Few would argue about the impact of social media. The voice of the customer has never been so powerful, so connected, nor so frequently measured before. Customers are obviously engaged in conversations with brands. Customers choose to affiliate themselves with brands and businesses they “Like” while others consume the content (i.e., reviews, videos, etc.) produced by their fellow customers before and after they make purchase decisions. Social media has tremendous impact on brand perception.
One trend concerns me. So many marketers obsess about the return on investment of social media. I’m a big fan of ROI – always have been – always will be.
So what is the return on creating and strengthening a relationship and over what period do you measure it? Here is how it’s broken down:
- What is the investment (true cost) of listening and engaging in conversations?
- Can the returns (incremental revenue) really be measured using direct response metrics?
- Over what period do you measure the impact and how does that relate to lifetime value of a customer?
Measuring the short-term sales attributed to a tweet, YouTube campaign, or Facebook “Like”-athon might demonstrate “return,” but it is the wrong end of the telescope to be looking at measurement from.
Social Media Can Not be Measured in a Snapshot
Social media is about relationships. And anyone who has ever had one can tell you that you cannot judge a relationship from a snapshot; you need to observe a relationship over months or even years to get any sense of the quality and value of that relationship. Sadly, most of the social media analysis tools in the marketplace don’t provide this viewpoint.
When a brand chooses to participate in social media it is an investment in customer experience. Any investment in customer experience should be part of the cost of any marketing program today, but its costs should be amortized over the long term.
Irrational Hype Will Lead to Irrational Expectations
“If you torture the data long enough it will confess,” is what we learn from British economist Ronald Coase. The question to ask is what are the “social media pundits” trying to get it to confess to?
The McLie of Foursquare
McDonald’s first reported a 33 percent increase in overall foot traffic (and later clarified it was actually a 33 percent lift in check-ins) on a $1,000 Foursquare campaign. Have you seen this story? There has been quite a bit of analysis on this already by others, but here is the summary:
- This was a contest with gift cards. Long-term impact: zero.
- Measuring check-ins doesn’t measure increased foot traffic.
- To measure foot traffic, measure actual foot traffic. Metrics are not randomly interchangeable.
- If you cannot measure the financial impact of your campaign, all you know is its cost. You didn’t measure the outcome.
- Measure conversions: reach > response > visits > check-ins > transactions > revenue > repeat.
- McDonald’s has about 26 million customers per day, so a 33 percent increase equals 7.8 million Foursquare users. But, Foursquare only has a total of 3 million accounts and 1 million active users.
Even if this case study from McDonald’s was misunderstood, the point pundits are pushing is the same. Too many people are trying to look at these relationship building tools as a direct response vehicle. Can you get a direct response from a relationship medium? Sure you can. So why not put your customer relationship management (CRM) initiative on commission and then insist that any communication with customers that doesn’t directly contribute revenue be cancelled? No more smiles for you! Online, those virtual smiles are visible to everyone. Do you want to be that company who only smiles to those customers transacting right now?
Take it from someone who loves measurement, conversions, and improving responses, you ain’t going to get any satisfaction trying to measure the short-term impact. You will get a lot of noise, false signals, and opinions.
Measuring the long-term impact is what you need to look at and hopefully the tool vendors will catch up with this. However, it’s not probable. It is especially challenging considering the volume of data they would need to go through to do this properly, the false hopes they’ve spread, and the “experts” they’ve endorsed.
There is a ton of value in engaging with your customers in social media. No doubt about it! Please get realistic about what it takes to build real value. Only then might you deliver the type of happiness Tony Hsieh, the CEO of Zappos.com, has acheived by leveraging great customer experiences and nurturing real brand evangelists. That is how you can experience the true ROI of social media!
I can always count on you to point out what should be obvious: relationships are what is important and they don't usually generate immediate sales. Obsessing over what you can measure will lead to focusing on all the wrong activities and metrics too much instead of on building relationships that grow over time. Love the video too! I'm off to check out their site.
When I read your comment, I automatically put a big emphasis on the word "can" in your second sentence. Even people who say they want to measure the relationships they're creating are stuck with the things we have tools to count.
And when you count and compare things, you have to pretend each one is worth the same. So the erroneous thinking just gets compounded.
If you understand and believe the slide in the Social Media Revolution video that says, "The ROI of Social Media is Your Business Will Still Exist in 5 Years" – then short-term measurements seem beside the point and a major waste of attention.
Here's my observation of what's been going on. The companies claiming the most success using social media are the ones who didn't really "need" it to begin with. For the most part, they are doing okay financially and could have continued for the next 5 or 10 years using traditional advertising and PR tactics and still be fine. They benefit from social media activity with or without much effort on their part, because they are known brands whose customers are actually seeking them out.
What's happening, though, is that social media is being sold as a "free" or "no-cost" marketing strategy to start-up companies and struggling local businesses and it's just depressing to watch, really. There are a few great success stories of rags to riches, but again, the focus on a financial ROI is really the wrong approach.
Social media will not save a dying or struggling business who really needs a strong ROI from their marketing efforts. They are better off taking a look at their business development, and then working on packaging, positioning, and marketing their products in such a way that they are perceived as important enough to be worth the time it takes to connect with them. Social media efforts can only enhance a service or product offering that is incredibly strong from the start.
How about another ROI, about SEO trough Social Media – see this
RT @dannysullivan: SEO earthquake today. social signals used in ranking http://selnd.com/fksssT & merchant reviews http://selnd.com/gg7jLE
Interesting. We engage with our clients the old fashioned way at the moment and are looking at Social Media because of it's ability to quickly receive feedback. If we can then use that feedback to shorten our product development cycles and to improve our existing services then we'll be happy.
Tweeting for tweeting's sake seems to be a waste of time…