Yes Virginia, there is a Social Media ROI – Here are 4 ways to measure it

Unless you last flew on Oceanic 815 you probably already know that social media is the hottest thing in marketing right now.  Everyone loves social media marketing, except for a few pesky CFOs and CEOs who actually expect proof that the marketing money they spend helps to increase sales.  They like to bring up things that make some marketers go all glassy-eyed, like revenue generated and ROI.  Of course, us semi-geek marketers get excited at the prospect of showing the actual value of the work we’ve been spending so much time on.  The irony is that while social media marketing is new and many people who use it talk about how marketing has changed, many of these same people use old-fashioned marketing thinking when they talk about ROI.  Do a Google search on “social media ROI examples” and you’ll see plenty of case studies where SMM ROI is proven by things like Facebook friend increases or Twitter re-tweets.

Don’t get me wrong, there’s nothing bad about increasing your brand’s visibility, but saying that these measures “prove” ROI is like saying that page visits or TV impressions prove ROI.  They don’t.  No way.  Not even close. ROI as we all recall from Finance 101 is “Return on Investment” and the only way to measure it is to show financial gain, either increased revenue or reduced cost, greater than your costs or investment.  It’s a pretty easy concept, but not always easy to measure, especially where social media is concerned.

But the good news is that there are actual case studies that come pretty close to showing a social media marketing ROI.  Here are a few examples along with some suggestions I would have on how to make them great examples.  To be fair, it’s not always easy to get the details on these case studies, so if some of these are already following my suggestions, I apologize in advance.

AJ Bombers – I love this case study, not just because I love hamburgers but also because it is one of the more solid examples.  After six months of break-even sales and no money for traditional marketing, Joe Sorge, the owner of AJ Bombers, a burger restaurant in Milwaukee, started using Twitter to attract customers. What happened? 75% of Joe’s patrons now come from Twitter and AJ Bombers has attracted 20,000+ Twitter followers.  But the big news is that within a year, weekly sales increased +60%. Here is the AJ Bombers story.

Justin Boots – Great case study from a larger, more traditional company.  Justin Boots wanted to break out of a somewhat conservative rut and become hip and trendy to the 18-to-24-year-old audience.  They had a new product line focused on younger boot lovers called Justin Bent Rail Boots that they needed to launch. Justin budgeted $120,000 in advertising that would have been eaten up with just a couple of print ads in a typical Western magazine. Instead they launched branded pages on Facebook, MySpace, Twitter and Blip.fm.  The campaign exceeded their sales goal for the new product line by 30 percent and they attribute 95 percent of their sales to social media marketing because that’s where they elected to spend their dollars, rather than the previous go-to tactic of expensive print ads.  And the kicker here is that the results were produced for approximately half of the original advertising budget of $120,000.

Foiled Cupcakes – An online cupcake company that delivers.   Created when founder, Mari Luangrath, tried to buy her son a dozen gourmet cupcakes for his birthday. In Chicago, that wasn’t possible for under $100. Mari’s model was to lower costs with no store but a website with delivery service. But when the creation of the Foiled Cupcakes website was off-shored and the developer ran into a problem with PayPal, the cupcakes were ready; the website wasn’t. Mari jumped in and started the company with only Foiled Cupcakes Facebook and Twitter pages and a commitment to build relationships. Today, 97% of Foiled Cupcakes’ customers come from social media and the company exceeds forecasts by 600%. Last week (July 23), Mari was asked about an order for 40,000 cupcakes.

Joie De Vivre – This major operator of boutique hotels has over 7,600 Facebook fans, and 11,000 Twitter followers, and its social media campaign has booked over 1,000 rooms in less than a year for rooms that would have remained empty if not for its online promotions.  TechCruch features Joie De Vivre in its article titled, “How Social Media Drives New Business” and discusses how they use weekly deal giveaways on Facebook and Twitter as well as partnerships with coupon and travel sites to drive sales.

These are all good examples that show how social media can be linked to financial benefits, but they are all a little loose on the specifics to say that they actually show ROI.  Here are some suggestions on how to make them strong arguments for social media marketing:

  1. Decide on how you will measure success in advance – The first step in determining ROI is to decide what you are going to measure to prove it in.  Again Facebook Friends and Twitter Followers are great, but for the purposes of measuring the success of your program, you need solid financial results.  For example, Joie de Vivre used extra rooms booked – makes sense as this is a critical for hotel chains who find themselves with empty rooms generating zero revenue.
  2. Track your results back to your social media – But how can we be certain that those rooms were booked due to social media?  Web analytics and tracking measures can help provide statistics to prove the linkage.  Google Analytics can be used for a variety of tracking activities including social media like Twitter or Facebook.  Tweetburner also provides Twitter tracking capabilities as well as shortened URLs.
  3. Set very specific goals for revenue and expenses that are measurable – Once you decide how you’re going to measure, you need to determine what that measurement of success will be.  For example, Justin Boots had a specific sales goal target for their campaign.  Knowing their goal and knowing how to track it allowed them to attribute an almost 30% bump in sales to social media.  That kind of hard data will help you maintain (and maybe even grow) your social media marketing budget.
  4. Tell the world (or at least the key people within your company) – Make certain that everyone, and especially your CFO and CEO, know just how big a success your social media program was.   Use numbers that show you had goals, how you met them and the return your program produced.  It’s also important to develop a plan on how you will share results widely within the organization prior to launch of your social media tactics/campaign.  That way, when the results come in you can communicate them in a timely manner, because if too much time goes by the information loses its impact.

So yes, you can show a social media marketing ROI.  It will take a little work and planning, but if you are aggressive and positive about how you show your value to the organization, you’ll be rewarded with marketing dollars…and respect.

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