Hot on the heels of last week’s Altimeter Open Research Report on Converged Media, today, analyst Susan Etlinger, Researcher Andrew Jones, (I served as editor) have published a report answering the absolute top asked question in the social space: “How do companies measure ROI of social?”
In this definitive report, Altimeter found that there are half a dozen methods being deployed, each with flaws and strengths. It’s key that the business knows which method to deploy, when, and then line up the right process, teams, software, and partners to help. Despite a thorough look into leading case samples and speaking with dozens of members of the ecosystem, we found there is no single solution that is fool proof.
In this Open Research report, you will find:
A through set of industry findings with 16 brands, 38 vendors, 3 agencies and 4 ecosystem contributors, and surveyed 71 social media and analytics practitioners. Breakdown of the 6 use cases of Social Media ROI, with analysis, case examples, and insights for each, and pragmatic recommendations to business leaders on how to deploy.
Key Finding: There is no “one-size-fits-all” approach. The four most important criteria for determining the measurement mix are:
- Business: the nature and structure of the business
- Product: the nature and type of products or services offered
- Media: type of media being used
- Customer: the nature and type of customer(s)
Above: Six Ways of Measuring Revenue Impact of Social Media
Altimeter will cross-link to the discussion around this report, we’re open to the discussion –even if you’ve other points of view.
Companies are frequently misguided by relying on fan and follower count as the primary measurement for their social media investments, instead they must focus on the outcomes of these fans and followers.
We wouldn’t buy a car without looking under the hood, or buy a house without getting it inspected, or hiring an employee without doing a background check, so we should also ensure we’re providing the right metrics for our social efforts.
Because fans and followers are so easily viewable by all employees of our owned social accounts as well as our competitors, it’s easy to use that as a default index. In fact, strategists should not serve up fan and follower data to executives, as they often self-diagnose this number to be most important and compare themselves to their competitors.
Instead, focus on the business outcomes of the account, whether it be for being involved in influencing them, transacting leads or conversions, fostering word of mouth, improving customer service and support, or generating ideas for future products or the brand.
Don’t focus solely on fans and followers as a primary key performance indicator, instead focus on the business goals the fans and followers yield for you.
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Over the last few months, Susan Etlinger, a former marketing strategist, and most importantly has used brand monitoring tools, has lead Altimeter’s latest research report on analytics. After interviewing nearly 40 experts and working with Charlene Li and a bit of help from myself, she’s found six distinct use cases (see compass below) on how companies are measuring using these new toolsets.
We know that measurement is the the top goal inside of companies, and while I’ve published this data before, it’s important to recast it to show the important of measurement in an emerging technology set.
Why are social analytics so important?
- This is a new medium, and proof over re allocation of investment is key.
- Being a new tool set, there’s a lot of experimentation and it’s important to see what will actually make a change,
- It’s a very difficult medium to track, unlike transactional advertising, social engagement is hard to tie to point of sale or conversion.
- Since most social media programs are not tied to existing systems in support, marketing, and product innovation, it’s very difficult to collect the disparate data and make sense of it
Framework: Social Media Measurement Compass
In particular, I’m fond of how the report lays out a measurement strategy based on organizational model and maturity, there are different strategies to deploy depending on the internal structure. You may recognize these five states from the research I’ve been doing over the past few years
How to Organize for Social Media Measurement
Read the report, print it out, and share with others. The more you share it, the easier it is for us to produce more. Read Susan’s post announcing this report. I’ll link to posts that add to the discussion below.
Who has more information about US’s Gen Y? Facebook or the United States Government?
Each time I ask this question on stage, most hands vote that Facebook has more information, although someone usually suggests the United States Governmant can obtain it if they need to.
In fact, the amount of consumer data emerging in the social web only continues to hockey stick (see this graphic from Twitter) The following is a summary of a research project we did to understand how to harness new data types in their online experiences.
The 7 Elements of Social Data
We segmented data that has been tried and true for years on the top tier: demographics and product. Then, we segmented data that digital marketers are striving to tackle now in the middle tier: Pschographic, behaviroial, and refferal data. At the bottom tier, we listed out experimental new types of data that most companies have not harnessed, the newcommers location based and intention data.
This data types enables an effecient way to create context about consumers, yet broad survey-based research may not yield specific nuances and needs about specific individual taste as today’s consumers are given more choices and have more discrete needs. Some marketers are able to glean demographic data from social accounts gender, age range, by profile data, profile pictures, or searching public records like Zabasearch and Spokeo.
A data type commonly used in ecommerce websites, this data type is used to match similar products with each other, in order to cross-sell and up-sell products. Often combined with demographic data, this data type, mixed with referral and behaviorial data yields greater accuracy. Visit any ecommerce website from Amazon, BestBuy and beyond to find examples of product matching.
As the social web exploded in the past few years, consumers are volunteraily self-expressing their woes, pains, and aspirations in websites. This provides those who want to reach them increased opportunities to market based on lifestyle, painpoints, beyond just product sets. This data type is useful in both message and conversation creation as well as identifying features and products to improve or fix. To learn more about lifestyle and pain point positioning see the 5 stages of positioning by Lifestyle, Pain, Brand, Product, or Features.
There’s at least two ways to find this data, it’s in both existing customer records like CRM or ecommerce systems or also in the “digital breadcrumbs” that users are leaving in social networks using a variety of web techniques from cookies, FB connect, and other social sign on technologies. The opportunity to suggest content, media, deals, and products to them that matches their previous behaviors will yield a greater conversion.
Customers are emitting their recommendations for products, but positively –and negatively. Both explicitly through ratings and reviews, as well as implcity though gestures like the ‘like’ button to their social network. Vendors like Bazaarvoice (disclosure: client) offer a suite of tools for customer feedback and intelligene, Zuberance fosters positive WOM through positive ratings, and ExpoTV is a catalyst for conversation using video reviews, and see the well known case study from Levi’s who implemented the Facebook Like button.
As location based technology and services emerge for consumers to emit signals where they are using mobile devices, this data helps to triangulate context around location and time for brands to reach them. From Foursquare checkins and the associated contextual ads that emerge to ‘players’ to Facebook places, consumers can now emit their location, in exchange for contextual information, see how Awareness Hub (client) is able to surface influencers by location in Foursquare Perspectives.
The most innacurate, this volatile data type holds great opportunity to predict what consumers will do in the future. Wish lists, social calanders like Facebook Events, Zvents, and aspirational websites like PlanCast, 43 Things allow consumers to broadcast their future plans
Savvy marketers will harness explicit content and serve up the right messages in advance – as well as poach from competitors. Learn more about intention data –which is faster than real time.
Conclusion: Use Data Elements in Combination to Yield a more Potent Elixir
In our initial findings we had many other types of data, but organized these in as discrete buckets as possible. While this seven segmentation types makes sense today, we expect many other types of data to emerge just as technology and consumers do. Be sure to use in combination for reaching maximum potency in your ‘data elixir’ –relying on only one is no longer sufficient.
Want to learn more? I did an hour long webinar on this topic, you can watch the replay at NetBase, who hired me to present this original research. Scott attended the webinar, and reviewed the highlights. Thanks to Altimeter’s Christine Tran for help on this project.
Often, our industry can appear complicated, and yearns for simplicity. One such technique to glean simplicity is to develop frameworks which the corporate social strategist can then apply to achieve their business goals. I’ve been working on this “ROI Pyramid” framework for a few months now, and am ready to share in greater detail than on my keynote at LeWeb (slides and video) where I introduced this to the public for the first time.
[The novice provide executives with engagement data --causing themselves to be stuck in the churn of obtaining more followers and fans --without a clear business goal]
140 social strategists around the globe at enterprise class size companies indicated their top internal objectives for 2011 is to “Create ROI Measurements”
Measurement, the Number One Priority, Is Important to Social Business
In our recent research report on the buyer of social business, (read research report: Career Path of the Corporate Social Strategist) we learned that measurement is one of the most important aspects to social business, in fact the top priority stated by 48% of corporations was “Creating ROI Measurements” for internal programs, (see data).
- Experimental mediums require proof they work. The corporate social strategist is constantly being challenge as they grasp more budgets to prove their efforts and teams are making a difference. In addition to proving these new mediums are worth the time spent, the corporate social strategist is being challenge by their peers in incumbent positions who may be giving up effort and budget to support social efforts.
- Down markets put greater scrutiny on spending. As spending across the board reduces in a recession, focus on proving new efforts is required by all parties involved. Those that can effectively measure improvements can make the business case they can truly obtain more budget.
- The Corporate Social Strategist Must Develop Frameworks Now. Most corporations are already forming in the “Hub and Spoke” formation (see data) which means a small cross-functional team is helping a variety of business units. Establishing a standard way of measuring now is important before corporations move into “Dandelion” where measurement strategy fragments into spokes.
[The seasoned professional provides executives with business metrics first. They know fans and followers aren't a business goal, but what you do with them is]
Yet, Measuring Social Media Is Challenging
While we learned that measurement is the key, we found (see data in slide 20) that 65% of corporations are using engagement data as the top used metric, with only 22% using product revenue as a metric.
- Excess variety of data options, and disparate platforms. Due to the thousands of applications, dozens of social networks, and millions of combinations corporations are stymied by how to make sense of this disparate space. In addition to the variety of choices to deploy, each has a different set of ways to measure from fans, engagement, followers and the like.
- Technical limitations vast in a fast changing environment. As if the choices weren’t staggering enough, there are significant challenges to measuring. Corporations are unable to apply web analytics tools on third party sites they don’t have ownership on, and therefore are often relegated to manually counting data, or relying on one of the 150 brand monitoring platforms to scrape it for them.
- Hard to tie engagement to bottom and top line efforts. In addition to being a new program, understanding of this disruptive set of technologies causes friction. Additionally, social media is frequently known for driving awareness (second to ads) through WOM then through customer engagement through interactions –yet rarely tied to transactions or ecommerce which often occur on a disparate platform.
Apply the Social Media “ROI Pyramid” In Your Measurement Strategy
(Above: First, recognize there are three types of role, all who need different types of information about your social business efforts)
(Above: Secondly, understand the high level types of data they need in order to be actionable)
(Above: Finally, assemble this information using the metrics and creating formulas. The above are just examples, as customization within every corporation is required)
Matrix: Understand the Social Media ROI Pyramid
||Who it’s for
||How to generate
||What no one tells you
||Executives, and everyone else who supports them, which of course, is everyone.
||This is a roll up formula of Social Media Analytics. Use tracking software or referral traffic to infer how customer engagement moves down marketing funnel. Existing CSAT methods should also incorporate social channels, and measure a sample of sentiment from customer communities. Cost reduction is a formula based on reduced costs and time in these lower-cost channels.
||The pyramid is smaller at top as their are less metrics to give to busy executives. There’s really only three: increased top line, reputation, and reduced costs. Compare these lower cost channel to existing marketing efforts to get additional budget, and benchmark over time.
|Social Media Analytics
||The Corporate Social Strategist and the internal stakeholders and internal clients (leaders of the ‘spokes’ in the hub and spoke model)
||This is a formula based on Engagement Data (the tier below), there are no industry standards, so pick one and benchmark over time
||We’ve identified there are 16 analytics, but there are many more in existence, you’ll have to create these formulas on your own
||Those who are deploying social media: community managers, developers, designers, agency partners, IT.
||This data is already created by many social tools, and a variety of analytics are already available to gather this info from brand monitoring to the analytics provided by Facebook and Twitter and others. Don’t forget to include traditional web analytics. Read our research report on Social Marketing Analytics to learn about the existing formulas.
||Don’t ever give this to executives until you’ve first given them business metrics or expect many months focused on ‘more followers’ without a business purpose.
(Above: Here’s a single slide with all three columns of info on it which you can use as an instant reference)
Five Steps To Start Using the ROI Pyramid Now
Corporations must develop a standardized way to measure first based on business goals. Next developing a standard way that the entire company and agency partners can think about measurement is key in 2011 as social business will fragment to every customer touchpoint.
- Start with a Business Goal in Mind. Expect significant challenges to occur if your social media efforts don’t have a business goal, so clearly you should first start with a purpose. It’s easy to spot when this happens as the goal will be on getting ‘more fans and followers’ rather than moving the business needle forward. Start with a clear business goal and define ‘what success looks like’ or don’t start at all.
- Give the Right Data to the Right Roles. Not all roles require the same types of data, and be sure to give the right type of data to the right segment. While all the formulas of the pyramid should be accessible by the corporation, understand the viewpoints needed from each vantage point.
- Frequency and Quantity of Data Varies in Pyramid Tiers. Recognize that executives need reports less frequently that the deployment teams, hence their size on the pyramid. Also, there is more data needed at the bottom tiers than at the top, remember the top tiers are roll-up formulas from bottom tiers.
- Know the Customization of Formulas is Required. This industry lacks any form of standards, so don’t wait years for an industry wide formula to appear as it likely won’t even apply directly to your business needs. Invest the time to create the social media analytics needed to support your business goals now, which you should expect will take massaging over a period of time.
- Benchmark Over Time and Cascade to All Spokes. The specific numbers aren’t as important as the trend lines over months, quarters, and years, yet in order to obtain these, you must start now. Looking at how these numbers trend over time will provide more insight to the teams involved.
I look forward to hearing how you implement this framework in your measurement efforts, let’s open up the discussion in the comments below, please share this with your teams, agencies, partners, and staff. Thanks to Christine Tran and Asha for design help. Feel free to use these slides, flickr images, just provide attribution to Altimeter Group.
I’m frequently asked “What’s the top challenge the corporate social strategist is struggling” and over and over, ROI comes up very high. To tackle this challenge head on, Altimeter has conducted a research project to find out how companies are connecting social technologies to the overall buying process as well as analyzing how they increase revenues for brands.
In conjunction with our recent conference on Social Commerce, we’ve now published the findings from interviewing top social commerce vendors and brands that are connecting commerce with social media. Our lead researcher analyst on this project is Lora Cecere who stems from Gartner and AMR and stems from Supply Chain Management, her and I will be doing a no-cost webinar to discuss these findings, I hope you join us.
This report is intended for you to use, share, and spread, under creative commons, feel free to embed it on your own blog, comment on it, and discuss. I look forward to hearing your feedback.