Matthew Williams
by on September 29, 2017
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As a first step, marketers should focus on objectives that explicitly recognize the value of operating in the social media environment. Most managers feel pressure to emphasize traditional objectives such as direct sales, direct cost reductions or increases in market share from social media. Ultimately, of course, outcomes like these are the bottom line for any manager. And a marketer who wants to know the immediate effect on sales of a particular social media campaign can do so relatively easily by tracking the revenue generated from the dollars spent, even if tying social media actions directly to sales is difficult. It is becoming increasingly obvious that social media can lead to real cost savings, such as when customers serve as their own version of a company’s toll-free help desk through FAQs on user forums. It is also clear that social media can improve the efficiency of market research efforts when, for example, marketers set up online prediction markets to crowdsource new ideas or mine online forums that allow customers to comment on product concepts and offer improvements for existing products.

Sales, cost efficiencies, product development and market research are obvious objectives, but in our development of appropriate social media metrics we want to emphasize objectives that take advantage of the distinctive characteristics of social media. In the social media environment, marketers have unique opportunities to develop social media programs that tackle awareness, engagement and word-of-mouth objectives. Social media applications can fulfill any of these objectives, where the appropriate set of metrics depends on the objective. (See “Relevant Metrics for Social Media Applications Organized by Key Social Media Objectives,” p. 44.) To get an ROI estimate, managers would link the social media metrics to an additional set of proxy benchmarks (e.g., the likelihood of futurepurchase by a user engaged with the company’s brand through a specific social media application, or the reach of a specific word-of-mouth element and subsequent conversion to future sales). For example, a popular personal care brand ran a largescale integrated ad campaign on MySpace in the second quarter of 2008 and used matched consumer panels to link online social media behavior to survey measures of purchase intent as well as actual in-store sales. The results showed an ROI of 28% for the ad campaign.4

As this example shows, companies are starting to see some success measuring the ROI of their social media experiments, including some that offer the consumer a relatively complex social media experience. For example, in 2007, Kellogg created an integrated digital media experience for the “Special K Challenge” featuring a support website that offered consumers the opportunity to customize a diet using Special K cereal, participate in online forums with pointers from experts, join a Yahoo! e-mail support group and click through to Amazon.

com to purchase the cereal. Kellogg, which was able to translate those website interactions and click-throughs to market response over 18 months, found that the online ROI for Special K cereal was twice as large as that from television.5 Vocalpoint, Procter & Gamble’s social networking site, has over 350,000 members who talk about P&G products; by linking these customer investments in brand conversation to sales, the site is credited with market response increases of up to 30%.6

To be sure, there is some complexity involved in calculating the ROI of a sophisticated social media campaign, not necessarily limited to determining the size of the test and control samples and the ability to match online customer profiles with offline purchases. However, even small-scale social media efforts can benefit from plugging in segment- level estimates and proxy measures to quantify how the customer investments from brand awareness, brand engagement and word of mouth affect the purchase decision funnel and, ultimately, the bottom line. We expect that over time the number and quality of the necessary inputs will increase, but marketers can find even rough proxy estimates useful in the meantime to generate the calculations necessary to link marketing investments to customer investments and market response.

Below we discuss three social media objectives and provide several examples of each.