand updates with friends.”
He also discusses the issue of attributing results to social media campaigns, when they are part of an integrated campaign that employs both social and traditional media. He illustrates the point using PepsiCo’s Pepsi Refresh Project. The project used television to drive awareness of the program and traffic to the Pepsi microsite.
“With offline, online, and social strategies increasingly integrated, attributing value to the “last touch” on social networks can result in undervaluing other marketing vehicles.”
The paper goes on to explain the ways to create a Balanced Scorecard Approach to more accurately define social media marketing results. The logic is easy to understand, and tackles the issues of applying traditional metrics with new evaluation measures.