Wednesday, October 21, 2009

How to Measure Social Media's Effectiveness

I've followed many debates on how the term "ROI" is being misused in social media. Josh S. Peters (one of my partners on Branded Tweets) has written a couple of posts about ROI. In the first, he explained why it was being inappropriately applied to a campaign The Gap had run. Josh followed up with a post that concluded the use of KPI's (Key Performance Indicators) is a more relevant way to measure the effectiveness of social media usage. I was originally going to comment on his latest post, then realized it was worthy of an entire post on its own.

The same debates about social media are ones that happened over a decade ago with online marketing in general. In the mid-90's, banner advertising was popular. Some people believed that all banner advertising campaigns needed to have an associated ROI. Others believed that banner advertising had to have a call to action otherwise it wasn't effective. The reality is banner advertising back then - and still today - can serve a variety of functions where ROI isn't even an immediate factor. The same kind of rhetoric is being spouted about social media today.

ROI has never, and will never be, the single most important metric that can be applied to marketing. This is true both offline and online. Consider Superbowl ads. The costs of producing and running an ad are enormous. Where does ROI come into play for Superbowl ads? In the short-term, it doesn't.

I agree KPI's are important - what I don't agree with is that KPI's are relevant on their own to social media. Benchmarks, metrics tied into business goals, other kinds of data that are quantifiable and that can be tracked back to social media efforts. But KPI's typically refer to the overall marketing efforts of an organization. Unless a company is *only* using social media for marketing and no other marketing methods, the metrics associated with the impact of social media are just part of the arsenal of what a company does to market.

Here's an example: let's say John sees your ad on TV for the Gizmo - a new product your company is offering. John uses Twitter and asks if anyone has used Gizmo. As part of your company's social media efforts, you have a monitoring campaign tracking mentions of Gizmo. You engage John, answer his questions and John buys Gizmo.

What metrics should you consider here? More importantly, what data should be gathered?

Where things become even more challenging is that it's rare that a company that uses social media will just have one objective. It's more likely that a company will have multiple objectives when using social media - some of which may not even come under the umbrella of marketing. Two examples: customer support and recruiting. Where it becomes even trickier is that business/organizational use of social media is becoming increasingly complicated.

We can compare the evolution of social media to how the Internet itself has progressed. Whereas ten or twelve years ago it was acceptable to just slap up a website - the build it and they will come mentality - things have changed and the same is true with social media. It's not simply enough to have a presence on Twitter, but you need to have objectives for using Twitter. Having a Facebook fan page isn't enough. There has to be some strategy behind it.

With an increasing number of Internet users and organizations looking to social media to get answers, conduct research etc, is it really even necessary at this point to consider social media in isolation when it comes to any kind of quantitative analysis? Would it not be better to look at things from an overall integrated campaign perspective where social media may be just one component? Then under the umbrella of social media, shouldn't we look at individual sites and applications and the metrics just as we would look at PPC advertising, banner advertising, etc?

Consider this question: what distinguishes "social media" from everything else that existed before? I first got started online when I was 16 years old - 25 years ago. What did I do online? I used forums on bulletin board services. Over a decade ago, I started to work with clients on ways they could engage prospects and customers. The term "social media" may be relatively new but what it means isn't.

What has changed is three-fold: 1. the speed at which information/news can be disseminated; 2. the strength of some very dominant presences not tied to specific companies (Twitter, Facebook, MySpace, LinkedIn, etc) and 3. the voice of the consumer has more impact. The end result is that consumers today are much more empowered than they were even a few years ago.

Where we are now is that a lot of traditional marketing/corporate folks are just plain confused about how to handle it. There is simply too much conflicting information about what social media really is and there's this unnecessary "push" to look at it in isolation - which is completely unnecessary. From an organizational standpoint, you should be defining what kind of social media presence you want to have. From there, you should then be looking at your use of social media in conjunction with everything else for individual campaigns - your website, your blog, your email marketing, your PPC advertising, your banner advertising, your online PR, your offline advertising, your offline PR, and so on. Now with this more integrated approach, reliance on KPI's is relevant - with social media being just one part of overall efforts yet with individual benchmarks being relevant to individual social media activities.

As more and more consumers become involved in social media activities, I think we'll see a natural progression where organizations almost automatically integrate social media into their business models. Whether this will happen in three, five or ten years - I have no idea. But it is coming. And sometime between now and then the accepted standards will evolve to where "social media marketing" as we know it will no longer be a catch-all phrase.