On July 24th, The Altimeter Group, which “provides research and advisory for companies challenged by business disruptions, enabling them to pursue new opportunities and business models,” published its latest study, which is called the Social Media ROI Cookbook. Although the study, per the name, focuses primarily on how companies are (or are not) tracking sales through social media marketing efforts, the study to us really seemed like a summary of the debate that has been raging for the last five years or so. Is Social Media an essential marketing tool now or is it not?
Altimeter makes it stance on the issue clear in the introductory portion of the study. They write, “Social Media is no longer optional for business; it’s a fact of life.” If you are not currently using social media for your business, this will be either a great shock or something that you shrug off. Regardless of the strong statement, the research, to us, summarizes pros and cons of social media marketing. Let’s dig a little deeper into the research and see what it reveals.
Disadvantage: Too many changes, too fast
Altimeter points out (and rightfully so) that one obstacle companies face in measuring social media is the sheer quantity of data out there. Sites are changing and growing (just think about Facebook), new sites are popping up, other sites are dying, and this is all happening at a lightning pace.
Advantage: You can find what works best for you
With a strategic plan and perhaps some outside help, you can comb through these platforms and determine what the best match for your company might be. We don’t think companies need to be everywhere – a B2B Metalworking manufacturer might have a hard time rationalizing a Pinterest presence, for example – but some portions of the social web, like YouTube and blogging, can be useful for almost any type of company. Finding the right match out of all of the options narrows what you have to measure and gives you a better chance for success.
Disadvantage: It’s difficult to tie revenue to social media marketing efforts
Altimeter writes, “Fifty-six percent of brands and agencies that Altimeter Group surveyed reported the ‘inability to tie social media to business outcomes’ as the primary challenge to quantifying the revenue impact of social media.” Indeed, it seems companies are having a difficult time tracking sales to many different marketing tactics, including event marketing. If your company is not currently using social media as a marketing tool, perhaps one of the reasons is that you have heard stories about how difficult it can be to prove the value of your efforts. The study also indicates that only 30% of the organizations surveyed claimed to be “very effective” or “extremely effective” at tying revenue to social media marketing efforts.
Advantage: Social Media as market research
While it seems tying revenue to social media marketing efforts is a common problem, 84% of those polled said that social media had brought greater customer insights. This is the core of how social media can truly benefit a company. You can tweet or “chat” with prospects and customers in a way that used to be reserved for the personable door-to-door salesman. You can learn what your customers like and what they don’t. You can learn about their online behavior and thus you can learn how to better target them with your marketing messages. You can learn what their interests are. You can even learn what they REALLY think about you.
Disadvantage: Social Media ROI simply can’t be measured
Many people have suggested that social media is simply impossible to measure because it does focus so much on relationships. The connections you make, the insights you get into your customers, and other facets of a social media marketing campaign cannot be measured in the same way a simple transaction can be measured. This belief probably lies at the heart of why many companies still are not using social media. If your budget is tight and your time is tighter, investing in something that can’t be proven as a contributor to your bottom line can be a tough sell.
Advantage: There are (at least) six ways to measure Social Media ROI
This is by far the strongest portion of Altimeter’s research. The survey uncovered six techniques that companies are using now to measure the effectiveness of their social media marketing efforts.
1. Anecdote – a specific connection between a social media interaction and a sale
2. Correlation – looking at blog comments, for example, versus an uptick in sales. Could there be a connection of some kind?
3. Multivariate Testing – much like A/B testing of websites to see what people react to more positively, you can try campaigns with a social media audience and a non-social media audience. Which performs better?
4. Links and Tagging – use special links, cookies, or tags to track traffic that leads to conversions
5. Integrated – Altimeter is referring to either apps or Saas (Software as a Service) that have their own analytics programs
6. Direct Commerce – of course the easiest way to tie sales to social media is to actually sell via social media – this can be done on Facebook pages, for example
According to Altimeter, anecdotal measuring and correlation measuring were the two most common types used among companies (44% each). Direct was the least commonly used at 16%.
As always, we want to reinforce that social media marketing, like any kind of marketing, should not be executed in a haphazard fashion, in part because there *is* so much to keep track of and so much to measure. Have a plan, have goals tied to that plan, and make sure you have means to track whether you are reaching those goals. Without those steps in place, you are much more likely to see disadvantages rather than advantages tied to your efforts.
Image Credit: http://www.flickr.com/photos/sepehrehsani/5766453552/ via Creative Commons