By: Special K – ETMG Writer/Editor

What is the ROI of social media?

Marketers want to know what they can expect from their social media efforts, and results ought to be measurable. Image: iStockphoto

This question is notoriously difficult to answer because ROI is designed to measure specific returns on specific investments, while social media consists of variable channels, platforms, and activities that require different kinds of investments and produce a broad range of results.

A recent report published by the Altimeter Group provides some insight into the ways that leading market influencers and solution vendors are both identifying and measuring business value in social media.*

The report, A Framework for Social Analytics, identified six different cases where leading companies are using metrics to evaluate the impact of social media in their businesses:

Brand Health. Monitoring brand health is the most common use of social data. The insights gained can improve market research, help prevent or ameliorate a crisis, and uncover competitive threats and opportunities. To measure brand health, companies focus conversations that take place about them (and their competitors), what words people use, how sentiments change over time, number of fans or mentions, and the highest number of shared, liked or retweeted information or brand mentions.

Marketing Optimization. Marketers can use social media to determine how their products and services perform in the real world and drive decision-making for future campaigns. For example, American Express along with YouTube and VEVO used an online concert to discover viewers’ brand awareness of American Express and how likely they were to make purchases. One can measure a campaign based on revenue, conversions, or leads per dollar spent compared to traditional marketing programs.

Revenue Generation. Although social media is not the most efficient way to generate revenue, it‘s a strong influencer. The most useful metrics here include leads by channel, conversions by channel, search engine placement that drives traffic, and measurements of a customer’s lifetime value such as average transaction size or transaction frequency. Most of these metrics can only be tracked with a web analytics platform such as those offered by Adobe, Coremetrics/IBM, and Webtrends.

Operational Efficiency. Social media can help organizations contain costs. Best Buy, for example, used online videos to explain its ordering process to Spanish-speaking customers in Latin  America. The result – they cut calls to the Spanish-speaking toll free number in half.

Customer Experience. Companies can measure customer service levels by tracking the number of service issues addressed in social media. DIRECTTV uses social media as an “early warning system.” When a broadcast problem arises, people talk about it online — and the company uses social media to keep customers informed while moving to correct the issue.

Innovation. Companies like Starbucks have pioneered the method of crowdsourcing innovative ideas. While most companies do not have the resources to build customized innovation platforms, what people say in social media, such as phrases like “I love” or “I hate”, can help companies innovate. To measure idea resonance, companies can track the volume and sharing of ideas and the acceleration and reach of idea topics over time.

*The Altimeter Group report, A Framework for Social Analytics, is published under a Creative Commons License and is available on SlideShare at http://www.slideshare.net/opinionwatch/a-framework-for-social-analytics-by-altimeter-group.  In addition to discussing the ways that companies are identifying and measuring value, the report also discusses measurement challenges and organizational considerations. It also includes guidelines for choosing social media monitoring and analytics tools.

Further Reading:

How Corporations Should Prioritize Social Business Budgets
by Jeremiah Owyang

http://www.slideshare.net/jeremiah_owyang/how-corporations-should-prioritize-social-business-budgets