You know how many followers you have on all of these channels.
Right now, “the million-dollar question is, how do you figure out return on investment of social media?” says Frank Falcone, co-founder and executive program director of the Centre for CRM Excellence at the Rotman School of Management at the University of Toronto.
In this Web Strategy series, we've looked at audience measurement on the Web. Now we turn to the hardest area for analytics to track: social media.
Starting from the beginning
Traditionally, businesses use return on investment as part of their planning process. It’s a calculation to see if an idea is worth doing by measuring the cost of the investment against the expected success.
But somehow, when it comes to social media, businesses have gotten ROI all wrong, says Scot Wheeler, Chicago-based senior director of marketing science at digital marketing agency Critical Mass.
He says too many businesses have approached social ROI backwards. Instead of doing the calculations before taking action, many businesses spend time or money to get Facebook or Twitter presence and then look at metrics after the fact.
Instead, metrics should be used from the beginning, along with a greater understanding of what a business can actually get out of the social Web.
Social media shouldn’t be a goal in and of itself – it’s a tactic a business can use to reach an objective, such as selling more widgets or improving customer service. It’s the difference between: “We need a Facebook page” and “We need to learn more about our customers through our Facebook page.”
Small businesses can be especially prone to jumping too quickly on social media trends without enough consideration, Mr. Wheeler says.
“People feel they have to get into it or they’ll be left behind … but then they may overcompensate by putting in too big an investment,” he says.
Businesses small and large have been prone to get overly excited by social media because they see it as a free television channel to reach consumers.
But with every individual and corporation rushing in, social media has gotten crowded. “It’s the opposite of TV; you don’t demand anyone’s attention,” Mr. Wheeler says. “The world doesn’t need another Facebook page or Twitter account.”
What to look for
At its heart, the best thing about social media is the conversation. It’s a chance to interact and get to know your customers.
It also gives patrons a chance to talk about your business with their social circles – which can be both good and bad. It’s good if they recommend your restaurant’s new tuna salad, but bad if it gave them food poisoning.
How do you measure that? The idea of controlling the public conversation has often been the domain of public relations agencies, but that’s ill-suited to the number-based Web world.
“It’s a whole new set of metrics,” Mr. Falcone says.
“Some of it you can’t even put numbers around. It’s a combination of quantitative and qualitative data points.”
There are five key criteria for gauging a business’s social media reach, according to Mr. Falcone:
1. Volume. How much people are talking about your product, service or topic.
2. Tone. Whether people are talking about you in a positive, negative or neutral way.
3. Coverage. How many sources are generating the conversation.
4. Influence level of source. The authority of the people talking about you can raise the quality of your reach.
5. Share of conversation. Within your topic or industry, how much of the conversation is about you.
Putting a number to sentiment is the hard part
Sites like Klout measure general popularity, but don’t give much detail and can easily be gamed to produce higher scores. Radian6, one of the biggest social media trackers, has a full suite of social analytics that are expensive and aimed at enterprises. Hootsuite, a tool for managing multiple social media accounts, has some sentiment analysis options from developer Lymbix.
There are ways to calculate the monetary value of your fans. You can figure out how much more an engaged fan is worth to you – such as whether he or she is more likely to spend twice as much as a casual fan – and compare that to your social-media costs to see whether it was worth recruiting them. But putting a value on your engaged fan in the first place can require surveys or other investments.
What a small business can do
Before a small business gets worried about diving too deep into these unknown waters, there are some simple steps that can help. (It’s worth noting that most social-media experts admit that social analytics are still in their infancy.)
People use platforms in different ways. Twitter users tend to be more engaged than Facebook users, for example, which can be attributed to the ease of replying to someone with a tweet or Twitter’s fast-paced nature. So while you may have fewer followers are Twitter, they’re likely to be worth more to you.
Mr. Wheeler recommends location-based social channels, like Foursquare, as excellent opportunities for small businesses with a physical location.
A coffee-shop owner, for instance, could transition his or her loyalty program from a card that’s stamped 10 times to a location-based social media service for customers who check in at the coffee shop 10 times.
That simple step serves the same loyalty purpose, while also advertising the shop to all of that customer’s friends. It’s free, and creates a new advertising channel by taking advantage of customers who are already coming in.
Some tech watchers say 2011 was the year of social media, and 2012 will be the year of social metrics. If so, the year is just beginning.
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