Those who understand Social Media don’t talk about ROI

It is not uncommon to see people arguing passionately about “Social Media ROI”, thanks in part to discussion on the subject in Social and Mainstream Media. Businessweek recently published an in depth piece titled Beware Social Media Snake Oil.

It is important to remember that Social Media is just a medium for connecting with people (or customers if you prefer that term). It provides necessary platform or tools to reach out to millions of people instantaneously across time-zones in a cost effective manner. But since “Social” is just a medium, it doesn’t have any ROI of its own. ROI will depend on how well this medium is used for attaining a well defined objective. So ROI is for the “usage” and not the “medium”. Many people associate ROI with the medium and that is incorrect.

See this excellent interview with Lee Odden on Social Media Marketing and ROI. According to Lee, measuring ROI as a direct result of Social Media is not the right question. Social Media is a platform, not a tactic.

Moreover, Social Networks as a medium for connecting with Customers for branding and engagement is a very new development and unlike marketing through traditional media such as Television, Print or Radio, we are yet to fully understand how Social Media marketing affects consumer behavior. To borrow famous words of former Defense Secretary Donald H Rumsfeld, we don’t know what we don’t know about how Social Media influences consumer behavior. And in the absence of this understanding, it is prudent to say that those who understand Social Media don’t talk about Social Media ROI.

Rather than trying to measure effectiveness of Social Media campaigns through ROI, it is better to use other KPIs (for a good list, see 35 social media KPIs to help measure engagement).

So beware, next time some one talks about Social Media ROI, it is very likely that person is trying to sell Social Media Snake Oil.

  • http://howto.commetrics.com/articles/best-blogs/ Urs E. Gattiker – @ComMetrics

    Harish

    Thanks for this post you said it so nicely ….. We put it a bit different here and suggest one uses a cost-benefit analysis approach to figure out what SMM can do for the bottom line:

    http://commetrics.com/articles/metrics-3/

    Thanks for sharing.

    Regards

    Urs
    @ComMetrics

  • http://howto.commetrics.com/articles/best-blogs/ Urs E. Gattiker – @ComMetrics

    Harish

    Thanks for this post you said it so nicely ….. We put it a bit different here and suggest one uses a cost-benefit analysis approach to figure out what SMM can do for the bottom line:

    http://commetrics.com/articles/metrics-3/

    Thanks for sharing.

    Regards

    Urs
    @ComMetrics

  • http://hkotadia.com/about hkotadia

    Urs:

    Thanks for your comments and kind words. Much appreciated!

    Regards,

    Harish Kotadia (HKotadia)

  • http://hkotadia.com/about hkotadia

    Urs:

    Thanks for your comments and kind words. Much appreciated!

    Regards,

    Harish Kotadia (HKotadia)

  • http://www.targetlatino.com/ Target Latino

    Dear Harish,
    You are correct on one thing: Social media is a medium and doesn’t have ROI in and of itself. But so is TV, and it doesn’t have ROI either but every single true marketer will talk to you about the Return On Investment of their strategies on whatever media they choose. Therefore, there is talk about ROI on Social Media, just as there is talk about ROI on TV because it always refers to the strategy executed on that particular media and no other. A strategy may be brilliant but if the media chosen is not reaching the target market, my ROI will not be as high as expected. The two pieces are tied together. You can’t have one without the other and they both contribute to the ROI.
    Hope this helps clarify some concepts. Thank you for the opportunity of contributing to you and others.
    Warmest regards,
    Claudia

  • http://www.targetlatino.com Target Latino

    Dear Harish,
    You are correct on one thing: Social media is a medium and doesn’t have ROI in and of itself. But so is TV, and it doesn’t have ROI either but every single true marketer will talk to you about the Return On Investment of their strategies on whatever media they choose. Therefore, there is talk about ROI on Social Media, just as there is talk about ROI on TV because it always refers to the strategy executed on that particular media and no other. A strategy may be brilliant but if the media chosen is not reaching the target market, my ROI will not be as high as expected. The two pieces are tied together. You can’t have one without the other and they both contribute to the ROI.
    Hope this helps clarify some concepts. Thank you for the opportunity of contributing to you and others.
    Warmest regards,
    Claudia

  • Kris C.

    Four days after this post, you posted Olivier Blanchard’s Social Media ROI presentation that has received thousands of views, visits and discussion comments on various sites. He is not selling snake oil, and I definitely believe smart marketers, execs and consultants will not be afraid to ask about the ROI of taking their marketing in a new direction they’re unfamiliar with – if they DIDN’T ask, that would be a problem. People who already know a lot about it aren’t the ones seeking consultant help and standing to be ripped off by those who want to deflect attention from the question by calling it influence, engagement, relationship-driven marketing or any other keyword concept they pick up at a conference.

  • Kris C.

    Four days after this post, you posted Olivier Blanchard’s Social Media ROI presentation that has received thousands of views, visits and discussion comments on various sites. He is not selling snake oil, and I definitely believe smart marketers, execs and consultants will not be afraid to ask about the ROI of taking their marketing in a new direction they’re unfamiliar with – if they DIDN’T ask, that would be a problem. People who already know a lot about it aren’t the ones seeking consultant help and standing to be ripped off by those who want to deflect attention from the question by calling it influence, engagement, relationship-driven marketing or any other keyword concept they pick up at a conference.

  • http://hkotadia.com/about hkotadia

    Hi Target Latino:

    You are correct that Strategy and Media determine effectiveness of any campaign. It must also be emphasized that Social Media is still in infancy, we are yet to understand how social media influences consumer behavior, especially the brand selection process. We cannot use metrics of broadcast medium such as radio or television for measuring social media impact. Rather than trying to measure ROI, which might be inaccurate as we do not know all the variables involved, it is better to measure engagement or similar direct measures.

    Thanks again for your comments,

    Harish Kotadia (HKotadia)

  • http://hkotadia.com/about hkotadia

    Hi Target Latino:

    You are correct that Strategy and Media determine effectiveness of any campaign. It must also be emphasized that Social Media is still in infancy, we are yet to understand how social media influences consumer behavior, especially the brand selection process. We cannot use metrics of broadcast medium such as radio or television for measuring social media impact. Rather than trying to measure ROI, which might be inaccurate as we do not know all the variables involved, it is better to measure engagement or similar direct measures.

    Thanks again for your comments,

    Harish Kotadia (HKotadia)

  • http://hkotadia.com/about hkotadia

    Kris C:

    Thanks for your comments. I like Olivier Blanchard’s presentation on the Basics Of Social Media ROI, especially slide nos. 32-34 on Investment Return Relationship and emphasis on Non-financial Impact of Social Media. The reason I want to exercise caution when using the term “Social Media ROI” is that Social Media is still in infancy, we don’t know enough on how social media influences consumer behavior, especially the brand selection process.

    Social Media is characterized by customers interacting among themselves and talking about a brand or product. It is not one way communication from marketer to customers like advertising. So cannot use metrics of broadcast medium such as radio or television for measuring social media impact. We should also not use metrics derived for web-based marketing as they don’t factor in the “Social” dimension. We are trying to measure a 3 dimension object with 2 dimension scale – it is bound to fail.

    Rather than trying to measure ROI, which might be inaccurate as we do not know all the variables involved, it is better to measure engagement or similar direct measures. Once marketers realize this, they will stop using the term “Social Media ROI” the way it is being used today. Hope this clarifies the point.

    Thanks again for your comments,

    Harish Kotadia (HKotadia)

  • http://hkotadia.com/about hkotadia

    Kris C:

    Thanks for your comments. I like Olivier Blanchard’s presentation on the Basics Of Social Media ROI, especially slide nos. 32-34 on Investment Return Relationship and emphasis on Non-financial Impact of Social Media. The reason I want to exercise caution when using the term “Social Media ROI” is that Social Media is still in infancy, we don’t know enough on how social media influences consumer behavior, especially the brand selection process.

    Social Media is characterized by customers interacting among themselves and talking about a brand or product. It is not one way communication from marketer to customers like advertising. So cannot use metrics of broadcast medium such as radio or television for measuring social media impact. We should also not use metrics derived for web-based marketing as they don’t factor in the “Social” dimension. We are trying to measure a 3 dimension object with 2 dimension scale – it is bound to fail.

    Rather than trying to measure ROI, which might be inaccurate as we do not know all the variables involved, it is better to measure engagement or similar direct measures. Once marketers realize this, they will stop using the term “Social Media ROI” the way it is being used today. Hope this clarifies the point.

    Thanks again for your comments,

    Harish Kotadia (HKotadia)

  • http://www.rondegiusti.com/ Ron De Giusti

    I agree with the posts that state social media does not have an ROI any more than a TV has an ROI.

    The point is that the medium is another medium through which companies can run marketing campaigns; and, those marketing campaigns can have an ROI.

    Someone can tweet a link to a blog. The blog could be a thoughtful article that gets someone interested in a particular product. The blog could have a link at the end that points to a CRM landing page that pushes a lead into CRM. The lead could generate an opportunity that results in won business.

    And even if the whole scenario above does not play out like above with an actual measurable ROI of revenue generated from a campaign pushed through a blog and a tweet, it still could generate eyeballs on a companies website. And those eyeballs are something people pay for all the time through ad agencies.

  • http://www.rondegiusti.com Ron De Giusti

    I agree with the posts that state social media does not have an ROI any more than a TV has an ROI.

    The point is that the medium is another medium through which companies can run marketing campaigns; and, those marketing campaigns can have an ROI.

    Someone can tweet a link to a blog. The blog could be a thoughtful article that gets someone interested in a particular product. The blog could have a link at the end that points to a CRM landing page that pushes a lead into CRM. The lead could generate an opportunity that results in won business.

    And even if the whole scenario above does not play out like above with an actual measurable ROI of revenue generated from a campaign pushed through a blog and a tweet, it still could generate eyeballs on a companies website. And those eyeballs are something people pay for all the time through ad agencies.

  • http://www.1680PR.com/ Ken Lingad

    What an absolutely spot on post! Thanks so much for your concise summary of the real state of Social Media’s ROI! We’ve already passed this along to several industry colleagues for additional reference to what we constantly discuss.
    Ken Lingad
    1680PR

  • http://www.1680PR.com Ken Lingad

    What an absolutely spot on post! Thanks so much for your concise summary of the real state of Social Media’s ROI! We’ve already passed this along to several industry colleagues for additional reference to what we constantly discuss.
    Ken Lingad
    1680PR

  • http://hkotadia.com/about hkotadia

    Ken:

    Thanks for your kind words. Much appreciated!

    Harish Kotadia, Ph.D.

  • http://hkotadia.com/about hkotadia

    Ken:

    Thanks for your kind words. Much appreciated!

    Harish Kotadia, Ph.D.

  • http://hkotadia.com/about hkotadia

    Ron:

    Thanks for the comment. You are right in saying that Social is another “Medium” and doesn’t have ROI of its own. This is the reason why I suggested that rather than trying to measure effectiveness of Social Media campaigns through ROI, it is better to use other KPIs like Engagement (or similar measures like traffic to the website etc..).

    And you are absolutely right that people pay for traffic to a website or clicks. Social Media can be very effectively used for “engaging” customers and prospects. This will generate traffic/clicks and will result in revenue and ultimately, ROI.

    Harish Kotadia, Ph.D.

  • http://hkotadia.com/about hkotadia

    Ron:

    Thanks for the comment. You are right in saying that Social is another “Medium” and doesn’t have ROI of its own. This is the reason why I suggested that rather than trying to measure effectiveness of Social Media campaigns through ROI, it is better to use other KPIs like Engagement (or similar measures like traffic to the website etc..).

    And you are absolutely right that people pay for traffic to a website or clicks. Social Media can be very effectively used for “engaging” customers and prospects. This will generate traffic/clicks and will result in revenue and ultimately, ROI.

    Harish Kotadia, Ph.D.

  • About Dr. Harish Kotadia


    That's me with photo gear,  taking snaps of Texas wild flowers. #texas

  • Dr. Harish Kotadia

  • Dr. Harish Kotadia is an industry recognized thought leader on Big Data and Analytics with more than fifteen years' experience as a hands-on Big Data, Analytics and BI Program/Project Manager implementing Enterprise Solutions for Fortune 500 clients in the US.

    He also has five years' work experience as a Research Executive in Marketing Research and Consulting industry working for leading MR organizations such as Gallup.

    Dr. Harish Kotadia's educational qualification includes Ph.D. in Marketing Management. Subject of his doctoral thesis was Customer Satisfaction and it involved building a statistical model for predicting satisfaction of clients with services of their ad agency.

    His educational qualification also includes M.B.A. and B.B.A. with specialization in Marketing Management and Diploma in Computer Applications.

    Dr. Harish Kotadia currently works as Principal Data Scientist and Client Partner, Big Data and Analytics at a Global Consulting Company. Views and opinion expressed in this blog are his own.



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