25/07/11

By Fefie Dotsika, Senior Lecturer in Business Information Management, Westminster Business School

Can the adoption of social media benefit your business? Most of us would not hesitate to say yes. And, if asked to identify potential benefits, many will mention marketing-related gains, such as exposure, brand awareness and discovery of new products and services. Others may mention benefits related to an organisation’s competitive intelligence and strategic decision making. But while most of us would probably agree about the impact of social media, very few would have a clear idea about how this impact can be measured, translated into actual revenue, and more to the point, return on investment (ROI).

How can we measure social media impact?

Despite the fact that various approaches have been proposed, the truth is that there is no tangible direct method measuring the effect of the adoption of social media. Existing methodologies are either application-specific or provide indicators that are not directly, or easily measurable.

Generally speaking, public relations and digital marketing are areas where the influence of social media is more or less well understood and easily measured. The same is not necessarily true in other application areas. Such counter-examples are the adoption of social media in customer relationship management (outwards), or their use as a tool for organisational content and knowledge management (inwards). In both cases the metrics that provide direct proof that social media improves ROI are rather elusive.

In order to overcome this difficulty and provide a comprehensive approach, we determine a number of indicators that influence organisational transformation and can provide tangible metrics. We substitute the role of the user/customer for the generalised term of consumer and group those indicators according to their effect and weight as follows:

Low impact indicators

Low impact metrics address the visibility aspect of social media. There are two types of visibility: potential and actual.

Potential visibility corresponds to an in-depth online market analysis which measures and analyses similar products and services offered by competitors, relevant trends and the noise they generate. There is no actual consumer commitment and no necessary web presence. Potential visibility can be measured using the off-site web analytics method.

Actual visibility corresponds to consumer traffic, that is to say, the measurement and analysis of casual or frequent visitors, readers, followers and subscribers. As with potential visibility, consumer commitment is low. Search Engine Optimisation (SEO) is the method used to improve the actual visibility of a website. The idea behind it is that the higher and more frequently a site appears in the search results list, the higher its visibility is. The method used to measure actual visibility is on-site web analytics, a group of metrics used to monitor web site usage in order to understand and optimise its performance in a commercial context.

Medium impact indicators

Medium impact metrics address consumer engagement and retention. There are various aspects involved that address consumer attitude and standpoint. We can divide them into two sub-groups:

Reaction/ interaction

The consumers approve (or disapprove) of the content and react by rating it accordingly, or sharing it (email, twitter, wall posts etc.). The method used for the measurement of this indicator is on-site web analytics.

Participation and influence

Often overlapping with the previous group, participation occurs when the audience reacts by creating new content (comments, reviews, forum contributions etc.). Content analysis is the technique used to measure participation. Traditionally a tool for measuring success in public and media relations, it is increasingly used as an element of social media evaluation and analysis.

High impact indicators

The last category corresponds to directly measurable business outcomes and performance. The methodology followed is based on key performance indicators (KPIs), is organisation-specific and requires a setup that establishes a foundation that predates social media adoption. The baseline should identify the KPIs that will be monitored and list their initial values. A timeline of activities should be determined, against which the KPIs will be appraised. Providing that the performance indicators are well chosen, ROI can be calculated by measuring the results and comparing them with set goals.

A good example is the frequency-reach-yield (FRY) method used in evaluating social media campaigns. The parameters are straight-forward: frequency refers to sales, reach to consumer spread and yield to the profit made. They are measured before and after the campaign, and assuming that all other parameters affecting sales are kept constant, ROI can be established.

The moral of the story?

Social media may be seen as a set of tools and tactics that can benefit a business through exposure, engagement, participation and bottom up development. However, it is not a silver bullet. Its impact can be difficult to measure, if the organisation is not willing to adopt a social media plan, followed by a suitable evaluation method. For this, the company ought to invest in:

identifying targets

educating and training users

administering access controls

and regularly reviewing practices and procedures.

Unless business objectives are linked to performance indicators which, in turn, can be translated into appropriate metrics, the adoption of social media may prove to be unsustainable.

About The Author

Fefie Dotsika is a Senior Lecturer in Business Information Management in Westminster Business School. Her expertise and research interests are in the area of web information modelling and retrieval, and web-based knowledge management.