The ROI of social media marketing: of course you can measure it

Many social media marketing experts claim you can’t measure the ROI of social media marketing. That’s nonsense and a proof that some so-called social media experts don’t know what ROI is.

These days, “social media marketing experts” like to use the acronym ROI for Return On Influence or Return On Interaction.

Although those can be useful metrics (as is engagement and so on), marketing spend in the end is about the bottom-line and real metrics and ROI, not (just) those so-called soft metrics. And that goes for social media marketing too.

Social media program ROI is not measured: time for change

Measurement of ROI for social media programs - August 2009 - source eMarketer
Measurement of ROI for social media programs – August 2009 – source eMarketer

The whole idea that the return of social media programs can’t be measured, is created and strengthened by a few very influential “experts”, however, is not only making my stomach turn, it’s the most stupid thing you can do if you want to explain to marketers why and how to use social media marketing.

Knowing that, according to research mentioned on eMarketer, only 16% of those polled measured ROI for their social media programs, it’s time to do something about it and stop claiming it’s not possible, even if it’s hard, depending on what you want to measure and what your goals are of course. We can’t emphasize it enough but social media marketing is an umbrella term and there’s a big difference between, let’s say social networks, blogs and micro-blogging platforms such as Twitter. Moreover, there is a growing range of tools that enable you to measure, make sure you pick one that measures what you (and your customers and social connections) demand.

I am a firm believer in social media marketing, otherwise I wouldn’t be blogging about it. However, marketers don’t need new acronyms or exaggerated statements. They need cases, data and proof. No, you can’t measure everything. Sure, you might not have the possibility to measure shifts in brand perception nor the ability to relate it with actual sales. And, indeed, it requires some work to find ways to measure the ROI of social media marketing (marketing, not social customer service and such, that’s another story).

Social media marketing is not a miracle solution, it’s marketing

Social media marketing is not a miracle solution or a cure for everything: it can’t stop global trends, help an uninspiring business, erase uncertainties or stomp your competition.

However, it is very important if you use it well. It’s about community, engagement, interaction and so much more (word-of-mouth, being where your customers are, authenticity, advertising, branding, etc.).

But it is and should be part of an overall marketing strategy. It’s marketing so it requires planning, strategy, metrics, etc. And it needs to be measured, as well on a tactical level as regarding ROI. And, again, it’s nonsense to say you can’t measure the ROI of social media marketing!

Return On Marketing Investment, ROMI, marketing ROI, or whatever you call, it is a financial parameter that is used to forecast, approve and measure all marketing efforts. You can use it on all levels: both micro and macro. From a specific medium or campaign over a program to the full marketing plan. So you can certainly use it for social media, email marketing and so on.

A word on the ROI on marketing investment for social media marketers

However, many companies still have to discover and implement ROMI. The Return on Investment of marketing is one of the ‘hottest’ topics for many marketers, marketing managers and senior management in general. 

The ‘marketing nephew’ of ROI, ROMI (Return on Marketing Investment) or Marketing ROI, is becoming increasingly important but make no mistake: it differs a lot from ‘plain old’ ROI and there are many issues to solve before implementing ROMI for marketing reporting and forecasting purposes throughout your company.

Anyway, today’s marketers are increasingly expected (especially in the actual economic climate) to be accountable for what they do and thus in a way to ‘prove’ the value that they create within the company (no wonder some marketers are a bit reluctant).

ROMI is more than just a way to find out, in actual financial results, the impact of our marketing activities: it is primarily a tool for forecasting and for making decisions in terms of future marketing initiatives, at the level of campaigns, marketing programs or the overall marketing plan (and many other levels, including media such as, indeed Twitter and other social media).

Using ROMI has many advantages but there are also many stumbling blocks:

Resistance to change

Implementing a ROMI program requires a major change in thinking and working, not only for marketers but for the company as a whole. Some marketers think ROMI represents a risk to their job. This is understandable, especially for marketing activities that are vital to the company but difficult to express in revenue or profit. Marketers that resist ROMI might not see the benefits for them and their activities, including in terms of the approval of their budgets, their position within the company and a better collaboration with sales that (finally) will see marketing can help them meet targets. It’s the task of management to prove them all this.

A lack of cross-divisional cooperation

Implementing a ROMI program requires several divisions such as sales, marketing, finance, etc. to work together. If this company-wide collaboration, that aims to generate more profits and set up more customer-centric and efficient marketing activities (without forgetting important activities like brand marketing), is counteracted by mistrust or competition between different divisions, that is a crucial problem. Well, in fact, it’s a recipe for failure.

Data issues and lack of knowledge of ROI 

The calculation of the return of marketing activities requires lots of data on micro and macro levels: campaigns, channels, media, customer life cycle and so on. If for specific marketing activities there are no tools in place to gather these data, there are missing elements in the ROMI program. In addition, the data need to be ‘prepared’ in order to make forecasts. ROMI is in the first place a financial instrument and marketers are not financial experts. A lack of understanding of the true meaning of ROMI is a problem in the implementation and management of ROMI programs. That’s why often companies that start implementing ROMI programs, call upon the expertise of people that are used to work with ROI in general, like the finance people of course.

Business objectives versus marketing objectives

The objectives that are typically pursued by a company are expressed in revenue increases, profit increases, gaining market share etc. over specific timeframes: a quarter, a year and so on. Aligning the marketing plan with the corporate objectives and finding a ‘common language’ and especially common ROMI metrics is not simple. For individual marketing campaigns or activities that can easily be related to their impact on sales this is easier than in the case of marketing programs that aim to achieve results in the long or medium run, actions that aim to improve customer retention and loyalty or activities that aim to strengthen the brand value.

ROI is about customer-centricity

These are the main, but not the only stumbling blocks in implementing ROMI programs. How difficult using ROI in a marketing context may be, it only requires the right tools, metrics, integrations, etc.

But most of all it requires a mentality change. And that change is not so much about using financial parameters in marketing. It’s about customer-centric thinking. Because, if you don’t forecast, measure and monitor the impact of your marketing efforts, including on social media, it means you’re doing a bad job in engaging your customers. And don’t forget that customers pay for your marketing efforts because they are calculated in the price of the goods or services you sell.

So, if your ROI sucks, the customer pays for it and you better stop using marketing at all, then your products will be cheaper. A word for marketers that are reluctant to use ROI: if your marketing efforts pay off, you get more budgets, and you don’t have to defend your programs any more.

A warning for (marketing) managers

However, I do understand the concern of some marketers, like brand marketers, that engage in marketing efforts that are harder to measure in terms in ROI (but it surely is possible).

It’s the job of management to understand that using ROI in marketing is not an excuse to only engage in activities with direct results and fast, easy and highly measurable promotions: do not underestimate the power of a brand!

Management should realize that some activities will have a lower and others a higher ROI.

Implementing ROI cannot be an excuse for not exploring new ways of engaging with customers either: if you don’t take calculated risks, you’re not doing marketing. If management fails in doing that and in looking at both short term and long term and at the overall marketing plan, a ROMI-program will never succeed.

An additional word for some social media marketing experts

However, a word for some social media marketing experts out there, claiming that you can’t measure the ROI of social media marketing. It’s even a plea.

Please stop, think, talk to real marketers, buy a book on marketing ROI but don’t spoil the efforts of people (who don’t call themselves experts), that try to explain to companies how to use social media in marketing.

Not based on hype but on facts and in a language that marketers understand.

Update: here are some posts and resources to learn more about social media ROI and ROI of ‘digital’ marketing