Measure ROI: a difficult calculation
The Social Media is beginning to be heard in the communication strategy of companies, the budgets allocated are therefore increasingly significant, hence the interest of measuring the ROI (Return On Investment) of this element of the strategy.
The Forrester Institute has released a report stating that corporate marketing investments for social media have been steadily increasing. According to their forecasts, these expenses then amounted to 1.4 billion dollars in 2012 should reach 3.2 billion dollars in 2017.
The social media is the most sought after channel for future investments by marketing managers. In fact, 79% of them were planning to increase their spending on social media over the next 12 months. Almost as many respondents say they are ready to do the same with mobile marketing. The growth of mobile devices (tablets, smartphones) and the craze for connected objects are increasing this phenomenon.
As a result of this general desire to make efforts in terms of marketing investments, companies naturally want to be able to estimate the return on investment of their presence and their actions on social media.
The main challenge in determining the ROI of a social media presence is to present evidence to prove the usefulness of a deployment.
Nevertheless, the calculation of ROI is debated within the communities of experts, opinions diverge but all agree that it is difficult to measure the return on investment. Indeed, how to accurately assess the value of a company’s reputation, its Facebook page, the number of fans, the consultations of a blog? The supporters of the calculation of the ROI create all kinds of algorithms whereas their opponents declare that it would be impossible and a waste of time to estimate it.
When analyzing the results of a traditional communication campaign, the calculation counters are reset each time: the company buys from the audience it derecognizes at the end of each campaign. On the other hand, when these campaigns take place on social media, they are based on this already existing audience which grows as and when actions already carried out. It is for one of these reasons that it is difficult to determine the real impact of this type of campaign.
In the end, even if all these social interactions do not represent financial assets and can not be accounted for in the turnover, they still have a certain non-negligible value. To measure the efficiency, the profitability and the performance of the social dimension of these actions carried out, one then evokes the notion of Social ROI.
Social ROI: 2 ways to measure ROI
The Social ROI aims to add a more humane dimension to the traditional ROI approach. Its purpose is to record the purely financial consequences such as the number of sales directly generated via social media but also the non-financial impacts such as the improvement of a positive image of the brand, the increase of the customer satisfaction or the reinforcement of the reputation.
The Social ROI integrates two new alternatives in addition to the traditional ROI: ROO (Return On Objective) and RONI (Risk Of Non Investment).
The Return on Objectives
The Return on Objectives (ROO) is intended to determine the level of achievement of previously defined objectives. As for the ROI, these objectives can be financial by joining the notion of ROI by calculating for example the decrease of the costs or the increase of the turnover. But these objectives are mainly concentrated around 5 indicators-pillars:
- The recommendation (number of shares, “virality” rate)
- Visibility (number of views or retweet…)
- The tone (positive / neutral / negative mentions).
- commitment (number of “likes”, review, comments)
- Acquisition (quantity, cost, conversions)
Non Investment Risk
Non Investment Risk (RONI) presents the risks of “non-implementation” on social media. This second approach takes the opposite route by calculating the costs and losses incurred for the company to be absent from social media while consumers themselves are active. As seen previously, not including this social channel in its strategy does not prevent customers from talking about the brand. Nissan Digital Marketing Director Erich Marx says on the Digiday site “do not really think about the ROI of social media, but rather the cost of ignoring them”.
It is then that in a digital strategy on social media, the ROI should not be too focused on the financial aspect but more on the human capital by betting on the establishment of a real business-consumer relationship that does not require to be created.
Units of measurement
When it comes to measuring the non-financial impact of actions taken on social media, some quantitative units of measure may be more relevant than others such as:
- The number of members (fans, followers, subscribers)
- The number of people who like or follow the company
- The number of shares of the company’s publications
- The number of views of a publication
- The number of comments / retweets…
According to an article in the MITSloan Management Review, the majority of these indicators are classified according to the type of social media and their intended objectives: sharing, engagement, notoriety and word of mouth.
The collection and exploitation of data: the example of Facebook
After much criticism about the protection of users’ data, this topic has become the staple of many social platforms. This is the case of Facebook which clearly displays its desire to protect the privacy of its members. Indeed, even if this practice is far from always respected, in fact, no company has the legal right to collect the personal data of its users. Facebook nevertheless offers a targeting option called the personalized audience.
This feature makes it possible to target users of the platform already present in the advertiser’s database in order to send them a targeted advertising message. This can be done by adding their email address, phone number, or Facebook user credentials.
In addition to this option, it is possible to obtain data for marketing purposes via applications for the organization of quizzes. These allow the company to collect basic information (last name, first name, age, e-mail address) and to include these users in their database to register them in their newsletters.