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Keep Calling It Social Media ROI: A Response to Copyblogger

I hate it when people try to change the name of a well-known concept, just because they don’t think it accurately describes what that thing is anymore.

Some teeth grindingly well-known examples include:

  • Changing radio theater to audio theater “because you don’t just listen on the radio anymore — CDs, podcasts, and the Internet are also channels.”
  • American Public Radio changing their name to American Public Media for the same reason.
  • Debbie Weil wants to stop calling blogging “blogging,” because the term is outdated. It should be called “the social web” (I heard her say it on Doug Karr’s Marketing Tech Radio show last year).

Trust me, this list goes on and on and on.

Last December, Copyblogger did the same thing. Sean Jackson (CFO of Copyblogger) and Sonia Simone (CMO of Copyblogger) wrote a blog post called There Is No ROI In Social Media Marketing.

But the truth is, marketing will never produce an ROI.

Sonia: OK, you’re still sounding insane to me.

Sean: I’m not done yet.

Marketing will never produce an ROI because ROI is not what you think it is.

A pure definition of ROI is simple to quantify.

ROI = (Gain from the Investment – Cost of Investment)/Cost of the Investment

The problem for marketing professionals is that marketing activity is not an investment.

An investment is an asset that you purchase and place on your Balance Sheet. Like an office building or a computer system. It’s something you could sell later if you didn’t need it any more.

Marketing is an expense, and goes on the Profit & Loss statement.

Yes, this makes sense. But it makes sense in the same way that telling an 8-year-old that eating Brussels sprouts will help him grow up to be big and strong. And on one level, the 8-year-old wants to be big and strong.

On the other hand, it’s the dumbest thing he’s ever heard, because Brussels sprouts taste like shit.

We Need ROI

Frankly, I don’t care if you don’t think it’s accurate. I don’t care if you think there’s a term that better reflects all the subtle intricacies of whatever it is you’re involved with. I’m not just talking about the difference between investments and profits (that’s more than a little subtle).

I’m talking about the difference between the words you use, and the words everyone else in the world uses.

When I was in crisis communication at the Indiana State Department of Health in 2006-2007, I had to constantly stop the epidemiologists from referring to the bird flu as the “human flu pandemic.” Whenever we had a news interview, I had to remind more than a few of them not to use “human flu pandemic” when they spoke with reporters.

“But ‘bird flu’ isn’t accurate. It may not even come from birds. And it certainly won’t be limited to birds by then.”

“Okay, then call it ‘pan flu,’ because that’s the term the general public is using.”

They didn’t like it, because it wasn’t completely, technically accurate, but I was satisfied because the public was going to know what the hell they were talking about.

We saw it again in 2009, when — turns out the epis were right — it was the swine flu epidemic that got us. And predictably, the media types and general public were all talking about swine flu, swine flu, swine flu. Predictably, the CDC tried talking about the “human flu pandemic,” and no one knew what the hell they were talking about.

Word reached the CDC, and they started talking about H1N1 instead (it helped when the US Swine Association and other hog people told the media that the term “swine flu” was hurting their sales).

It was still accurate, it didn’t offend the epis, and it was still short and sound-bitey enough for the media and public.

What ROI and Swine Flu Have in Common

(Nothing. It was the pithiest sub-head I could think of.)

But at the same time, we do have to recognize that, for good or bad, people will use the term ROI forever. Like Jackson said, “I’m seeing ROI taking on a mythical status in marketing — a benchmark used to compare every decision to some financial metric of return.”

It’s not just marketing people, it’s businesspeople everywhere. We all use the term “ROI,” even if there’s really not an “I” in the first place. Same way KFC is now just “KFC.” It no longer stands for “Kentucky Fried Chicken,” they’re just “KFC.”

I think the term “ROI” is taking on the same meaning. We know it means something, but it doesn’t reflect what the letters stand for anymore.

Now, ROI can refer to investments in capital products, it can refer to marketing campaigns, it can refer to your website, your cell phone, your networking events, or anything you spend money on and hope to make money back.

(Because if you want to get even more technically accurate about it, most capital items don’t have a return; you use them until they wear out. And my personal finance friends remind me that an investment only refers to things that can appreciate in value; so a house is an investment, a car is not. So should we start referring to it as Lack Of Return On Investment, or LOROI? No, because that’s stupid.)

So Should We Change The Term “ROI?”

No, we should not. Because all the variations I hear — Return on ENGAGEMENT, Return on INTERACTION, Return on EFFORT — are about as mentally repulsive as a cold, half-chewed Brussels sprout in an 8-year-old’s mouth.

Just like with blogging, radio theater, and public radio, we need to stick with the term that people know. Rather than taking a prescriptive approach to language (i.e. “we have to follow these rules, because they’re the rules”), and changing the name of something to be as perfectly accurate as possible, instead just chalk it up to “common usage,” or the idea that too many people are doing it this way to change it.

Rather than complaining about the term, why don’t you instead try to get people to understand that social media is 1) measurable, and 2) can make money? That’s the more important battle to fight, rather than the ticky-tack little details that only matter to a select few people in an already tiny niche.

 

 

Jason Falls and I talk extensively about the ROI of social media marketing in our book, No Bullshit Social Media: The All-Business, No-Hype Guide to Social Media Marketing (affiliate link).

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Calling ‘Bullshit’ On Four Social Media Myths

There are days I just want to shout at somebody for all the misinformation I hear about social media. I hear all these myths and bad information being passed around the business community, because some know-nothing shyster tried to sell a business owner on social media, and cocked it up so badly, the poor guy is going to just stick with the Yellow Pages and door hangers for the next 10 years.

Here are four social media myths that, if I hear someone mention them with a straight face, I’m going to throw something heavy.

1. You can’t measure the ROI of social media.

This has got to be the biggest pile of BS I come across. And to make matters worse, I hear it from so-called professionals in this industry, who apparently have no clue that this is even possible. Olivier Blanchard just recently ranted about a recent South by Southwest panel where the audience was treated to these little nuggets of stupidity:

  • There’s no ROI for measuring ROI – it’s just too difficult.
  • You can’t put love and trust into a chart. Why? Because love and trust defies logical reasoning.
  • Social doesn’t always need to be quantified. Its not a spreadsheet metric only – trust, relationships, advocacy.

If you’re doing social media for your anarcho-syndicalist commune, then sure, you can’t measure trust, love, or that warm squishy feeling you get when you hand someone a fistful of daisies. But if you’re doing social media for a business that gives you money, then you’d damn well better measure it. Your boss is not going to want to hear about trust and love when she asks you to justify why she just spent $30,000 on your social media campaign. How are you going to demonstrate that the $120,000 your company made was a direct result of your efforts? If your job is on the line, you’ll figure it out.

There are plenty of tools for accurately measuring this kind of thing, the least of which is Google Analytics. It’s free, fairly easy to use, and there are big books you can use to learn how to use it. There are also books about measuring social media ROI, with real formulas and techniques and everything. And I can guarantee that not one jot of ink is spent discussing how to measure trust, love, or warm squishy feelings.

Granted, asking about the ROI of social media before you ever start on a campaign is a bad question to ask, but once the campaign is up and rolling, you’d better be measuring how well you’re doing, or you’re going to be out of a job three months after you launched this thing.

Read these blog posts about how, why, and how easy it is to social media ROI:

2. Social media can replace everything

Social media is just another tool in the marketer’s toolbox. It’s not a tool that can replace everything marketers have been using for the last 100 years. As much as the hipsters like to say newspapers are dead, TV is dead, radio is dead, and any other medium that’s more than five years old is dead, those things are still viable strategies.

As long as there are people who don’t have computers or smartphones, we’ll need TV and radio advertising. As long as there are people who don’t use computers and tablets, we’ll need newspapers and magazines. There are two very large groups of people who don’t use computers, smartphones, and tablets: the poor and the elderly.

In fact, because of these two very large populations, we will still need books and libraries, print publications, the Yellow Pages, broadcast television, and FM and AM radio. Not everyone has a satellite dish, a smartphone, satellite radio, and a laptop with broadband. We need to quit making the assumption that everyone in this country does.

As long as these media channels exist, there will be a need for that type of marketing. Until then, social media is completely ineffective for those two very large populations.

3. More impressions = good, fewer impressions = bad

Marketers who still believe their TV commercials are being seen by hundreds of thousands of people hate social media. They look at the social media stats and freak out when they see that only a few thousand people came to their sites and bought anything.

What they don’t realize is that they’re really seeing the actual size of their audience. They’re getting a real glimpse of what their true customer base looks like, and not the hyperinflated numbers from advertising salespeople.

Want to do a test? Launch a TV commercial, and set up a special URL specifically for that commercial. If you sell hammers for ABC Hammers, get the domain ABCHammersonTV.com, run it only on your commercial, and see how many people actually come to it. Use your commercials to drive web traffic, and then count the results. Those are the people who were inspired enough by your commercial to gather more information. Did it cause them to buy a hammer? We don’t know. But we can measure (there’s that word again) how many people that commercial drove to the website.

Want to quantify it some more? Let them download a 10% off coupon, redeemable within the next 21 days. Then count how many people redeemed the coupon. It’s not a completely accurate measurement, but you do know how effective your commercial was in driving traffic, how effective your website was in driving coupon downloads, and how effective the coupon was in driving sales.

No, it’s not the couple million viewers you were told would see your commercial on Monday Night Football, but it’s a better picture of who liked the commercial enough to take action. There’s still no mechanism to show you how many of those commercial viewers were in the bathroom. And there’s no way of knowing whether people went to the store and bought your hammer because of that commercial.

So if you keep thinking more impressions means success and few impressions means failure, you’re going to be in for a big shock.

4. The ‘I’ in ROI stands for influence, integration, intent/should be Return On Engagement

This is the hippie tree-hugging bullshit that Jason Falls and I wrote No Bullshit Social Media against. Social media is notYes, you want people to like you. Yes, you want people to trust you. Yes, you want people to be your raving fans.

But do you know what you really want from them?

Money! Being liked and being trusted are all fine and good, but it doesn’t mean a thing if they’re not buying from you. I’ve had plenty of potential customers who trusted me, but until I had a check in my hand, they did not contribute to my bottom line.

 
Social media marketing is all about marketing. It’s a business tool. And to be a business tool, it has to make money. And to show your boss that it’s making money, you have to measure it. You may even have to show that it’s as good as, or better than, the traditional marketing tools you’re competing with. (Of course, you should be measuring the performance of all your traditional marketing tools too. You’re doing that, aren’t you?)

Until people quit spouting all this nonsensical crap about what social media can and can’t do, it’s going to be slow going for businesses to adopt it. Hopefully the “professionals” who keep spreading misinformation like these four myths will eventually stop doing what they’re doing and go back to bartending, and let the real professionals clean up the mess they’ve left.

Photo credit: Oli R (Flickr)

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You Don’t Get Social Media ROI Yet? C’mon, Man!

I was feeling good about social media ROI, and how/whether people understand it. I figured, at least my people — marketers — get it. They understand how to measure social media, or at least the principles behind it.

Apparently not.

eMarketer dashed those hopes to the ground with their December 20, 2011 article When Will Social Media Measurement Mature?.

Marketers know that counting fans, “likes” and followers is not the best way to measure success in social media marketing. Yet these metrics are often the top benchmarks for performance. It’s not surprising, then, that marketers consider calculating return on investment to be the biggest challenge of using social media, and that a majority of them believe they cannot measure social media campaigns effectively.

How to Calculate Social Media ROI

Calculating the ROI of anything is easy. Subtract how much you spent from how much you made, and that’s your answer. If you spent $10,000 on a social media marketing campaign, and you made $50,000, your social media ROI is $40,000.

Simple, right?

$50,000 – $10,000 = $40,000.

So how do you know whether sales are coming from your social media efforts?

I’m not going to delve into the step-by-step process, but I’ll give you the tools and concepts you’re going to need to get started.

  1. Set up Google Analytics, and install the code on every page on your website. If you have a blog, it only needs to be part of the code. If it’s on a website with pre-built pages, it needs to be on every page.
  2. Set up a Bitly account. Bitly is a URL shortener that also lets you do some basic analytics on the number of people that have clicked your link.
  3. Create a Google Analytics tracking campaign for any and all major links you’re sending out. This is how you’re going to measure a particular blog post, tweet, Facebook status update, etc. If it’s just a basic link to the website, a campaign code is optional. But if it’s a blog post about a particular marketing campaign, set up the Google Analytics campaign.
  4. Put a hyperlinked call to action in your blog posts that take people directly to a sales page or order page. Make sure that the hyperlink is given a unique campaign code.

Here’s what will happen:

  • You’ll send out a link to a blog post via Twitter, Facebook, etc. Let’s say that 10,000 people see that link on your various accounts.
  • 1,000 people visit your page and read that blog post, all within a 6-hour span.
  • Of that 1,000 people, 100 people actually make a purchase with a total of $10,000 in sales.
  • Those 100 people also fill out their contact information, which gets placed into your CRM.

By looking at these numbers, you can determine a number of things.

  • 1,000 visitors out of 10,000 social media followers, fans, and friends means you have a 10% click-through rate.
  • 100 sales out of 1,000 visitors is a 10% close rate; out of a 10,000-person network, that’s a 1% close rate.
  • By looking at the entrance and exit paths of that particular 6-hour period, or particular day, you can see that a majority of people were moved enough by the blog post to go directly to the order page. Compare that to another blog post that only lead to 30 sales out of 1,000 visitors, and you know it wasn’t as effective in moving people to act.
  • You can then subtract the cost of that particular campaign from the amount of money you made to calculate the total ROI for the day/week/month.

Calculating social media ROI is not that difficult. It’s just a matter of having the right tools and knowing basic analytics and campaign creation. There are literally hundreds of articles and several books on each step I first described. It’s just a matter of reading, and then trying out what you’ve learned. With some trial and error, and constant measuring, you’ll soon learn what works and what you can stop doing.

Or you could just hire a social media professional to do it all for you.

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50 Things That You’re Not Measuring for ROI, But Should

I’m so sick of the “what’s the ROI of social media” question. It’s asked by people who a) think it makes them sound clever, and they’re hoping to show that social media “doesn’t work,” or b) think they’re supposed to ask it, because they read an article that said they should ask it.

The problem is, we can’t answer the ROI question during out first meeting. We can answer it after your social media plan has been up and running for six months. We set goals and then measure to see whether you made them. We count how much money the social media campaign made — because we can do that — and we subtract how much money it cost.

But we can’t predict it accurately beforehand, and anyone who tells you they can is lying.

What about you and your business? What’s the ROI on the stuff and the staff at the office? Have you measured them? All of the things you buy and the people you hire have a direct impact on your bottom line. Some contribute to revenue, some take up space, and some are a drag on your bottom line.Number 50 painted on a wall And yet, the people who are so quick to pull the “what’s the ROI of social media?” trigger haven’t asked that question about anything else in their own business.

So I’d like to see companies start measuring ROI on these things.

  1. Your college interns.
  2. Your brochures. You pay professionals to design these things. What have they gotten you?
  3. Your weekly staff meetings.
  4. Every other meeting you have to attend. They’re a big time suck and productivity killer. Yet we go to them without question. So what’s their ROI?
  5. The person who answers your phones. Don’t you think the voice of your company contributes to customer satisfaction?
  6. Your accounts receivable department. What does it do to your cash flow if they’re on time versus late with sending out invoices?
  7. The paintings and furniture in the front lobby.
  8. Your telephone hold music. People actually study this kind of thing, so it should be possible to figure out.
  9. That lunch meeting you had.
  10. Your mobile phone.
  11. The company mission statement that took eight people three months to write over six hour-long meetings.
  12. Your membership in three different trade associations. You should get valuable sales and clients from these. Are you?
  13. Your Chamber of Commerce membership.
  14. The company car. Lease costs, gas costs, maintenance. Are you making your money back on that?
  15. Your HR department.
  16. Your legal department. They’re great for keeping you out of trouble and for helping with intellectual property. How much did they make you this year?
  17. Your sponsorship of a Little League baseball team.
  18. Your fax machine. Seriously, do people still use fax machines? They have online services you can buy to send and receive faxes, instead of paying $40 a month for a separate phone line.
  19. Your voice mail system.
  20. The PR agency you hired for your latest campaign. And none of this “this is what your media coverage is worth” stuff — how much money did you actually make?
  21. Your office coffee machine.
  22. Your annual industry conference in Las Vegas.
  23. The business class flight you took to get to the conference. Execs need more leg room than regular staffers, apparently. So did you make more money by taking the more expensive flight?
  24. Your trade show display. These things are expensive. But did you make the money back?
  25. Your marketing department. These are the ROI experts. How much money did they make you?
  26. The cleaning service.
  27. The office Christmas party.
  28. Your office location. Retail stores can demonstrate how one location outperforms another. But what do you get for where you’re located? Do you really need an office downtown in the big city, when a location in the suburbs will cost less?
  29. The water cooler.
  30. The TV commercials you ran on cable TV for six months in 25 major markets.
  31. The IT department.
  32. Your CIO. Should your CIO really have the same decision-making abilities over the CMO? Should they be able to tell the CMO, “no, you cannot use social media tools to help market the company”? Hopefully they generated revenue to make up for all the lost sales they just caused.
  33. Staying at the conference hotel instead of a cheaper hotel a mile away.
  34. Your sponsorship of the local chamber event.
  35. The 90-minute morning networking meeting you attended. You go to this once a month. Have you gotten sales directly from going?
  36. The giant flat screen monitor in the conference room.
  37. The big table in the conference room.
  38. The conference room.
  39. Your administrative assistant.
  40. The company website. If you don’t sell anything on it, is it still making you money? Why did you spend $10,000 to get it designed?
  41. Subscriptions to all the business magazines that decorate your lobby. Did you even read them?
  42. Your newspaper ads.
  43. Your business cards.
  44. Casual Fridays. And while we’re at it . . .
  45. Appropriate business attire. There must be a reason we have to dress up for work. So how much money did you make from it?
  46. Your customer service department. You know how much they cost you, but do you measure how much they made you?
  47. The accounting department.
  48. The 12 books on new management ideas you bought and never had time to read.
  49. Your industry trade magazines.
  50. You.

I am not opposed to the social media ROI question. I just think it’s an easy fallback question that people use as an excuse, whether it’s out of fear or disdain. And I encourage businesspeople to ask that question. After all, you’re going to spend money on it, so you’d damn well better know how much money you’re making from it.

But you should do the same thing for some of these other things you have in your business as well.

Photo credit: duncan (Flickr)

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Fast Company Doesn’t Know You Can Calculate Social Media ROI

Fast Company seems to have an aversion to math or basic research. Their latest story, Does Social Media Have a Return on Investment, says that no one is able to calculate the ROI of social media, and that large brands like Audi and Home Depot are just fumbling around in the dark on determining the ROI of social media.

This is complete and utter crap.

People have been able to calculate the ROI of social media for a few years now. In fact, as Katie Paine (@kdpaine) pointed out in the comments section to this article:

This is ridiculous. Back in 2008, Wells Fargo and SAP were calculating solid ROI from social media campaigns. Social media agencies like Organic have been using sophisiticated data analytics for years to predict outcomes.  You stumbled across a few creative types that are allergic to math and haven’t a clue what data is available who don’t care about measurement or  ROI. And if they are using Klout, the really don’t care much about the accuracy either. Other marketers, the smart ones, are embracing all the data and analytics now available and providing solid ROI on a regular basis.

It’s not that hard to calculate the ROI, or to measure anything when it comes to social media. Here are the basic steps you can use to calculate even the most rudimentary ROI of a sales page:

  • Set up Google Analytics on your website. Make sure you put the code on every page.
  • Set up Google Webmaster Tools, and use their Campaign Code Creator.
  • Append any URL you tweet out or put on Facebook with the Campaign Code Creator.
  • Shorten every link you send with Bit.ly, including the campaign code, and send it out. Assign different campaign codes to different messages, tools, and campaigns.
  • Track down the visits that filtered down into visits to the sales page. Total up the sales from those visits. Cross-reference them with the contact data that came from the sales form.
  • Subtract the cost of your campaign from your sales total. That’s your ROI.

And that’s the writer’s method of dealing with ROI. There are entire suites of tools built to answer the ROI question, and professionals like Katie Paine have been doing it for years.

With thinking like this being erroneously spread by Fast Company and writer Farhad Manjoo, it’s no wonder businesses are afraid to spend money on social media. When uninformed media — who frankly should know better, or should have done some remedial research — start spreading bad information based on their own misunderstanding, it not only shows their ignorance of the industry, it spreads bad information to the rest of the business community.

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Businesses Don’t Care About the Social Media Expert Debate

After reading a few of the different posts about social media experts, including ours, our partner and founder, Mike Seidle (@IndyMike), wrote this response:

First, I am not a social media expert. I do sit on the board for a company that has several people that I would classify as experts on the payroll. Anyone who is saying “there are no social media experts” falls into one of two groups:

  • People who can’t accept that others may have more experience/deeper understanding than they do. This argument boils down to “since I don’t understand it, or can’t keep up, you can’t.”
  • People who do not have the resume to actually be an expert that are trying to get a job or gig that is for an expert. These people will claim that no experts can exist because of massive recent change that obsoletes past experience.

In the end, anyone who claims that social media experts are like the tooth fairy, Santa Claus or the Easter bunny ends up looking pretty silly:

Executive: So, you are here for the social media director position. I see here you’ve been using social media for two years. What makes you an expert?

Social Media Not Expert: There are not experts in social media. We are all explorers at sail on an undefined sea filled with incredible wonders and indescribable dangers. You see, no one can possibly be an expert on social media since it changes so fast. What I learned last year has no application to the future, and the tools we use and strategies we build often are rendered obsolete in the blink of an eye.

Executive: So, if it’s not possible to be an expert, then why are companies shelling out bucks on social media people?

Social Media Not Expert: Well, social media can get incredible results. Most social media campaigns fail because they are not well planned and are mismanged. On top of that it’s impossible to measre the ROI on social media… so do not count on predictable ROI or even expect a return you can measure. But social media will greatly enhance your brand. That’s why most companies are doing social media.

Executive: So, most social media campaigns fail for lack of management or knowege. I can’t expect any ROI, and you are not an expert. Right?

Social Media Not Expert: Well, when you put it that way… it doesn’t sound right. I would say that I’m not an expert, but I have experience and can guide your company around making mistakes that will make your social media campign fail. While we can’t …

Executive (Redfaced, Cuts off Social Media Not Expert): The door. Use it. Use it now.