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Is Social Media ROI Achievable?

By June 28, 2011Article

Achieving tangible value from social media remains challenging for the majority of CMOs according to a significant study from MarketingSherpa, however incremental investments “keep on trucking,” with over one-third indicating spending increases of 20% or more through 2011, and 25% indicating spending increases well north of that.
Survey participants, 3,342 consumer and B2B marketers, indicated that, as budgets grow to more significant levels, social media accountability has become the highest priority. The top three priorities being:

  • Converting social media members, followers, etc. into paying customers
  • Achieving or increasing measurable ROI from social marketing programs
  • Achieving or increasing measurable lead generation from social marketing

Studying the tactics that were most effective highlights that, although social media might appear easy on the surface, the most effective strategies require the highest level of effort including:

  • Influencer / blogger relations
  • Blogging
  • SEO for social sites
  • Moderating social networks

The easier tactics were seen as less effective including:

  • Social sharing buttons on e-mail and websites
  • Advertising on social sites
  • Micro-blogging and multi-media sharing

The level of effort vs. effectiveness conundrum translates to organizations having to spend significantly more than originally anticipated to generate social media results, increasing the risks towards achieving a positive, tangible return on investment (ROI).
When it comes to proving ROI, it seems that CMOs are still focusing on the easy-to-measure metrics, those that show a level of success but don’t necessarily prove the bottom-line impact of significantly increasing investments.
Most of the metrics used to measure ROI today revolve around activity or popularity-focused metrics including:

  • Visitors referred to website (85%),
  • Reach of fans, follows and subscribers (56%)
  • Search engine ranking positions (54%)
  • Leads generated (51%)
  • Inbound links (44%)

Bottom-line metrics are used, but not by the majority, especially conversions (54%) and sales revenue generated (35%).
Success measurement follows suite with social media tactics, where the highest level of effort / difficulty yields the greatest insight / rewards.
For those who are able to quantify the ROI impact, the results are indeed positive. An average ROI of 95% is being achieved, meaning that for every $1 invested in social media, the organizations are getting back their original $1 investment, plus an additional $0.95 of tangible incremental margin or savings.
The Bottom Line
As social media spending continues to grow, financial accountability will increase in lockstep. Assuring that social media efforts translate into incremental leads, purchase conversions and revenue increases is key to assure success. However, bottom-line measurement remains elusive for the majority of CMOs.
The good news is that for those CMOs that currently quantify social media ROI, the financial results are positive and significant.
Additional information on social media ROI can be found here and here.
Tom Pisello is chairman and founder of Alinean.

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