Social Media ROI: Check Before You Start


Jim Lenskold

Jim Lenskold

An army of social media thinkers has deemed it useful to redefine ROI, as in social media ROI. In 2010, Brian Solis introduced it in his book Engage! as Return on Influence (and also as Return on Investment, Return on Involvement, Return on Innovation and Relevance of Interaction).

The term Return on Influence (now Realization of Influence as well) is not Brian’s invention. Back in 2009, Amy Jo Martin came up with a popular video including so-called “cold and warm metrics” and mentioning Return On Influence. In 2007, Valeria Maltoni and others already talked about it, elaborating on a post by Paul Dunay. Since a few months, there is even a book called Return On Influence.

Confusing, isn’t it? Time to get serious about social media ROI as in Return on Investment again.

The term Return on Influence, that is defined in several ways and is far from scientific, today shows up in 312 million Google search results. The term Social Media ROI just in little over 42 million. I find this a bit awkward and even preposterous.

ROI stands for Return on Investment. Period. No, that’s not true. It is also used as an acronym for ‘Receipt of Invoice’, ‘Release of Information’ and ‘Risk of Infection’. But I bet you don’t care about that.

In this post, I will not further discuss ROI as Return on Influence. I surely will try to cover the impact and meaning of the holy grail, ‘influence’, one day soon but packaging influence and the return on it as ROI in social media context to me simply is useless, confusing and even naïve. I guess it is part of the social ‘new speak’ craze that unfortunately creates a context in which few simple marketers, such as myself, still understand what the pundits are talking about.

So, let’s talk about social media ROI a bit more, as it is covered in a chapter of the book with the same name by my friend and former Fusion Marketing Experience keynote speaker (read here), Olivier Blanchard. This text is based on a blog post by Jim Lenskold, in which he looks at the incessant discussions about social media marketing ROI. For me, Jim is the absolute expert on marketing ROI (he also wrote the – according to me best – book on it, back when most social media experts were discovering blogging), and I am more than glad he wants to come to Antwerp in May for our #fusionmex marketing congress.

Social media marketing ROI: a matter of maturity?

Let me start with a few findings from the “Marketing ROI & Measurement Study 2011” by Jim’s Lenskold Group. It shows that the need for social media measurement is lower in organizations that conduct social media experiments and are basically testing the waters on a relatively small scale, than among marketers who want to increase the efficiency of their social media programs and improve integration.

Lenskold Group Social Media Marketing ROI

This might seem insignificant, but it’s not. It indicates that measurement – and, yes, ROI – of ‘social’ becomes more important once the experimental phase is over. Moreover, it gets to be more significant when integration comes into play. And integration is exactly what customer-focused marketing is all about: no marketing activity is an island, and this is where many social media experts fail: they can’t think beyond the social silos they created.

As long as social media marketing is conducted on a small and experimental scale, it’s often left out of the marketing ROI context. This has to do with a lack of metrics, priorities, practical aspects, risk and the overall use of marketing ROI, among many others. When implementing marketing ROI, it’s important not to focus solely on marketing projects with proven ROI. It’s also meaningful to include programs with less certainty from the ROI viewpoint. When done on a relatively small scale, these kinds of investments will not impact the overall marketing ROI too much. However, when they succeed, they can boost marketing ROI in general significantly.

By the way: note that marketing ROI is not (only) about measuring, improving and reporting. It’s first of all about forecasting and getting programs approved.

The social media ROI question: more than a big one-size-fits-all yes or no

The reality is that the need to measure ROI comes down to more than just a simple yes/no question,” Jim writes, and he offers 10 questions you should answer about social media ROI. Below are some of them.

1. Should an investment in social media marketing be expected to generate a positive ROI?

Not if you believe David Meerman Scott. In that case, you should answer your boss, each time he asks about social media ROI, with another question: “what is the ROI of his mobile real-time device?”. Next, you might have to find another job.

If you are not looking at social media ROI from this perspective, want to prove marketing is not a cost (because that’s how many C-suite folks still look at it), work for a properly managed company that measures and don’t want to make the mistake, as David Meerman Scott does, to wonder what the ROI of Twitter is, the answer is obviously yes. In case you doubt: the ROI of Twitter is zero since Twitter is not a marketing strategy, so I guess David is right in a way after all.

Again: can social media marketing (note the word marketing) be expected to generate a positive ROI? In other words: can you generate incremental profits in excess of the marketing expense which of course also includes expenses regarding resources such as labor?

Jim Lenskold is amazed many marketers still ask such questions. I think Jim is a very polite man to be just amazed. The very least thing you need is an ROI projection that is based on your “best” data and assumptions to express the expected financial contribution.

2. Should we exempt some forms of social media from expectations in terms of ROI?

As I often write, social media is a huge umbrella term. Jim reminds us of that as well. Of course, the different functions and goals social media can be used for (we’re talking business, including marketing) has practical consequences in terms of ROI projections and calculations. Branding is not lead generation, which is not customer service or reducing costs while improving efficiency of your call center.

Also take into account the different levels (campaigns, programs, etc.) and timeframes (with relatively new tactics and strategies such as social media the long term can matter more) you are going to work with. Nevertheless, in general most forms of social media marketing and business can be measured and ROI calculated.

3. What results should you measure/predict to determine ROI?

This question obviously also depends on your goals. I guess I don’t have to say you need metrics and KPIs. By the way: there are no such things as cold and warm metrics. Amy Jo Martin’s video is not that bad but a metric is a metric and ROI is Return on Investment.

An inch is an inch, a mile is a mile, a click-through is a click-through and a ‘like’ is a ‘like’. Metrics are simply metrics. A metric can be used as a KPI although typically you combine different metrics to have a KPI that is relevant for your business (and customers). Nothing cold, nothing hard, just analytics.

What you do have, however, are metrics that are related to specific goals, stages in the buying journey, to certain channels, the individual customer lifecycle and social or other touch points, to name just a few. Also note that, in order to know Marketing ROI in a more holistic way, you obviously need to speak a ‘common language’ regarding the metrics that are used across the business.

As I just wrote, there is a difference between branding and lead generation Thus, the results you are looking for and by definition ways of measuring them, differ. There is also a difference between a campaign to sell more and one to create awareness. Complete the list.

Now, how do you move towards ROI of social media marketing using marketing – and obviously, sales, business and financial – metrics and KPIs.

Jim lists some examples of ways to measure social media ROI:

  • Incremental sales that can be directly linked to a social media effort or campaign.
  • The number of newly acquired leads that convert into sales.
  • The incremental customer value through retention and relationship or loyalty efforts
  • An increased awareness and interest, leading to more potential buyers in the early steps of the traditional funnel.
  • A higher brand preference that leads to more sales conversions.
  • Etc.

Obviously, the precise KPIs and metrics you use to gauge social media ROI ‘de facto’ thrive better on an integrated view. Marketing ROI can be calculated at the level of channels and micro-campaigns  but ideally also occurs at a higher level. And don’t forget the challenges regarding attribution and the shortcomings of the traditional funnel model in a cross-channel reality.

4. Should you measure ROI for every social media initiative?

The answer is no. Sometimes you cannot  immediately do it or better, want to do it. There are various reasons for this. It reminds me of what Jim Sterne once told me: you can’t measure the business impact of a blogger mentioning you. Yes, you should look at the micro-level but there is also the matter of setting priorities and the aim and scope of the ‘project’.

This does not mean you shouldn’t measure and watch the metrics you have though, also in rather small and rather social media marketing initiatives and even if no real ROI exercise is done. And obviously not everything can be measured – read “Social Media and ROI: Some clarity. (Again.)”.

Note that the question of what you can measure is not by definition related to a distinction between what we traditionally define as more measurable or ‘tangible’ activities (e.g. direct marketing) and less measurable and seemingly tangible activities (e.g. branding in the broadest sense). At least if you know what the branding impact of various activities is (preferably also in a channel-agnostic way), and if you know the impact several brand attributes (not just awareness) have on purchasing decisions.

That’s it for now, time to get ROI – and social media ROI – back where it belongs. Let me know what you think and read Jim Lenskold’s full post here.

Dutch version of this post here.

  • Francois Guay

    Well thought out article. Clear and worthwhile investment of my time. Very much appreciated. Great job.

    • J-P De Clerck

       Thanks François, glad you liked it!

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  • Belgium Social Media Maketing

    I must say this is a brilliant article on social media. Because it is obvious that any business organization would think it from the ROI perspective before investing into any technology. I am sure this article clears many doubts about Social Media Marketing. Great job!

    • J-P De Clerck

      Thanks a lot although all credit really goes to Jim Lenskold :)

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