By Nichole Kelly CEO, Social Media Explorer

Calculating ROI to Make the Business Case for Social Media Marketing

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Everyone’s doing social media marketing, but does anyone know if it’s worth the investment? The people we marketers report to—the ones who sign off on budget requests—and we ourselves want to know how we can measure the return on our investment in terms of business metrics like leads and sales.

Throughout 2013, pressure will increase on marketers to use metrics to close the loop between our social efforts and actual revenue. This eBook describes a methodology for doing that, explains where social media fits into the traditional sales funnel familiar to business decision-makers, and offers advice on aligning social goals and metrics.

Key Takeaways

Speak the Language of Executives To increase funding, support and therefore effectiveness for your social media campaigns, you need to place social in the context of the sales funnel and measure results in terms business executives understand, which are sales, revenue and cost.

Measure Retention Don’t neglect to continue measuring your success with prospects once they’ve become customers. You’re likely to find that people who come through the social channel remain customers longer and spend more.

Everyone Can Measure Cost Even if you have trouble measuring results, you can measure what you’re spending in social channels so you can at least generate a couple of core metrics and make better decisions about where to spend your time and money.

Narrow Your Objectives Unless you have a huge budget, you need to focus on only one primary goal, which may be generating awareness, leads, customers or improving customer retention. Knowing what you’re trying to achieve helps you determine what to measure.

Use Google Analytics and Trackable Links Set up Google Analytics and use custom URL parameters so you can analyze social data along with your other marketing channels, which enables you to measure conversion, determine where links are shared, and optimize your content to improve results.

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Contents

4 Should We Redefine ROI?

4 Placing Social Media in the Context of the Sales Funnel

5 Level 1—Exposure

5 Level 2—Influence

5 Level 3—Engagement

6 Generating High-Funnel Leads

6 Paying Attention to the Retention Side of the Funnel

7 Measuring Results from Social Media Marketing—A Methodology

9 Measuring Cost

9 Tying Sales to Status Updates

10 Case Study: Beachbody

11 Using Trackable Links

12 Accounting for Last Touch Attribution

12 Building Summary Dashboards

13 Final Takeaways

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Should We Redefine ROI?

The first question that comes to mind as we begin analyzing ROI for social marketing is, “Why is social measurement so hard?” I think it’s because we’ve decided to redefine ROI and call it something totally different. Strictly speaking, ROI is a business metric used to measure the return on just about any investment. To measure the return on an investment, we need a return—typically expressed in revenue and sales—and we have to understand our investment. As social marketers, we aren’t exactly sure how to express our investment or our return, so we’ve decided to add new metrics to the mix, like return on conversation, return on engagement, or even return on influence.

The problem is that when we redefine ROI in order to suit our needs, it’s not what executives know as the definition of ROI, so it’s difficult to get them to understand where social media is delivering. Our answer to that, unfortunately, is to make things worse by speaking in a foreign language and adding more new metrics, like re-tweets or followers or fans.

But redefining ROI isn’t going to work: We can’t expect executives to speak our language. We need to start speaking the language they understand, and that’s sales, revenue and cost.

Placing Social Media in the Context of the Sales Funnel

Another issue is that we’re looking for answers in the wrong places. We’re expecting a shiny box that’s going to deliver our social media ROI, and the problem is that social media is one touchpoint in a multitude of touchpoints that happen through a prospect or customer life cycle. If we’re looking only at social media, we’re missing 80 to 90 percent of the picture. In the end, there really is no silver bullet. Instead, we need to look at the entire path to conversion for social and try to understand and measure the role that social plays in getting prospects onto that path and guiding them towards becoming customers.

So where does social actually fit into the context of business? This is the secret of being able to explain social media ROI. The answer lies in aligning social media to the sales funnel. We need to do this because executives live, eat and breathe the sales funnel. If you can show them where social media fits into the context of the sales funnel, all their questions disappear and light bulbs go off.

Aligning Social Media Goals to the Sales Funnel

Social media can add three levels to the traditional sales funnel because it starts conversations with prospects much earlier.

Brand AwarenessExposure, Influence and Engagement metrics all relate to brand awareness metrics. If you were to show where they sit in the sales funnel they would be at the top of the funnel.

Lead GenerationLead generation is now at the bottom of your funnel.

RetentionRetention is on the back side of the funnel and shows repeat business

BrandAwareness

LeadGeneration

RETENTIONRETENTION

INFLUENCE

ENGAGEMENT

ACTION / CONVERSION

EXPOSURE

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When we look at social and the multitude of digital marketing channels it can encompass, we realize we have an opportunity to start the conversation with consumers much earlier in the sales cycle. When we do that, we actually add three levels to the sales funnel.

That doesn’t mean we’re making the sales process take longer; it means we’re intercepting potential buyers much earlier in the sales process, and beating our competition to the punch. When you explain that to executives, they understand that because we’re reaching prospects earlier than we have before, the process of converting those leads is going to take longer.

The levels in our sales funnel are:

Level 1—Exposure

At the top level of the funnel is Exposure, which is something we’ve been measuring for a long time. We do this in public relations all the time. It’s about how many eyeballs looking at our content we can generate. It’s also called Impressions or Reach. Exposure is how big a following you’ve developed, which translates into how many people have the potential to see your message.

Level 2—Influence

The next level is Influence. When an influencer in your space mentions your brand—whether that influencer is a customer, a blogger or a media outlet—it generates site traffic for you. A key insight is that influencer-generated traffic typically converts at a much higher rate than individuals who are led to your site by other means. And it’s not a five percent difference, it’s a 30 to 60 percent difference.

We move Influence one step along in the funnel because someone who comes to the site from an influencer is more likely to buy than someone who could have seen our brand, but probably didn’t. Remember that our total reach is a much bigger number than the number of those who actually see the messages we put out.

Level 3—Engagement

In social media, Engagement is all the metrics you’ve measured in the past; it’s every action that someone takes to engage with your brand. The difference between Engagement and Exposure is that with Engagement, an individual is taking a physical action; in Exposure, the individual might have seen your brand merely by being in a pool of people who could have seen it. Just to underline how complicated it can be to measure something like Engagement, I can count up to 650 different types of engagement metrics based on the different social platforms available today. There are a lot of ways to engage in social, and it’s almost unfair to compare social to channels that don’t have nearly as many ways to engage. That’s why, when we look at the cost-per-engagement in social, it’s usually very low, because there are so many ways to engage.

Engagement is something we need to consider as part of the sales process because once someone has taken the time to engage with our brand—whether they’ve come to our web site or they’re re-tweeting our messages or commenting on our blog post—we assume we have a higher level of brand awareness with them and therefore they’re more likely to buy than somebody who may have seen our message at the top of the funnel.

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Generating High-Funnel Leads

From Exposure, Influence and Engagement—which all fall under the umbrella of Brand Awareness—we move into Lead Generation. With social, we generate what I call high-funnel leads, meaning we’re engaging with someone who may not have even known they had a problem, but they were doing some research. We’re getting them before the competition, and we’re starting them down the conversion road earlier than you can in a traditional sales process. We can break these high-funnel leads into two different categories.

The first is a soft lead. That’s someone who has filled out a form on your web site and provided contact information. They’ve also opted in to receive additional messages, but they’ve done it in return for a piece of content.

The second is a hard lead. This is someone who has indicated product interest by requesting a demo, perhaps as the result of attending a webinar. This is someone we’re going to try to transition into a qualified lead, based on whatever the criteria are for qualification.

Paying Attention to the Retention Side of the Funnel

On the back end is the Retention side of the funnel, which is an area a lot of people forget to measure. Once someone has come through this funnel and has become a customer, we forget to continue to measure our success with them.

We find that when people come through the social channel or touch the social channel somewhere along the way, they tend to remain as customers much longer. And it’s important to measure things like retention rate, how long they stay customers, and how much they spend.

We can put this into the context of metrics you’re probably familiar with:

• For Exposure, we look at the reach. So, we’re measuring the total fan base, the total number of followers, e-mail subscribers, etc.; Facebook impressions is another measure we can use.

• For Influence, we look at site traffic generated by influencers. We typically do that by looking at referral URLs.

• For Engagement, we could choose any of a number of metrics; as we said earlier, there are many, many ways to engage with a brand in social.

• For Action and Conversion, the metric is completing a form or a direct action that’s actually driving a lead. In some companies that may be a phone call; in others, it may be adding something to a shopping cart. But there has to be some kind of an action indicating that the prospect is making a decision.

Lead-Gen Technique: Target Your Competitors’ Detractors

You can use NetBase to generate leads by targeting your competitors’ detractors who are complaining about a product or service in social media. They’re essentially asking for a better product, and if yours fits the bill, you can engage with them and create a lead. To apply NetBase to the task, simply set up a topic for each competitor, then filter for negatives, sorted by time. Read more here >

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Measuring Results from Social Media Marketing—A Methodology

You can get a bigger budget for your social marketing if you can demonstrate measurable results. If you measure what executives really care about, you may be able to get a blank check for your campaigns.

The first question to ask yourself is, “What exactly am I trying to achieve?” If you’re using Facebook, or Twitter, or you have a blog, what ultimately are you trying to do for your business? Are you trying to:

• Generate more brand awareness?

• Generate leads?

• Generate customers?

• Keep your customers happy?

• Deliver customer service online?

Now envision that you are a Twitter Follower or a Facebook Fan that just went through all of these phases in the buying cycle. We want to see how fast you move through the phases, how much you buy, how often you buy, and how long you remain a customer. The ultimate question is, if we compare social media leads against other marketing channels, would the results be better, worse or the same?

Putting Measurements Into the Context of the Sales Funnel

An important measurement is how leads that come through social channels compare with leads from other channels in terms of how soon they convert, how much they buy, and how long they remain customers.

Social media can contribute to three key marketing goals. To measure its contribution accurately, determine what you’re trying to achieve, then use tools that help you measure social’s contribution to reaching that goal.

Align Goals with Metrics

LEAD GENERATION

CUSTOMERRETENTION

BRANDAWARENESS

SOCIAL MEDIA

Fans, followers, subscribers, Facebook impressions

Mentions by Influencers

Brand mentions, retweets, clicks, likes, shares, @replies, DM’s, wall

posts, comments, site visits

Content downloads, lead generation forms, pitches, proposals, webinar attendees

Track repeat business and retentionOnline sales, phone sales, in-person salesRETENTIONRETENTION

INFLUENCE

ENGAGEMENT

ACTION / CONVERSION

EXPOSURE

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Lead-Gen Technique: Target By Activity

If generating leads is a primary goal, NetBase can help you by determining what activities are associated with your product, then finding people who are involved with that activity. For a company selling products and services associated with skiing, for example, you can set up a topic about skiing and build a dashboard that identifies people who enjoy that activity. Read more here >

You really have to pick. Unless you have a huge budget, you should focus on one of these as your primary goal. For that reason, I usually consider brand awareness as a side benefit of doing either lead generation or customer retention. It’s not that I think brand awareness is unimportant; it’s that I’ve struggled to get executives to support and write blank checks for brand awareness. If we can tie what we’re doing into lead generation or customer retention and at the same time build brand awareness, then we have a viable strategy for the executive team, but we’re also doing what we want.

Knowing what you’re trying to achieve is going to help you determine if the content you’re producing is right, if you’re talking to the right people, and, ultimately, it will tell you exactly what metrics you should be measuring.

So the three marketing key goals are:

• Brand awareness

• Lead generation

• Customer retention

And here’s what you should measure:

• If brand awareness is your goal, measure reach, impressions, and engagement.

• If it’s lead generation, measure conversions, leads, and sales.

• If it’s customer retention, measure retention rate, cost of service, and revenue. We also like to use Net Promoter Score because it shows the referral business that can be generated.

I think you’ll agree that those are pretty simple metrics. At the end of the day, it’s not about social media metrics; it’s about business metrics, and executives measure business in terms of three things: sales, revenue and cost. So the goal is for you to be able to answer how your social strategy is impacting one of those three key metrics.

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Measuring Cost

Quite frankly, the thing that 100 percent of us ought to be able to measure is cost—what we’re spending in the social channels. If you’re measuring that, then you can generate a couple of core metrics.

If we match up cost metrics with the sales funnel, at the top we have cost-per-impression. Under engagement, we have cost-per-click, or cost-per-site-visitor. We can roll it up into an all-around cost-per-engagement. We also look at cost-per-inbound link.

Companies that spend a lot of money on search engine optimization should measure a cost-per-inbound-link so they can compare it across platforms. If someone provides an opt-in e-mail address, measure how much it is costing you every time you get that opt-in e-mail (cost-per-subscriber). Ultimately we arrive at a cost-per-lead or cost-per-customer-acquired.

Tying Sales to Status Updates

Is it possible to track which status update generates a sale for your company? The answer is yes, but to do so, you need to understand the path to conversion.

The ultimate goal of measuring steps in the conversion process is to arrive at a cost-per-lead or cost-per-customer-acquired.

The entire path takes place on your website, so it’s vital to track prospects on their journey through your site.

cost per

• Social Channel• Website• Opt-in Form• Lead Form• Purchase

IMPRESSION

Site Visitor Engagement

inbound link Subscriber

click

LEAD

Path to Conversion

I’ve seen your brand

I’m a loyal customerI’ve

engaged with your

brand

I’ve provided

my contactinformation

I’ve purchased

your productBRAND

EXPOSURESOFT LEAD

GENERATIONCUSTOMERRETENTION

BRANDENGAGEMENT

PROSPECTCONVERSION

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From the social channel, where do we send people? We do a status update. Maybe it’s on Twitter, on Facebook, or somewhere else. That status update has a link that takes you back to your company web site. On the site, we have some kind of conversion point we can measure, whether it’s an opt-in form or a shopping cart. Usually, that opt-in form is either for some kind of informational content or for decision-making content. (That’s the soft lead versus hard lead distinction.) Then we have a lead form, meaning that someone’s actually interested in our product or service, and then we actually have the purchase. This entire channel flow takes place on the website, so it’s vital to track prospects throughout their journey on your site.

Case Study: Beachbody

Beachbody is a company that sells fitness, weight loss, and muscle-building home-exercise DVDs. They noticed that purchase habits are shifting from TV to the web, so they needed to shift their focus to where the conversation was happening, which is on social networks. They created a strategy to engage customers on several different social channels, and the strategy was tied to a blogger outreach program. They persuaded influential bloggers to use P90X, an intense home-exercise regimen, then blog about their results—all of which was shared across Facebook, YouTube, Twitter, and Flickr. This is a common strategy that lots of companies are using.

They measured success by noting that they got 26,000 mentions and reached over a million people with a tweet. That’s very high funnel and an impressive exposure metric. It makes for an excellent case study factoid, but if we look at it in terms of community management versus business objectives, we realize this is very much a community management metric that isn’t tied to business objectives.

If I were the one analyzing Beachbody results, I’d measure different things. I’d measure cost metrics, that is, cost deflection metrics. I’d look at click, engagement, site visits, subscribers, and sales.

Lead-Gen Technique: Target By Benefit Sought

People looking for a specific product benefit—either emotional or functional—represent a sales opportunity. To find them, capture their contact information and, ideally, convert them, you can set up a topic in NetBase on that benefit and use a Positive Behaviors widget. For example, you can find individuals looking for gluten-free foods, and even segment that audience by gender to use different marketing tactics on each group. Read more here >

Community management metrics, like mentions or individuals reached with a tweet, aren’t tied to business objectives. It’s essential to measure the costs for actions that lead to revenue.

BeachbodyCost perClickEngagementSite VisitSubscriberSale

Units SoldRevenue GeneratedRevenue by Influencer

WowyUpgrades

WowySign Ups

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If you’re familiar with Beachbody, they have a community people can join called WOWY. They have a free community and a paid community. I would look at how many people signed on as free members and at the number of upgrades to paid membership. I’d want to know if this campaign generated any actual revenue. Did it generate revenue from the product, as well as the community?

On the back end, I’d look at units sold. How much total revenue was generated? I’d also want to know Revenue by Influencer, because if I want to do this again, I need that figure so that I know exactly which influencers I want to reach out to again.

That’s the difference of going from community management metrics to real business metrics.

Using Trackable Links

One essential key to your success is the link you’re sharing in the social channel. Often we share links and shorten them, but we should be asking if we can do something to make the link more trackable.

Can you leverage Google Analytics to get better data? You can. Keys are setting up goals in Google Analytics so you can measure conversion, creating separate URLs for each social channel, and adding unique codes to each URL so you can tell the exact status update where a link was shared.

Lead-Gen Technique: Target By Unmet Need

You can generate leads by identifying individuals who want to solve the problem your product addresses. You can express that problem in a phrase (like “bad-tasting mouthwash”) or in a word (like “spam”). By setting that up as a primary term in your NetBase topic, you can target individuals with that unmet need and use trackable links to determine where they saw your message. Read more here >

Set up goals in Google Analytics and use trackable links so you can get better data and compare results from such options as pay-per-click vs. organic search.

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The result of adding unique codes is that everyone who clicks the link gets a cookie when they come to your site—just as Google Analytics has always done with other campaigns—and your social data is now in the same platform where all your other marketing channels are. So you can see the difference between pay-per-click and organic search, and you can see social traffic.

Accounting for Last Touch Attribution

Google Analytics, useful as it is, does have a downside, and that’s Last Touch Attribution. What that means is the campaign that gets credit for a conversion is the last campaign the customer touched before they convert. This poses a challenge for social because many times social is so high funnel that it’s not interpreted as the conversion source. Social media tends to bring people to the door, but traditional marketing tends to convert them.

The way to get around this and see all the campaign history so you can determine if social participated in a conversion is to add a marketing automation platform that tracks all that information throughout the process.

Building Summary Dashboards

Once you’ve acquired data, I recommend you create a summary dashboard, like this.

We also build an Executive Dashboard where, under the social media heading, we note the different channels we’re measuring and include four to six metrics. We fill this in every month and assign a budget to it. The Executive Dashboard compares channels against each other: public relations against advertising against events against social media. This doesn’t mean that we’re trying to say that social media is better than any other marketing platform. In truth, social media is best when used in conjunction with other marketing platforms. But it allows us to see where social media is delivering the highest value, that is, which channel it’s supporting the most.

We measure Impressions, Engagement, and Conversions, then translate that into a cost-per-impression, cost-per-engagement, and cost-per-conversion. Now we can compare against these channels: public relations, radio, TV, SEO, and online advertising.

This dashboard places data into three categories: Exposure Metrics, Engagement Metrics and Conversion Metrics.

This dashboard enables you to compare channels at a glance and see where social contributes the most.

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Final Takeaways

Here’s the umbrella takeaway I’d like to leave you with: I recommend that you set up Google Analytics and start using custom URL parameters so you can start measuring success, which will help you optimize your content and work smarter not harder.

Measuring the results you get from social media marketing in terms that business decision-makers understand will help you get more funding and support for your work, which in turn will enable you to do more and better social marketing, which can result in greater brand awareness, more leads, more sales and better customer retention.

VIEW THE ORIGINAL WEBINAR VIDEO

You can watch the entire webinar in its original format by visiting the NetBase website.

Watch Now >

ConclusionSet Up Google Analytics

Measure Success

Optimize Content

WORK SMARTERNOT HARDER

Start Using Custom URL Parameters

Measuring success and putting it in terms executives understand can demonstrate the value of social media marketing to your organization.

For more information, visit: www.netbase.com.

@NetBase NetBaseInc

NetBase Solutions, Inc NetBaseInc

About Nichole Kelly

Nichole Kelly is CEO of Social Media Explorer, and author of How to Measure Social Media. Her team helps companies figure out where social media fits and then helps execute the recommended strategy across the “right” mix of social media channels. They use a scalable content approach and measure the results to your bottom line. If you need help developing and implementing an integrated digital marketing strategy, contact Nichole here.

About NetBase

NetBase delivers the social intelligence that global brands and agencies use to publish, monitor, analyze and engage with customers in real time. Using a high-precision natural language processing (NLP) engine, our platform processes billions of social media posts to extract structured insights delivered via customizable dashboards. Our solutions enable digital marketing, public relations, brand management, customer service, sales, and product innovation leaders to craft winning strategies faster. Clients include Coca-Cola, Kraft, HP, ESPN, GfK, McCann Erickson and Taco Bell. NetBase solutions are sold globally by SAP AG and J.D. Power & Associates.