How to measure the effectiveness of social networks
11th Oct 2012 | 05:50
How to measure a tweet and a Like
Since social media became a commercial imperative for businesses, the issue of Return on investment (ROI) has been in constant debate especially within the small business sector. How can a business measure the value of the social networks' it uses? What is the value of a tweet or a Facebook 'like'? These are questions that are now being answered, as social media is more clearly understood.
Indeed, two businesses have even gone as far as to place an actual value on their social media activity. Eventbrite has stated that when someone shares some event information on Facebook, this is worth an additional £2.25 in gross ticket sales to the company. A share on Twitter is worth £1.80 with LinkedIn coming in at £1.24.
Bulmers along with We Are Social conducted research that concluded that the monetary value of Facebook to Bulmers was £3.82 per week, or £198.64 a year. Of course research like this is highly subjective, but does indicate that social media isn't the intangible environment that many businesses think it is. Research like this indicates to business that:
- The social networks their customers use have a commercial component.
- Actual value can be calculated, but this must be within clearly defined and understood boundaries.
- Social value is closely associated with monetary value. Businesses with highly engaged social media initiatives will also gain financially as well.
- The leading social networks now have a social commercial component that can be carefully exploited by businesses.
Says Jan Rezab, CEO at Social Bakers: "ROI in social media is ROE (return on engagement). There's little difference. The level of engagement in your message or medium is your first metric. Then the actual return can be measured in terms of increased sales, increased customer loyalty (less turnover), or even more engagement, i.e. more posts, more comments, more shares, more fans. All this leads to a wider, yet more dedicated customer base. When you listen to your customers, they tend to pay more attention to what you actually have to say."
Calculating social ROI
So, the question then becomes how does your business develop a metric that can allow it to track the ROI or ROE of its social media exposure? There are a number of factors that will need to be present including:
- The size of your business' social media following is a general indicator of engagement. However, large numbers of followers doesn't lead automatically to more sales. How active and engaged these people are is the important factor to identify and track.
- The level and quality of interactions is also important to track. How many people clicked the 'like' button on your site should be known, but what did they do next? Did they further engage with your brand?
- Customer services response is a powerful metric within social media. On average, businesses only respond to about five per cent of the questions posted on their Facebook wall. Indeed, social media is the new platform for your business' customer services. Track interactions from initial contact through to their resolution, as positive customer services outcomes can be worth their weight in gold.
- Brand advocacy and the level of positive sentiment that your business receives is also an important metric when social commerce is concerned. The people that shout about your brand are ambassadors that will influence sales.
- Understanding that ROI is now not simply about income minus costs. Social media has many facets all of which feed into the overall ROI that your business is achieving.
IBM in their report 'Perfecting the Right Next Offer' on how marketing has evolved stated: "Business-as-usual marketing does not resonate well with the big changes in the consumer landscape. The power has shifted from the seller barking benefits in the marketplace to one where informed buyers rule with easily acquired information in terms of product reviews and ratings, brand reviews, and competitive pricing while the thought of a purchase or a change in buying habits just begins to take form."
Businesses that have been used to calculating traditional ROI are often baffled by how the intangibles of social media can be factored into their calculations. There are a number of factors your business can use to focus its ROI on the social aspects of its operations including:
- Decide which social networks your business will have a presence on. It's impossible to support all the current social networks. Which ones are a good fit for your brand and its customers?
- According to a report from the Pulse Point Group the average return on social engagement was calculated to be between 3-5 per cent. Don't be too optimistic about your ROI – be as realistic as you can.
- Businesses that engage with their customers are reporting a 7.7 per cent increase in business activity specifically from social engagement. Talk to your business' customers. These conversations are the beginning of the journey towards a sale.
- The development of specific and new KPIs is needed to track and monitor how social media is impacting on performance and ultimately profitability. Look at your business and develop metrics that are tailored to your company. General KPIs simply won't deliver the insight you are looking for.
In their report the PulsePoint Group said it best: "In order for companies to know whether their investments are providing returns, good metrics need to be developed. This will be more important in the future, as engagement spreads more deeply and widely through a company, there will be an increase in costs and more conversations about, or pressure on, when and where to invest resources."
Adding "It's critical to focus the measurement not on the number of tweets or posts, but on key performance indicators will be the top approaches for measuring social engagement in the next two years. Today, companies are depending on executive intuition or are not measuring impact and this must change."
Social commerce is a complex issue that businesses are only now getting to grips with. What is clear is that your business' customers have unprecedented control and power over the markets they are active within. Your business can detect and act on the movements within the social space and develop real-world measures to deliver an insight into what ROI means in today's socially focused marketplace. When your business has that information, it can then develop a solid metric for social ROI.