Determining the ROI of Social Media

We are always getting asked about the ROI of social media. Many of our customers or prospects are interested in getting on board with social media, but without tangible proof of its ROI, they are hesitant to get on board and worried that they won’t be able to validate their investments in this popular marketing channel.

We recently wrote a post on the incredibly successful Old Spice social media campaign featuring the “The Old Spice Guy” who cleverly responded to his Twitter followers' Tweets through tailor-made video responses. The problem with a campaign like this is that despite the attention that it’s getting, there often isn’t actual proof that the attention will turn into sales, and if your marketing efforts aren’t resulting in an increase in quality sales leads, then they aren’t really paying off.

Well according to a Nielsen report which was published in Brandweek, there has been significant evidence that the campaign has actually had a positive effect on Old Spice's sales.The report states that sales of Old Spice Body Wash have increased by as much as 55% over the last three months (around the time the original ad launched) and by a whopping 107% in the past month (the social media campaign was launched on July 13th). Those results are pretty telling, but the financial metrics are only one way of evaluating the effectiveness of the campaign.

According to a new report from research firm Forrester, when it comes to evaluating the ROI of social media, it’s important to remember that to properly judge the impact of your campaigns, marketers need to address social media ROI across several different areas including: financial, digital, brand and risk management and that marketers must not forget that social media delivers results that are much more substantial than just simple financial ROI.

In the report, Forrester states that because social media delivers such a wide range of advantages, it’s crucial for marketers to look at metrics in several different areas which are directly (or indirectly) financial, and to balance these metrics between the short and long term effects. The metrics look something like this:

1. Financial - Has revenue or profit increased or costs decreased? Have you had improved promotion responses for promotions that are posted on social media with trackable URLs? What other costs have you eliminated? have you reduced spending on other networking areas like conferences?
2. Digital – Has the company enhanced it owned and earned digital assets? Have you increased your search engine relevance? Are your digital assets having increased traction?
3. Brand – Have consumer feelings towards your brand improved? Are people more aware of your brand? Do they better brand association? Have you increased your fans online? Have you noticed improved word of mouth marketing from your social media following?
4. Risk Management – Is the organization better prepared to deal with attacks or problems that affect reputation? Has social media helped to eliminate the costs of potential PR issues? Have you reduced the likelihood the PR issues will occur in the first place?

Posted by Amberlie Denny at August 2, 2010 8:00 AM

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