This post is part of the Social ROI Blog Carnival at Think Customers: the 1to1 Media blog. Visit the blog carnival post “Calculating the ROI of Social Media" to check out the full lists of posts from numerous well-known social media thought leaders.
ROI = Social Media CRV
There have been an amazing number of attempts to quantify the benefit of social media so that we can get a traditional result to measure against. Most of them fail or are indecipherable stretches that really don’t apply. The problem is that social media interactions are in a simplified world, only of a few types:
- Identifying and capturing some unstructured information that is quantified by assessing the emotional state of the person’s who is the subject of the information.
- Identifying a number of interactions which define the volume of interactions or the source of interactions
- Taking an action based on the social media interaction - capturing a lead and starting the process of lead nurturing or opening a case due to a social media based complaint.
But when social media is treated as a channel for the interactions and is integrated with CRM customer records and CRM systems, then the ability to measure an ROI for social media becomes not only possible, but also important.
What does that mean?
Well, lets start with this. To me, as we enter what I’m calling the era of customer engagement, we are seeing a more mature view of social media and its use as part of a multi-channel strategy. Social channels have become one of the sets of channels being considered along with email, phone, etc. – They do represent a disproportionately influential segment because conversations in social channels have the ability to scale from one to one to one to many or even many to many.
What this implies is that the measurement of social media ROI has two components. One is strategic – and there it isn’t measured separately. It is part of the achievement of your planned overall return. The other aspect is tactical. And this is where it gets a bit dicey.
Ultimately, any company trying to measure social media ROI needs to be able to think beyond the traditional marketing measures like reach. But the problem is that many of those things that you’re looking to get a return on are nebulous when it comes to measurement.
For example, how do you measure your impact on influencers which is one area that social media is used for by some? To do that, it implies that you know how to measure influence digitally.
“Do you?” Well sure, you say, a Klout score. Sorry. Not the case. Klout is good at measuring how engaged an individual is on social channels at any given time but doesn’t really measure influencers of the buyer kind or the industry kind. Three weeks off the grid would lower your Klout score but wouldn’t necessarily impact your influence. You see that don’t you?
But social media measurement ROI does need to be associated with meaningful metrics, nonetheless.
Bet you think that I’m going to talk about Net Promoter Score as a measure of ROI for social media, right?
I’m going to talk about something far more important that begins to address the scalable power of social media and the most important return that social media can provide – revenue. Because we are talking about marketing to a large extent for this Blog Carnival, I’m going to stretch the definition to the more recent look at the alignment of sales and marketing that was initially discussed in 2009 by our hosts, Peppers and Rogers in their “Sales and Marketing, the New Power Couple,” report.
In his book, “Managing Customers for Profit,” Dr. V. Kumar speaks of an extension of customer lifetime value (CLV) that he calls CRV – customer referral value. For those of you not acquainted with it, customer lifetime value is the measure of the economic value of a single customer and his/her household over the full length of a relationship that the customer has with a particular company. It is a measure of direct revenue impact.
But what customer referral value does is take a look at the power of a brand’s value in the social channels by operating under the assumption that customers who may or may not have a high CLV, could be strong brand advocates who will refer their friends and others to the brand. Then some of those friends and others buy the products or services based on the brand referral. This is indirect revenue impact.
To determine that, there is data that needs to be collected from both social and traditional channels. There are four questions that have to be asked to prepare to do that. They are:
- Would you recommend this company to someone you know - the traditional Net Promoter Score question? This signals intent.
- Did you recommend this company to someone you know? The key question – signals action on the intent. About 1/3 actually do recommend.
- Did they become a customer?
- Are/were they a profitable customer?
These four questions are the foundation for the ROI of social media. If you use social media to determine who the brand influencers are and then go a bit deeper to find out who those brand influencers actually influenced, you can get an actual ROI for your social media usage. Which is what you want right?