Measuring your Marketing ROI

One of the biggest challenges facing marketers has always been how to quantify and measure the results of their marketing efforts. For decades, we’ve relied on very soft measurements like “impressions.” But, your company doesn’t get paid for impressions. You get paid when you make sales.

Thus, the better way to measure the effectiveness of any marketing campaign is by measuring the number of sales that result from that campaign, or, in an industry where there is a long sales cycle that relies on the performance of a sales team, you can measure the effectiveness of your marketing based on the number of sales-qualified new business leads that are created and passed off to the sales team.

Sounds great, right? Just measure these important metrics instead of the less-important ones. Easy. Except it’s not. Marketers have struggled for years to capture these metrics. However, as marketing automation tools have advanced over the past few years, we are now able to quite accurately attribute sales and new opportunities to specific marketing initiatives.

Can You Measure the ROI of Your Social Media Marketing?

AS MANAGERS BECOME more comfortable with including blogs and social networks as part of their integrated marketing communications, they have naturally turned their attention to questions regarding the return on investment of social media. Clearly, there is no shortage of interest in the topic. A quick Google search recently for “ROI social media” returned over 2.5 million hits, many seemingly relevant. Internet marketing and online retailing conferences now devote attention to ROI issues, and managers are asking themselves every day, “What’s the ROI of [substitute social media application here]?”

Blog posts, white papers and case studies pre-pared by social media gurus, consultants and industry analysts abound, yet the answer remains largely unsatisfying. That isn’t good, especially when the CEO and CFO are demanding evidence of potential ROI before allocating dollars to marketing efforts.


As social media applications like Facebook (here, co founder Mark Zuckerberg) have changed the ways consumers interact with brands, companies have struggled to keep up. Target, Dell, Burger King and more are trying to learn what’s effective.

Can You Measure the ROI of Your Social Media Marketing?

You can. But it requires a new set of measurements that begins with tracking the customers’ investments — not yours. How can you tell whether social media are working?

FINDINGS Forget traditional ROI. Instead of calculating the return on the company’s investment, managers should assess consumer motivations to use social media and measure the social media investments customers make as they engage with the marketers’ brands.

Measuring customer investments in a social media relationship reveals the likelihood of a long-term payoff, not just short-term results.

We understand the pressures and the desire to quantify the return generated by investing in social media, but we believe most marketers are approaching the issue the wrong way.

Effective social media measurement should start by turning the traditional ROI approach on its head. That is, instead of emphasizing their own marketing investments and calculating the returns in terms of customer response, managers should begin by considering consumer motivations to use social media and then measure the social media investments customers make as they engage with the marketers’ brands.

Handling the measurements this way makes much more sense. It takes into account not only short-term goals such as increasing sales in the next month via a social media marketing campaign or reducing costs next quarter due to more responsive online support forums, but also the long-term returns of significant corporate investment in social media.

We will explain our reasoning in detail and suggest some guidelines for better integrating social media into your overall marketing strategy, but first a quick example of the kind of radical rethinking we believe is called for.

Turning Your Thinking Upside Down

In calculating social media ROI, most marketers start by measuring the cost of launching a blog, for example, and then seek to calculate the return on sales, say, from that social media investment. But a company could also start by thinking about what marketing objectives such a blog might satisfy (e.g., brand engagement), why its customers would visit

the blog (e.g., to learn about new products) and what behaviors they might engage in once they got there (e.g., post a comment about a recent consumption experience) that could be linked to the company’s marketing objectives.

These behaviors then can be considered (and measured) as customer investments in the marketer’s social media efforts.

This suggests that returns from social media investments will not always be measured in dollars, but also in customer behaviors (consumer investments) tied to particular social media applications.

Consumer investments include obvious measures such as the number of visits and time spent with the application (the blog in this case) as well as more active investments, such as the click here valence of blog comments and the number of Face-book updates and Twitter pages about the brand.

These investments can then be used to measure key marketing outcomes such as changes in awareness levels or word-of-mouth increases over time. Although what we are proposing might seem radical, we believe you have no choice.

Traditional media measurement seems almost quaint in today’s dynamic and increasingly complex media environment. Marketers are struggling with social media measurement partly because the frameworks are still largely driven by “reach and frequency” and are ill-suited to the interactive media environment.

On one side are the managers in the trenches whose experience and gut feelings tell them that social media are important, even as they struggle with how to quantify this. On the other side is top management, who may not be 100% convinced about the value of social media or fully understand them and even if they “get it” in principle, they still want to see the numbers. This tension explains the constant questioning about ROI in emerging advertising media like Twitter.

While managers certainly need hard numbers to know whether their investments are paying off, they represent a narrow “show me the return” focus rooted in a traditional mainstream media. This narrow focus has two problems. First, it is oriented to the short term (“show me how my company’s tweets will improve sales next quarter”). Developing meaningful relationships with customers takes time because online relationships involve interactive “conversations,” and some managers still do not fully appreciate that they are entering a brave new world of “relationships” with customers.

This is a world in which customers are fully in Control of their online experiences and where their motivations lead them to connect online with other consumers while they create and consume online content, much of it user- rather than marketer-generated.

These four key motivations connections, creation, consumption and control drive consumer use of social media.

This “4c’s” perspective is important because it leads to a consumer-oriented framework for evaluating social media.

Most managers still consider social media applications as “just another” traditional marketing communications vehicle. That is a mistake. The social media environment is largely Consumer not marketer controlled.

And marketers who don’t understand that do so at their peril. (See “The Worst That Can Happen Is Worse Than You Think.”) Second, and more importantly, the narrow focus ignores more qualitative objectives such as the value of a tweet about a brand that flow from the unique capabilities of the Internet and have no obvious analogues with traditional media metrics. This is a powerful point that is often overlooked. Both these things call for a different way of thinking about how to measure social media. Let’s talk about how you might do it.

The Social Media Objectives

Drive Social Media Metrics as a first step, marketers should focus on objectives that explicitly recognize the value of operating in the social media environment. Most managers feel pressure to emphasize traditional objectives such as direct sales, direct cost reductions or increases in market share from social media. Ultimately, of course, outcomes like these are the bottom line for any manager. And a marketer who wants to know the immediate effect on sales of a particular social media campaign can do so relatively easily by tracking the revenue generated from the dollars spent, even if tying social media actions directly to sales is difficult. It is becoming increasingly obvious that social media can lead to real cost savings, such as when customers serve as their own version of a company’s toll-free help desk through FAQs on user forums. It is also clear that social media can improve the efficiency of market research efforts when, for example, marketers set up online prediction markets to crowd source new ideas or mine online forums that allow customers to comment on product concepts and offer improvements for existing products.

Sales, cost efficiencies, product development and market research are obvious objectives, but in our development of appropriate social media metrics we want to emphasize objectives that take advantage of the distinctive characteristics of social media. In the social media environment, marketers



Marketers often think the worst thing that can happen during a marketing campaign or support forum is no activity or response. They are wrong. The “rules of engagement” and the dynamics of interaction in the social media world are often quite different from traditional marketing.

Several companies that are considered marketing experts have learned the hard way that even well-intentioned social media efforts can go embarrassingly wrong. And while social media blunders may not necessarily negatively impact sales, managers need to be mindful as the results of social media experiments gone awry live on, just a Google search away, for years to come.

Keep tuned in for more insight on Marketing ROI.