Social Media ROI: Measuring the unmeasurable?

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On Friday we posted about an experiment running on one of our online communities, comparing paid and organic search strategies. This is just one of the ways that our clients measure the ROI of their online community - by increased traffic from organic search or significant savings on their paid search bills.

Measuring ROI is an important topic in social media, all the communities that we build at FreshNetworks have very clear ROI cases. We spend time during the planning and strategy phases working on the objectives of the online community and how we can measure this. This may be increased sales, a specific number of new ideas generated for the business, increased retention rate, traffic to an ecommerce platform, savings in market and consumer research spending… The areas where online communities can contribute to business objectives can be vast and depend on the specific needs of the business. Time spent working on this is time well spent.

That’s why this week’s Required Reading is a great presentation on Social Media ROI from Egg Co. I particularly like the way that they break down an ROI measure into a Success Metric and then into a Goal. This is very similar to the way we work with clients at FreshNetworks, and the examples in the presentation show how this approach to ROI can show the real impact social media can have.

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18 Comments

  1. Allyson:

    Great article. Effectively measuring social media’s ROI is on everyone’s mind these days. Justin Perkins over at the Frogloop blog created a social media ROI calculator at http://www.frogloop.com/social-network-calculator

  2. links for 2009-03-24 « Brendan Cooper, your friendly neighbourhood social media strategist:

    [...] FreshNetworks Blog » Blog Archive » Social Media ROI: Measuring the unmeasurable? Comparing paid and organic searches, this is one way to establish that elusive ROI (tags: roi measurement metrics freshnetworks) Posted in socialmedia. [...]

  3. FreshNetworks Blog » Blog Archive » Social media ROI - a calculator for not for profit campaigns:

    [...] post a few days ago on measurement and ROI in social media, Social Media ROI: Measuring the unmeasurable, prompted a fair amount of discussion. The main thrust of the post, and of the presentation it [...]

  4. Footprints (25.03.09) | Chris Deary:

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  5. Reasonable Robinson:

    The only way to cut through hype and assumptions about Social Media value and effectiveness is to get a handle on things with metrics. Anybody who has Business 101 knows that ‘what you measure is what you get’. I agree that a blend of ‘hard’ and ‘soft’ measures is the best way to go. The logic behind a balanced score card (Norton and Kaplan again)seems relevant here. I would recommend the work of Tim Ambler too - Marketing and the Bottom Line - for a good tour of generic principles in establishing marketing metrics. Folks should not underestimate the issues involved in defining metrics. The assumptions people make about the metrics they favour will be based on their ‘theories for success’ and how far they are willing to accept subjective metrics as ‘useful’ and helpful’. Meetings to define metrics can be long and arduous and turn into ‘bun fights’ if underlying management assumptions aren’t made clear.

    I have written 3 articles that review the whole topic of general marketing metrics that can be read here
    http://gullibility.blogspot.com/2007/07/marketing-metrics-1-of-3.html

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  13. Ryan Jean:

    Let’s say a consumer comes in for a housing resource and talks to a staff for 30 minutes. A computer user comes to our site and views our housing page (we can see this by stats).

    Obviously, it takes longer to type than to talk. Does 1 minute in person equal 1 minute on a page? How do we know the user is getting the same information online than they would in person? They could be away from the computer and left the page open. In person, the consumer is asking for resources from staff, who gets information from either online, over the phone, or other staff. Online, a user can find the information themselves; however, they may not know where to look or get the exact answer they are looking for. This is where social media comes in… Where users can get feedback. The problem still lies within the value of time. Using my example, if a user is on our housing page for 30 minutes, does that equal 30 minutes of “in-person” time?

    There’s so many variables, such as if a consumer comes in and asks a housing question, the staff may ask a co-worker for advice (5 minutes), go online for research (15 minutes), and make a phone call for the consumer (10 minutes) to equal 30 minutes total. If the consumer went online themselves with social media, they could take maybe research 5 minutes online and make the 10 minute phone call to add up to 15 minutes total. Although this is just an example, using social media, we reduced the time in half. However, in person, our staff worked with the consumer for 30 minutes while online, the consumer would’ve used our resources for 5 minutes (excluding the phone call). Therefore, in this example, the ratio of “in-person” time to “online” time is 6:1. In other words, every minute online is equal to 6 minutes in real time. Do you agree? And any feedback on this?

    I still haven’t covered comments, viewers, and followers.

  14. Matt Rhodes:

    Hi Ryan,

    It’s a really good point. And your ratio of 6:1 for in-person to online time is a good observation, especially if you overlay on this relative costs of providing the information through both channels.

    At a much higher level, I think you can probably say something that is simpler but still effective in terms of an ROI case study. You know the number of people who effectively resolve their problem online - be that getting the information they need or solving a problem they have. You also know the average cost of resolving a problem offline. With this information you can show the cost you would have incurred to solve all these problems, and the net saving if you deduct the cost of providing the online channel.

    Of course this can be an exaggeration, because one benefit of online is not that you just help people to resolve their problems in a way that is more cost-effective for you, but that you can actually solve more problems. Including many you would never have been able to help with before.

    But in both cases this kind of measure can give you a monetary value of the benefit that the online channel is bringing.

  15. Ryan Jean:

    Matt,

    Can you go in more detail with this please? Our ROI is based on time spent working with our consumers. Therefore, how do we know how much time consumers spent on our site? Sure, we can look at the stats, but as I said, what if one walked away from the computer and left the page open? They only used our page for maybe 5 minutes but when we look at the stats, they were on it for an hour. We wouldn’t be able to tell.

  16. Ryan Jean:

    Let me try to explain or give an analogy. Let’s say an organization gets paid by how much time they work with consumers. In other words, let’s say for every 15 minutes a staff works with a consumer, that staff gets $10. A lot like a seller in a store. If the seller works with the client for an hour, they will receive $40. Same idea for the organization. If the client went online and only took 15 minutes, the seller would only get $10. But, let’s say the client left the computer and kept the site up so that the stats read an hour instead of 15 minutes. The seller would assume they get $40 instead of $10. And it’s important to obtain the true time value. How do we achieve that?

    Today, we live in a fast-paced world. We go in, get what we need, and get out. This also goes for the internet and social media. If we don’t see what we need, we move on. There are also those who linger. Using my example above, if a client came into the store just to linger or after purchasing an item, lingered, that client would not be serviced and therefore, the seller cannot receive any pay for that. The seller only gets paid if the client gets services. However, I am excluding the fact that the seller could be claiming pay if the client is actually looking at the seller’s products, which is a service. So, how can stats tell whether a consumer is actually getting services from a site or just lingering (such as being away from the computer and left the site up)?

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