Blog Assignment: How to measure ROI for Social Networking, Forbs

Measuring Social Networking Success: More Than Just Likes

How is ROI is currently measured?
As with any other mass media such as print ads or TV, marketers typically assess the effectiveness of their social media efforts at various points of the customer journey. To illustrate, social media (for example, ads on Facebook or blogs) might help potential customers discover a product or service, form an opinion about it, strengthen one’s conviction that they respond to a specific need of these potential customers and decide to purchase the product or service.
Social media analytics provide metrics that accurately estimate how many customers are converted across their journey. For instance, number of views of a Facebook ad might reflect an increase in awareness; number of clicks might reflect interest about a product; similarly, companies might use the number of fans as a reflection of their interest in their products; and finally, online purchases capture the conversion of new customers.
Today, most brands and companies use one of a combination of these metrics to assess social media efforts. For instance, many business-to-business (B2B) companies, such as Dassault Systèmes, measures social media effectiveness through cost per lead or customer acquisitions. Other measures, often favoured by business-to-consumer (B2C) companies include metrics of Brand Impressions Frequency, and Reach. Companies also use more specific metrics such as product sales, referral site traffic or even social product mentions.

While each of these metrics do represent a portion of social media activity, together, they can look like a kaleidoscope that slows down marketers’ understanding of the true value of social media. Worse, they can sometimes mislead executives in their strategies. To illustrate, a brand might get much more revenues from 1,000 highly interactive fans who post one comment each, than from one million fans who rarely interact with brands.

So why are these metrics so popular today, if they are so dangerous? First, they are very simple to assess (given they are numbers). Second, they are aligned with metrics that are well understood by companies’ marketing departments because already used for other media channels, such as reach and frequency. Finally, having an army of fans and followers represent a goal that is easily communicated to senior management.

From positional equity to relational equity
Yet, on all three counts, relying on these metrics is simply in absolute contradiction of the essence of social media – communication tools that create and strengthen relationships between people. It would be a gross mistake to think that social media ROI can be measured as any other communication channel, precisely because its nature is fundamentally different from that of other media channels.

Rather than being a “stock media”, where the number of impressions represents the main outcome, social media is a “flow media”, defined by the depth and breath of relationships between brands and various stakeholders.
While many organisations tend to place too much importance on the quantity that accurately represents their position in the competitive landscape – i.e.. their positional equity – at a given moment, what they often overlook is the relational equity with their community and stakeholders. For example, in many of our conversations with top executive management, managers tend to compare how well they are doing in terms of fans and follower count against their competitors.

While this is a start, we believe that what they should really be paying attention to is how close their brand is to their community – how many comments do the social assets receive everyday? How many of them are being replied to? What is the social sentiment of the brand? While positional equity is determined by quantitative measurements such as number of likes, fans, shares, etc., relational equity requires more refined measurement as it is determined by the kind of responses or feedback on your posts/photos/videos/infographics (for example, thank-you messages, messages of encouragement, positive shares, etc).

To assess relational and positional equities, we call for managers to build and rely on relational metrics, not positional ones and act accordingly to maximise these metrics.

The future of social media ROI

As with 3M Singapore, these brands have invested the time, energy and tools to cultivate strong relationships with their communities. This is the first step on a longer journey focused on creating and evaluating relationships.  Instead of blindly investing in paid reach, such as adverts, brands should focus on what truly matters in the long-term and create sustained interactions with customers.

As a second step, companies should focus on building relational metrics, in addition to positional ones. Importantly, managers should make the distinction between positional equity and relational equity early on in the phases of planning their social media marketing strategy. Next Next, marketers and business managers should focus on their content strategies.
We live in a time where social media has disrupted industries, started a myriad of political movements and has even contributed to overthrowing governments. Every business wants to harness the power of social media. Yet, with the fast-changing nature and proliferation of platforms, many businesses get all caught up with being present on social media, reporting its success to management in conventional ROI terms, and tend to forget about growing engagement. What businesses need to do when measuring ROI is take into account both the positional and relational to reflect social media’s true added value.
This article was originally published at INSEAD Knowledge.
(http://www.forbes.com/sites/insead/2014/04/16/measuring-social-networking-success-more-than-just-likes/ )