The question of Social Media ROIs
I have been asked this question many times.
How can we measure return on investments for social media marketing efforts?
Most brands recognize the importance of social media marketing, but find it challenging to attribute social media spend to tangible business results.
Many are still preoccupied with engagement metrics and social data which are inadequate in informing their impact on business.
The context of disconnect
Our world has changed, the media landscape is highly fragmented and the path to purchase is no longer linear.
We all know that.
And yet, we are still approaching the ROI questions on the premise of a direct path to purchase.
The reality is, marketing and sales is no longer single-dimensional and social media plays different roles at different parts of the sales funnel. Direct attribution to conversions really depends on where it has been deployed.
In fact, not everything you do on social media translates directly into dollars and cents.
Click-throughs to “Shop now” do not guarantee transactions
Even the most advanced eCommerce sites experienced bounce. Product assortments, prices, platform experience, checkout and payment mode are all factors that affect the final conversion rate.
Joining the dots at the strategic level
The key to address (business) return on marketing investment lies in its alignment with business objectives.
First of all, there are still disconnect between the languages of marketing and business measurements.
Most marketing performance indicators, like reach, engagement, are largely media-centric. Whereas financial performance, higher growth at a lower cost of business, optimized value chain are the expected indicators for business performance.
Marketers should adopt these business narratives so as to demonstrate relevance of marketing investments (social media included) for business.
Business objectives could look something like these,
- Growing serviceable and addressable markets
- Increasing gradient of business S-curve
- Improving profitability
When we start to define marketing objectives from the business angles, we will run social media marketing (or any marketing) differently.
We should not deploy social media because there are new gimmicks on social media platforms, or because other brands are doing it.
Can we measure social media attribution to sales?
The answer is yes.
However, we need to consider the following:
There are multiple dimensions to marketing
Conversion is just one part of the sales funnel.
Marketing to sales is not a linear path
Social media marketing can impact different parts of the sales funnel. Hence, a combination of metrics is needed to define the success of marketing efforts.
Start from business goals
The best approach to marketing strategy is to work backwards from business goals, not the other way round.
For example, for the business objective to grow X% in revenue, we would look at:
- Growing serviceable and addressable markets – by building brand appeal among potential new segments at the top of sales funnel.
- Increasing gradient of business S-curve – by reducing the cost of growth in new customer acquisitions and up-selling from existing customer base.
- Improve profitability – by growing the value per customer and retaining profitable customers.
A good marketer adopt full sales funnel strategy to meet those objectives.
Every marketing effort, including social media, should associate with one or more goals.
Specifically for social media marketing, there are many metrics to quantify its impact.
It is important to use a combination of metrics, both before and after sales conversions.
Google Analytics offers a bunch of metrics that are useful. Landing pages, network referrals, trackbacks reports, visitor flow, UR: tracking, etc are some of them.
We can also track O2O activation from social media offers, depending on the respective roles of social media deployment.
Marketing KPIs = Business KPIs
The answer to marketing ROI become clear when the use of social media are aligned with the business goals.
A good marketer that drives business results considers business KPIs as their marketing KPIs.