By Francisco Marco-Serrano, Lecturer in Economics, and Module Leader for Social Media Marketing in the DMI Professional Diploma in Digital Marketing at GSM London,
The Marketing Department is a key area of any well-respecting business. Although the c-suite may not understand exactly what they get up to, they do understand that it works. Yet for any marketing professional worth their salt, and for any director with their finger on the pulse, effectively measuring ROI of digital marketing efforts can be somewhat elusive.
Whilst a social media strategy is something that most organisations may want, proving its efficacy in terms of increased sales or customers is difficult, leading to headaches all round. A good digital presence takes time to build, and as we all know, time is money. So how can heads of marketing demonstrate that their time on Twitter or Facebook is, indeed, time well spent?
There is limited benchmarking data available on measuring the tangible financial outcomes of social media marketing, and the majority often feels too aggregated and circumstantial. When measuring the ROI of one’s own social media strategy, perhaps the best approach to use is the one that works best for you and your business. The key is to drill down to what you are hoping to gain from your social media activity, and for any company, whichever way you choose to phrase it, this is an increase in sales. We all cite ‘increasing customer awareness’, or ‘boosting engagement’, but we all know the reason behind wanting to do just this.
Although I may be somewhat simplifying the sales flow, the fact remains that businesses need to understand how their target market becomes aware of their brand or product. Awareness translates to interest, which translates to ‘desireability’, which in turn translates to action. In social selling, interest can be measured by the number of page views, fans and/or followers, and the majority of social media metrics of which you may already be aware. The trick is adapting your measurement strategy to your target market. As per the action side, number of transactions, revenue, average price, unique customers and profit margin all relate to hard cash metrics!
Now that we’ve got to the crux at the matter, we need to focus on the sales process to understand what drives customers and consumers towards our desired result. This process is traditionally viewed as a funnel, yet given that social media is a new way of selling, maybe we need to re-evaluate this model. Indeed, other models have arisen, such as those representing marketing and sales as a continuous loop, thereby representing the customer journey as a non-stop process. Marketing has a greater role to play in this loop, with the sales effort being the last push after a dedicated and strategic marketing campaign carried out with the purpose of influencing and informing customer behaviours, of which social media is only one facet.
As for social networks, people (i.e. your customers!) have used them to interact before the advance of technology changed what we now consider to be a social network. They are by no means a new concept; all that has happened is that the environment has changed. With this change in environment has come an increased dynamism of actions (buying and selling, interactions, comments, complaints), more channels exist to which conversion can be attributed, and, most importantly for businesses, more data is available to be analysed! So we have more channels, and therefore a greater reach. Excellent! But this is the sticking point, and the one currently creating the greatest hurdle in the measurement of social selling: how do we attribute conversion to these social media channels?
The intricate nature of both social networks and social platforms, and their relationship with sales data, makes the search for an answer a complicated task. Tracking the source of the conversion is difficult because firstly we have to ascertain how the customer gained awareness of the product or service, and secondly we have to consider that not every sale will take place online.
Before we disappear into a black hole of meaningless data, however, there is light at the end of the tunnel. Very soon we will have a wide range of tools at our disposal to help in bypassing these problems, from very elaborated statistical techniques (i.e. marketing mix modelling, which FMCG companies are using to assess their ROI), to simple ones such as correlation analysis, the usage of affiliate marketing strategies which allow tracing back to the source of conversion, or even, God forbid, asking the customer! In any case, my recommendation is to look for at least one or two cases that may help you to analyse the relationship between the social media campaign and resulting activity before applying more resources to the quest of social media ROI. Of course, for the data-lovers among us there is always analysing the ROI of measuring ROI to keep you busy…