We discussed some engagement metrics in my previous post: level of exuberance or bonding or conversations with the customers. While engagement metrics are very important for measuring Social Media, NO marketing campaign can be sustained or successful without getting an adequate return on the dollar. We need to look at other quantitative metrics in addition to the ones we discussed earlier to measure the Return on “Investment”. To calculate return, we need to see:
- Increase in repeat business from existing more satisfied customers
- Revenue generated through new customer acquisition
- Revenue generated through customer referrals
- Decrease in support costs as problems get identified earlier
- Decrease in sales and marketing costs due to reduced customer turnover
But are quantitative and qualitative metrics alone sufficient to measure the success of your Social Media strategy?
I was at a social media event earlier today hosted by Acxiom and got introduced to a new definition of ROI: Return on Insight. Webster defines “insight” as the act or result of apprehending the inner nature of things or of seeing intuitively.
Metrics measure past events. We have all heard from financial advisors that past stock market behavior is no indicator for future performance. By focusing solely on metrics, you may miss out some customer conversation that will lead to the next big innovation for your company. You can gain valuable insights and feedback on product features and design (or service components) that will bring you closer to consumers and ultimately lead to a bigger market share.
So, I am proposing a new mantra for measuring Social Media: Return on Investments and Insights (ROII). And the first “I” should be Investments, to keep the focus on MONEY. But let us not lose sight of INSIGHTS.
What are your thoughts? I would love to hear what monetary and non-monetary metrics you currently use…
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I think this is a wise approach but find that too many people are quick to confuse measurement terms. ROI is a financial measure, as you say Nitin. Everything else is an NFI or non-financial indictaor. Depending on the business, this may actually be more important than money (did I just say that???) … but the reality is, sometimes it is very complex tying social media behavior to direct sales. That doesn't mean we stop measuring so I agree with you.
Mark,
Thanks for your comment. In the long term though, I do believe that all (or most) INSIGHTS have to translate to revenue growth or reduced costs or some financial measure. That is the only way any marketing program can be sustained over the long term. But in the short to medium term (when we may not be seeing the insights resulting in any dollars), it is important to monitor the NFIs
Great post, Nitin. Insights are extremely valuable and often overlooked. The challenge is how to balance these – what is the balance between return on investment and return on insights? This is especially challenging for companies during the budget allocation process. If budget is allocated based on return, what role does insights play? One way to manage this could be to set aside a ‘testing’ budget (10% of budget, maybe?) and let social media investments fall into that bracket.
Srishti,
Welcome to the DMT community. Most Social Media engagements start small and then grow as the firms see more returns. Keeping that in mind, a “testing” budget and setting aside 5-10% for social media investments is a great idea.