I had a chance to sit down recently with a Vice President of Marketing with a software company that is thriving in the recession. She was proud to tell me they had experienced six straight quarters of growth and hadn’t laid off a single staff member during that time. A very different conversation than I have had with others in the same industry. I was interested to find out what part their social media strategy contributed to their staying ahead of competitors. She assured me they were in fact proud of their efforts. Their blog, launched only nine months before, was definitely getting traffic but they weren’t really sure yet what part social media was playing in getting their message out. She had devoted one full time marketing staff position to championing their social media efforts but this person was more of a coordinator and project manager who was actually prodding other members of the organization and serving as a standards bearer for the company efforts.
I hear this uncertainty a lot. Companies know they need a social media presence to look current in their marketplace but is all that blogging, tweeting, Digging and LinkIning translating to dollars? According to a recent study 84% of business professionals engaged in social media are not measuring the ROI of their efforts. See chart below.
I am an analyst by nature. I know I am mentioned here before but I am really a data junkie so I knew there had to be a measurement for Social Media ROI and I set out to find it.
The absolute best explanation I found related to ROI is this presentation by Oliver Blanchard.
In a mere 67 slides he conveys through humor the real world problem my VP of Marketing colleague was facing nine months into her social media investment. I highly recommend sharing this with anyone you know who is struggling with the ambiguous results of their social media investment.
But still in my quest I needed a simple formula. Something I could quickly whip out and draw on a white board to illustrate to my clients how they can do a gut check on their social media investment return. So I found this post by Steve Gershik where he references an equation from Jason Stamper. I couldn’t find this equation on Stamper’s own blog but I am trusting the citation was correct and if he ripped it off from you feel free to contact me and I will correct this post!
Anyway the equation credited to Jason Stamper says:
The assertion is that a Social Media Value greater than 1 shows ROI. Most companies expect more than a 1 to 1 ROI for their marketing efforts but in this case a demonstrable ROI for Social Media coupled with all the “soft” factors that Blanchard mentions in his presentations might be enough to make your case. Only time and trend tracking will tell long term if many social media campaigns are paying off but it is nice in the short term to have some tools to calm the nerves of less progressive business leaders.
I would love to hear from some readers about ways you have justified or quantified social media efforts based on ROI. Is there a better formula out there?