What is the ROI of Social Media? Part I

@Kevin | Strategy

(This ended up being very long, I broke it into two parts so it is easier to digest.)

It seems like the ROI debate around social media is continuous. The more and more this industry evolves the more and more answers to that question change. Some people say that you can’t really measure the ROI on any of this and if someone tells you they can it is BS. Others will tell you that some of this can be measured but most of it can’t be. (Some people just don’t know how to measure.) Then there are people who I see eye to eye with and well tell you that if you set goals, think about how you can measure them, and work your strategy around these metrics you can measure the ROI with some effort. (I must say that Amber’s post completely inspired this.)

Before I go into this I want to say that the strategy and measurement that I am doing for this client probably won’t work for 75% of the businesses out there. Their goals, their business model, and how they execute their social media is probably different from the way you do. THIS IS HOW IT SHOULD BE. Each business is different and their goals, execution, and how you track the results are going to be all over the map. There isn’t a cookie cutter approach to this and I think that is where a lot of the frustration lies. My goal with this post is to show you the thought process behind setting goals, breaking those goals down, and how we track them.  Because this company is set up a certain way it makes breaking this down very easy, I have clients where this answer is much more complex but I figure this is about the process. (This is really written for a 101 level.)

Also this isn’t even taking into account other forms of traffic including search engine traffic, Jason Falls has a great post about that.

The Company

I am not going to name the client but they are a bootstrapped startup that is basically using social media as their main marketing until they can afford to use other marketing channels and have more of a complete marketing blend. They sell goods through a private shopping website much like the Gilt Groupe, so all of their business is done online. (Which I know is an advantage over brick and mortar when tracking all this data; again I wanted to make this simple.)

Setting Goals and Breaking Them Down

In our original discussions there were two top-level goals they wanted to achieve.

1) Gain members
2) Sell more stuff

These goals as listed above you can track on some level but they are very general. This is going to be the case with most companies you need to look at these goals and break them down into smaller and much more measurable goals.

Gain more members and sell more stuff…

There are tons of ways that we can gain more members, which ones are we going to focus on? For our first couple months we had to focus on just a few channels and leave other options until this year. We went with Facebook, Twitter, PPC, our blog, and blogger outreach. Through these channels the members we bring into the site we also want to buy product. Through this through process it has adjusted our goal to.

1) Gain members:

a) Through Facebook
b) Through Twitter
c) Through PPC
d) Through Blogger outreach
e) Through our blog

2) Sell more stuff

a) Through Facebook
b) Through Twitter
c) Through PPC
d) Through Blogger outreach
e) Through our blog

If we want to we can break these down even further to a per post analysis for the blog, Twitter, and Facebook. Our blogger outreach can be broken down by campaign, by interests of the blogger, by gender, by location. PPC can get sliced down into looking at keywords.  We can determine what we feel is important to track this and continually break down each of these goals into more data points. Remember that these smaller goals all feed into the large goals you have set. You need to determine what has value to you and create your goals around that.

You are developing your KPI (Key Performance Indicators) in this step; think through this using the SMART criteria model:

This means the measure has a Specific purpose for the business, it is Measurable to really get a value of the KPI, the defined norms have to be Achievable, the KPI has to be Relevant to measure (and thereby to manage) and it must be Time phased, which means the value or outcomes are shown for a predefined and relevant period.

The point is that we took two pretty general goals and broke them down further into goals that can be measured.These smaller goals can be combined after we split and track the data to determine if we have reached these large goals.

Setting goals is the first and most important step. You need to understand your goals and figure out how to break them down into reasonable and measurable chunks.

Part II – Coming tomorrow.

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