Rethinking Social Media's ROI

Historically, return on investment (ROI) has been predominantly based on financial considerations. This is changing as other parameters must be considered. The explosion of social media and the resulting impact on businesses are key developments. I believe ROI needs rethinking -- not because it’s no longer effective, but because it may result in the strategic emphasis being placed potentially on the wrong kind of marketing activities.

Despite all the apparent excitement and buzz dedicated to digital marketing, brands are still struggling to find the perfect social media campaign. The brand teams often fail to achieve the results they need because their social media campaigns fluctuate wildly. Finding the true ROI of social media becomes a considerable challenge because it throws up a multitude of data points from likes, comments, follows, shares, and retweets to Web site visits. Despite the growing number of tracking tools available, social media is also difficult to benchmark and relatively easy to leave off and pick up again.



On the one hand, social media has similarities to other forms of communication. We can ask what the true value of a follower on Facebook is versus the value of a TV commercial viewer. 

As with any new media, people quickly adopt it and then spend considerable time with it. Marketers are aware of this and increase their budgets accordingly. Companies have faith in the power of television commercials, demonstrated by the fact that they continue to invest vast resources in them (although the proverbial conundrum of ‘which 50% of the budget is working?’ remains unresolved). The same is being experienced today with investment in social media campaigns.

Yet social media offers a different style of engagement, taking on a more “intimate process” as the brand sets out to engage on a personal level, nurturing the relationship and persisting in the building of confidence levels to the point where a purchase is made -- whereas conventional advertising may actually take longer to convert a follower into paying for a product or service.

It could be said that developing a level of trust with the consumer will be significantly more enduring than a sales connection made via advertising. This loyalty and trust strengthen the brand and pave the way for potentially lucrative business in the future.

For many companies, social media networks can be a compelling communications environment to attract new customers and retain existing ones. In their recent analysis of the top 100 brands on Social Media in 2012, Blogmeter (a social media monitoring and analytics organisation []), reported that 70% of the world’s most valuable brands have a Facebook and/or Twitter profile. Almost 25 percent of the brands analyzed used more than one Twitter account and almost 15% had more than one Facebook profile.

It is easy for brand teams to get carried away with their new found ability to reach millions of potential customers with a click of the mouse. It is also easy to come horribly unstuck.

Pepsi’s much-heralded 2010 online social media initiative known as the ‘Pepsi Refresh Project’ is a good example of heavy investment in social media with a substantially reduced marketing spend on traditional advertising and promotional projects. While the Pepsi Refresh Project was running, the company lost market share and sales volume, dropping to third place behind Coke and Diet Coke.

Coca Cola, on the other hand, continued to invest in both social media and traditional mass media campaigns, taking vital market share from its biggest adversary. Of course, this loss of share could be a result of the execution rather than simply the fact that Pepsi focused primarily on social media, but it does raise significant concerns about how we use -- and indeed measure -- the social media impact.

In terms of social media metrics, Pepsi’s campaign was deemed to be successful. It has been reported that in a short space of time, more than 80 million votes were registered, there were around 3.5 million “likes” on the Pepsi Facebook page, and almost 60,000 Twitter followers. As we know all too well, companies bank profits, not metrics -- and the ‘Pepsi Refresh Project’ simply did not produce the former, although the company was widely lauded for its involvement in social causes.

Few will doubt that social media activities create a level of interaction with a brand, but it should not come at the cost of involvement or engagement typically associated with other mass media campaigns. Television, radio and print media are a long way from following the Jurassic era into oblivion. Marketing teams may well be able to quantify their efforts to their bosses by latching onto the metrics everyone easily understands -- views, likes, followers etc. -- but all they are doing is lowering the bar. In the short term, they may succeed, but not in the long term. And it is the long term that ROI and branding should be all about.

2 comments about "Rethinking Social Media's ROI".
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  1. Mike Kirner from, November 19, 2012 at 12:18 p.m.

    Good article and good points on Social Media ROI. I think I've read approximately 200 articles on this topic in the last couple of years and one certainly hears a plethora of opinions and analysis. When I was the Social Media & Marketing Director for a
    B 2 B company, I clearly witnessed the ROI of my blogging, facebook and twitter efforts. My google analytics showed me how unique visitors increased to my websites; time spent on sites increased;positive google indexing for my brands increased and ultimately leads increased.

    Regards, Mike Kirner
    Marketing & Social Media director


  2. Kevin Horne from Verizon, November 25, 2012 at 5:53 p.m.

    "Historically, return on investment (ROI) has been predominantly based on financial considerations. This is changing as other parameters must be considered..."...It is? "changing" ??? really? the fact social has nothing financial to measure doesnt mean ROI is "changing"...

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