The Importance of Measuring Social Media’s Impact on Sales & Marketing

I’ve been beating the “measuring social media” drum for the last several weeks, talking to whomever I can about the importance of measuring the nebulous world of social media.tape_measure_small

(In some cases, I’ve actually had to argue that it can be measured at all, but that’s a different story. My suggestion is, if you don’t do social media, don’t say what it can or can’t do. Ask if it can, but don’t declare it can’t.)

A few months ago, social media guru Jeremiah Owyang wrote how online community managers need to prove the worth of social media if they’re going to survive cutbacks during a recession.

His three areas to measure

  • Improvement in marketing efficiency – Measure how quickly a new product launch goes from awareness to the close of a sale, or spreading word of mouth. Measure your clicks on Twitter and your blog, and see how many of them place an order. How long did it take to go from date of launch to profitability? Back when I was in the poultry business, we measured that in months and sometimes years. Now it takes — and can be measured in — days and weeks. And sometimes months and years.


  • Reduction in support costs – Owyang says to measure any decreases in whether a customer goes to physical stores, emails an account rep, or calls the tech support line. You want to see an increased reliance on the community itself, and measure the dollars saved through your community. Apple takes advantage of their raving fans and expert users who provide free tech support to their customers with simple and not-so-simple problems. The net result to Apple? Fewer phone calls to tech support, which means lower tech support costs.


  • Actual improvement to sales – I said it before, and I’ll say it again. You CAN measure sales from social media and your community. It’s a simple matter of having an analytics package — like StatCounter or Google Analytics — installed on your site. Count the number of people who enter the site, count the number of people who buy your product, divide the number of visitors by the number of buyers, and you have your conversion rate. Dell Computers was actually able to show they sold $1 million worth of products just through Twitter alone. If you can show this, shout it from the mountaintop, or at least from the desk in your cubicle.”


But what about the long sales cycle?” the naysayers grumble. “What about realtors and insurance agents who don’t sell anything online?”

Easy. Here’s how:
1) Keep track of how long they spend on customers, and how long a sale takes. (Many of them already do.)
2) Keep track of each channel that gets customers, whether it’s the Yellow Pages, email, WOM referral, networking, or social media. (There are software solutions that do nothing but measure social media.)
3) Add up the time AND money spent on each channel.
4) Total up sales gotten from each channel.
5) Divide a channel’s sales by time spent on the channel. That’s your value per hour.

Sales ÷ Time = VPH

6) Subtract the channel’s cost from the channel’s sales. That’s your ROI.

Sales – Cost = ROI

See? Easy as pie. But if you’re still stuck, give us a call. We’ll help you out.