How to Achieve 10x ROI From Social Media
It's a myth that you can't measure return on investment that's produced by social media programs. You can. To quote Stephen Quinn, the chief marketing officer of Wal-Mart, "I'm always baffled when I hear people say, ‘It's really hard to prove the ROI.’ We have ROI that's really strong. And it's transforming our organization."
So how does a company show incredible ROI from social media? There are several obvious options like direct sales, general revenue increases or cost savings when customer support is delivered via social channels. But many of my clients find accurately measuring these challenging because of the need to coordinate with departments outside of marketing. Other ROI measures such as customer loyalty or awareness are fuzzier to measure.
With all these challenges, one really straightforward measurement of ROI that we're using more is marketing equivalency ROI, which is great because marketing has access to all the numbers. This kind of ROI shows that social media is reducing costs by accomplishing marketing goals more effectively than other media spend.
Marketing equivalency is nothing new. It's how PR agencies have long measured ROI. If you measure the word-of-mouth results (the reach) and compare that to what it would have cost to reach a similar number of people via other means of advertising, the difference is your ROI. Let's use Facebook for example: How many people are talking about your posts over time? How many impressions have your posts received? Once you measure your social reach, ask what you would have had to spend to get the same numbers in digital, print, TV and radio with standard CPMs.
Keep in mind that some forms of your social media reach are broad and warrant a low CPM. However, some are more targeted, reaching more qualified audiences, thus warranting a higher CPM. Some involve direct customer interaction and conversation, which warrant a very high CPM — so much so that these experiences can be equivalent to the in-store/dealership iteration cost that some companies rate at being worth $100 per visit, $400 per visit or for, say, a very high-end sports car, $2,000 per visit.