During the first phase, ‘getting into social media’ is often defined as establishing a presence on one or more platforms such as Facebook and Twitter.  This is of course a very limited and narrowly tactical approach, and it is not surprising that it often doesn’t generate any meaningful results.   No wonder almost all social media pundits advise against following this route.  Most point to a more strategic approach – phase two.

During the second phase, organizations recognize that in order for social media initiatives to be impactful, they need to first and foremost establish a listening ability, find out what’s being said about them, their industry and/or their competitors in the online space, define their audience(s), find out where those audiences congregate in the social media arena, and how they typically engage there.  On that basis, a more strategic perspective can be created, with specifically defined objectives, aligned to existing communications programs and goals.   It is during the second phase that key performance indicator (KPI) definitions and return of investment (ROI) questions in relation to social media come into play.

However, it is only during the third phase of social media adaption that companies begin to fully reap the benefits of social media.  During this phase organizations begin to recognize that they need to transform their organizational DNA in order to capitalize on the true potential of the ‘conversation age’.  It’s the open leadership concept as outlined in Charlene Li’s most recent book that addresses this phase in organizations’ migration towards a much more transparent, relationship-oriented culture, where information is more freely shared.

Isn’t it actually striking that with this organizational transition we appear to be moving towards a simpler, flatter, more direct communications structure where information is relayed in a way that is very similar to the communications dynamics as they take place in a village or a tribe?  But along with these similarities there are also major differences of course, as today’s communication is global, instantaneous, and web-based.   

The case for ROI

Social media is obviously a relatively new phenomenon, and therefore social media measurement models are still undeveloped, but a number of individuals in the social media arena have made attempts to address existing confusion and lay down some basic ground rules. While many in the field have compiled lists of key performance indicators (KPIs) by which the success of social media initiatives can potentially be measured, Olivier Blanchard and Jacob Morgan, among others, quite correctly emphasize that ROI is by definition a financial equation that specifies the correlation between an investment and its financial return.

As Greg Satell noted in his blog Digital Tonto, in business finance ROI is actually used to identify the financial return on major investments or initiatives such as whole divisions or product lines, and not for more granular initiatives such as campaigns. Outside of finance circles there appears to be an increasing tendency, however, to use the term more loosely to relation to financial returns on smaller business initiatives. Let’s explore whether this actually makes sense.

Key Performance Indicators (KPIs)

Key performance indicators measure various types of actions, expressing different levels of engagement, which indicate intent that in turn can lead to behaviors of various kinds which have an impact on the financial bottom line. For example, an action such as a website visit represents a fairly low level of engagement and therefore not a lot of intent can be read into it; however, registration for a company’s software demo indicates a much higher level of engagement, and therefore a greater potential for intent that could include purchasing behavior that would impact the financial bottom line.

While KPI measurements are relatively easy to obtain, the correlations between exposure, intent and purchasing behavior have always been very difficult to establish. In this context, department store merchant John Wanamaker is often quoted. He stated more than a hundred years ago; “Half of the money I spent on advertising is wasted; the trouble is, I don’t know which half.

Markers on the ‘path to purchase’

Since Wanamaker’s time, corporations have continued to aim for as much clarity in the investment/return equation – after all, they owe it to their stakeholders to allocate resources as efficiently as possible. More recent technology innovations have helped to establish a more direct correlation between specific marketing campaigns and their results – direct marketing comes to mind –, but the ultimate solution to the ROI question remains elusive due to a simple reason which we as consumers can all intuitively understand – our purchasing decisions are influenced by a large variety of factors, some of which we are not even conscious of. As the price and complexity of a product or service increases, so does the variety of factors impacting our decision, and the amount of time it takes to come to one. After all, it’s one thing to buy a bar of chocolate in a deli; quite another to purchase a car or computer system. Marketers refer to this process as the sales cycle, but it might actually be more accurate to refer to it as the path to purchase – and this path is unique to every individual with each individual purchasing transaction.

The Holy Grail for marketing would be to be able to identify all the specific individual paths prospects take on their way to a purchasing decision. In this context, social media is promising, as we tend to increasingly exchange perspectives and opinions about products and services online, thereby leaving individual traces in cyberspace which can be captured as data points. Even though these systems are still immature, marketers today can in principle monitor online actions and intent related to specific products and services, and have them linked to business systems such as CRM. Marketers are more than ever able to track and monitor actions and devise intent, but they will never manage to accurately identify all variables impacting purchasing decisions, or accurately weigh these variables in terms of relevance. Say you were driving down a highway, and glanced at a billboard ad – how much did that impact the purchasing decision you eventually made for that product advertised there? As you cannot even accurately assess that, how can a marketer be expected to do so.

KPIs defined along an ‘engagement ladder’

With this information as the backdrop, let’s see if we can come closer to a model that as accurately as possible measures the success of a social media campaign in financial terms. First of all, let’s address the issue of key performance indicators. KPIs can be quantitative (web visitors, tweets, impressions, etc.) or more qualitative (tone of comments, recommendations, etc.) in nature, with the last category more indicative of intent. The graph below sorts KPIs along the typical marketing continuum of awareness, interest, engagement and action, creating an engagement ladder. As one climbs this ladder, engagement level increases, and thereby potential purchase intent; therefore the KPIs at the upper end of the ladder are more valuable from an ROI perspective, even though they do not directly show ROI.

Which metrics to select for a specific social media campaign depends entirely on the goals and objectives of the campaign, but it is imperative to define them, early in the campaign development process. In his excellent article on social media measurement, Chris Murdough from Mullen Communications identifies five stages in a social media measurement process, and choice of metrics is defined as part of the first step in the process

The correlation between marketing initiatives and revenue generation

Depending on the goals and objectives of the campaign, some metrics allow for a narrow correlation between campaign metrics and resulting revenue impact. For example, a store that wishes to increase in-store sales via a social media campaign could encourage its audience to download a coupon online which is valid exclusively at its stores. Or a technology consulting firm could as part of its campaign encourage its online audience to download a white paper or tip sheet, with the downloads tracked to eventual sales. However, keep in mind that correlation doesn’t necessarily imply causation. Many different markers on the purchase path could be at work – but at the very least, we might be able to link specific marketing activities to specific results.

Very often, the nature of the social media campaign is such that a revenue correlation cannot be identified as easily as with the store coupon example above. The correlation appears to be more indirect, but not necessarily less valuable. Many marketing activities are of that nature – for example, the CEO of the company speaks at an industry event. Will that have a revenue impact? It surely could, but except in a few rare instances, it will simply be another marker on the path to purchase for a specific subset of the attendees of that particular event. Or to stay in the social media realm; say you roll out a program on specific social media platforms to generate ideas to improve your product or service. Hundreds are generated, and a few dozen are implemented, exceeding the program goals originally set. Sounds like you hit the mark, but what’s its revenue impact? It will be indirect, take place over time, and be impossible to measure directly.

A company’s revenue stream can simply most often not be correlated directly with specific marketing campaigns or initiatives. That includes social media. What can be attempted is to measure the impact that marketing initiatives in the aggregate and over time have on revenue and/or revenue parameters such as the number of customers; the number of sales transactions per month; spend per customer; and up-sells and cross-sells. With a revenue baseline established, a range of marketing activities unfolding over time can be compared against fluctuations in these revenue parameters for a specific time period after the marketing programs have been executed.

The limitations of measurement

But even these calculations have their limitations, as sales are impacted by many more variables than marketing and advertising alone – there are variables such as the quality of the product or service, corporate activities, competitive initiatives, quality of service and more. Real world dynamics are just too complex to allow for simple equations and correlations. Econometric models can handle this complexity to a degree, but most companies cannot drum up the massive amount of data these models require and cannot afford the associated expense.

In conclusion, can the revenue impact of social media and other marketing programs be measured? Yes, but typically only in specific cases when a program is very narrowly defined, and results can be directly linked to the campaign. Marketers simply have no choice but to operate in a real-world environment which is complex by nature. Any correlation identified does not necessarily imply causation, and results are therefore by definition inconclusive and tentative.

A few suggestions…

Despite all that said, it of course still makes sense to build as much measurement into your program as possible. Here are four recommendations for the development and success measurement of social media campaigns:

1. Always define goals, objectives and metrics early on in your campaign.

2. Dependent on your goals, aim for KPIs as high as possible on the engagement ladder.

3. Aim for KPIs that allow for a direct correlation with revenue impact—if at all possible.

4. Measure throughout the process, and incorporate learnings into future campaigns.

Stephen Debruyn is an international marketing strategist and social media aficionado with extensive experience in blending new Web-based marketing strategies with traditional marketing disciplines to maximize bottom line results. He can be reached at debruyn.stephen@gmail.com or on LinkedIn.

When we left off a few weeks ago, birthers, tea-partiers, grandma-killers and others from the wing-nut fringe had been verbally assaulting their elected representatives with charges that health care reform was the medical equivalent of the Wehrmacht blitzkrieg in Poland. Town hall meetings, a hallowed American ritual of representative democracy harking back to the nation’s founding, had previously stood for the right of the people to engage in reasoned debate with their elected officials back home from Washington. In the steroidal 2009 version, these otherwise frequently boring gatherings had been jacked by extremists armed with vitriol, cameras, made-for-tv signage, pre-printed press releases – and in several cases – exposed handguns.

The intent of the organizers of these protests was to intimidate the cowering politicians, impressionable mainstream media and their fellow voters into rejecting the already badly eviscerated health care legislation Obama had offered as one of his first initiatives, naively thinking his Republican and conservative opponents were still overawed by his November victory. As this page has noted before, the anger on display had less to do with health care than with the growing public awareness that the financiers who had caused the 2008 financial crisis were going to benefit handsomely from the Administration’s financial rescue package while the non-financial economy languished and the nation’s unemployment rate continued to climb. The Obama opponents were simply sailing before the angry populist wind.

Flash forward to mid-October 2009: as numerous reports make clear, the national mood has begun to change – and not in the way the ageing town hall ‘roid ragers imagined. The capital markets have stabilized, Obama’s poll numbers are rising, he won the Nobel Peace Prize (more on that below), various senior Republicans like Schwarzeneggar, Tommy Thompson, Bob Dole, Bill Frist, Bobby Jindal (!) have expressed some support for health reform, the Senate Finance Committee has (FINALLY) reported out a health care bill with a Republican supporter (!) – albeit the last of five congressional committees to do so and two months after the others – and passage of some sort of bill seems assured. Huh?

The bill is pretty much the same, the bankers look to rake in historically huge bonuses based on inside trading with the public’s money and unemployment continues to rise. So what changed?

First and foremost, engagement, leadership and demonstration of a willingness to fight.

The President finally emerged from his self-imposed internal summer exile and involved himself in the health care debate. Lo and behold! The numbers began to move. Something like a gazillion commentators had been predicting this, so it is not exactly a big aha! moment. Why did he wait so long?

Sometimes it is better to be lucky than smart, though this President was a little of both: the ultimate public reaction to the August town hall demonstrations was largely negative. Americans don’t like being bullied and public displays of intemperate behavior, let alone veiled threats of violence tend to backfire. However, the Obama strategy had been set before the town halls occurred. That strategy was to let the Congress battle over the details and then the President would come down from the mountain top (Sinai? Olympus?) to bless the final product. Surprisingly, the WH strategists had not anticipated the Republican resilience or that circumstances linked to the financial service crisis would give them an opening. Once that became apparent, the need for the President to publicly own this issue became urgent and he responded.

Secondly, in addition the unintended consequences of the opposition bullying, the WH became more forceful in calling out opponents and those in the media who were less than scrupulous in their reporting. It is nice to want to offer a commanding consensus, but as this White House may slowly be learning, to do so requires that one demonstrate the ability to cause others political and reputational discomfort if your will is ignored or denigrated.

In sum, those interested in managing reputation or communications in either the public or private sectors will note that having a popular principal take forceful ownership of a contentious issue is frequently the best way of swaying opinion, even if popular support is in doubt; leaders influence perceptions of reputation so a leader with capital must often expend some of it to get their way.

Jon Low is a partner in Predictiv, a consulting firm that measures the financial impact of reputation, brand, communications, intellectual capital, sustainability and other intangibles. He can be reached at jon.low@predictiv.net.

The reason is quite simple: Customer connectivity. As digital platforms become the preferred consumer communication platform, businesses are forced to follow their customers online. And by connecting with clients and customers online businesses must deal with the good, the bad and the ugly.

A case study example noted in the book Digital Strategies for Powerful Corporate Communications (McGraw-Hill 2009) demonstrates how quickly corporate ad messaging can translate into miscommunication and push back: A Johnson & Johnson ad meant to introduce mothers of newborn toddlers to its Motrin pain relief product as a cure-all from a stressful day for trendy moms that carry their children.

The ad soon found its way to the Web, appearing on YouTube and Twitter as angry Moms began forwarding the video and blogging about it – even going so far as to set up a Twitter page “MotrinMoms” – in outrage over the ads insensitivity for comparing their children to fashionable “arm candy.”

The fallout was a humbling moment for J&J, which later admitted to the mistake and its inability to respond in a meaningful way. J&J’s ad agency wasn’t even aware of the Twitter and YouTube backlash; however the wake up call proved a valuable lesson for the venerable company that has seen crisis before, learned and moved on in a forward thinking fashion. J&J is now one of the leading standards by which digital communications strategies are measured.

And for businesses wavering on the sidelines waiting for the other shoe to drop – its has. Last week, a Manhattan Supreme Court decision sided with a consumer for blog posts complaining about a finance course offered by the Swiss Finance Academy, according to the New York Law Journal. The Court found that the blog posts by a former student , which claimed that the Academy was a “bait and switch company” after he was expelled for what the Academy deemed was for the student’s rude and insulting behavior to staff member and for failure to pay tuition, were not defamatory in nature.

The former student denied posting such complaints to www.ripoffreport.com. However, he argued that even so, such speech was protected speech. The court agreed, stating such speech was “subjective expression of consumer dissatisfaction,” and thus not actionable because they were personal opinion. Further, the court found that the website owned by Xcentric Ventures was protected under federal law by the Communications Decency Act and therefore not liable.

Any questions comments or concerns – leave them at www.twitter.com/ThinkComLLC