Social Media ROI: Be Careful to Not Analyze It to Death

Social media ROI is a hot debate these days.  What most companies are realizing is that to create and operate a social media platform takes an intense amount of work and dedication.  So much so that it’s making a lot pine for the heyday of advertising: shoot it, print it and wait for the magic to happen.

So to prove social media ROI to themselves, their bosses and CFOs that the investment is worth it, we see more and more companies apply direct-marketing metrics to social media in an attempt to predict ROI.  This, my friends, is exactly backwards.  The answer is to invest in social media, apply comprehensive measurement tools, analyze the effects of various campaigns and activities, the refine and repeat.

Social media is not a mail drop or a free-standing insert. However, this is not to say it doesn’t drive leads or quotes.  It does.  It’s just that in social media, companies are engaging in a longer term proposition and relationship with prospects and customers.

In social media, the sales funnel gets longer and more complex, but over time the real result in social media will be two things:

First, a comprehensive social media platform will yield a higher level of leads, quotes and sales on a more consistent basis.  Second, social media will improve you lead-to-close ratio.

In my latest ebook, The 7 Deadly Mistakes of Social Media, I discuss the need for analytics beyond Google.  This is a post in itself, but this much I’ll say now: get a system that measure all the usual traffic stats (Google Analytics), add-in brand data like tone and sentiment (Radian6), but most importantly, make sure to also cross reference social media activity with other touch points such as call centers, dealer or retail activity and, of course, direct sales.  If you can get it all into one dashboard, all the better…and the first such dashboard will be announced next month. Stay tuned.

So, if you’re still reading, I’ll share with you a little humor on the futility–and lapse in logic–to over analyze social media ROI to justify jumping into the game.  Enjoy!

THE BURNING HOUSE.  A Screenplay by Constipated Marketing Group

Johnny Marketer: “Sir, the house is burning.  We need permission to run the hose.”

Big Boss Man: “Water costs money, son.  Tell me exactly how many gallons you will need, how long it will take to put out the fire, and analyze the cost of the water vs. the value of the portion of the house you expect to save…per gallon of course.”

Johnny Marketer: “I can tell you that in past fires, we haven’t done well fighting with the hose we have.  I recommend a really big hose with more pressure to save the house.  In fact, all the houses on the street are burning, and the ones doing the best are using all sorts of techniques: water, buckets, sand, foam…”

Big Boss Man: “Okay then, let’s do this.  I’ll give you a one-gallon pail.  Dump it on the fire and give me a report.”

(Two hours later after much debate on the color of the bucket, which hand to carry it in, and exactly where to dump it…and how fast to dump.)

Johnny Marketer: “Sir, we were successful in putting out a few flames, but the house is still burning…but now it’s A LOT worse. We need more water…at least 1,000 gallons!”

Big Boss Man: “Why would I give you 1,000 gallons?? I gave you one gallon, and the house is still burning.  From my calculations, that would waste 999 gallons! Prove to me more water will put out the fire.”

Johnny Marketer: “It’s hard to prove, but I know that if we do nothing, the house will burn to the ground.”

Big Boss Man: “But think of all the water we’ll save!”