Northeastern University Social Media Discussion Basd on the attached article to answer three questions about the social media ROI FA L L 2 0 1 0 V O L . 5

Northeastern University Social Media Discussion Basd on the attached article to answer three questions about the social media ROI FA L L 2 0 1 0
V O L . 5 2 N O. 1
Donna L. Hoffman and Marek Fodor
Can You Measure the
ROI of Your Social
Media Marketing?
REPRINT NUMBER 52105
MARKETING
As social media applications
like Facebook (here, cofounder
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.
CanYou Measure the
ROI ofYour Social
Media Marketing?
You can. But it requires a new set of measurements that begins
with tracking the customers’ investments — not yours.
BY DONNA L. HOFFMAN AND MAREK FODOR
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 prepared 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.1
COURTESY OF FLICKR USER CVRCAK1, STARBUCKS, SOUTHWEST AIRLINES, TARGET, DELL, SQUARE ENIX, BURGER KING
THE LEADING
QUESTION
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.
FALL 2010 MIT SLOAN MANAGEMENT REVIEW 41
MARKETING
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
42 MIT SLOAN MANAGEMENT REVIEW FALL 2010
time spent with the application (the blog in this
case) as well as more active investments, such as the
valence of blog comments and the number of Facebook 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,”2 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.3 This “4c’s” perspective is important because it leads to a consumer-oriented framework for
evaluating social media. Most managers still consider
SLOANREVIEW.MIT.EDU
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.
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 crowdsource 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
SLOANREVIEW.MIT.EDU
THE WORST THAT CAN HAPPEN
IS WORSE THANYOU THINK
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.
Case Study: Raging Cow. In 2003, Dr. Pepper/7UP elicited consumer anger with its Raging Cow campaign. The company
enlisted a group of six teenagers and 20-somethings to post favorable reviews and spread positive word of mouth about its
new flavored milk drink, without disclosing that the enlisted
bloggers received incentives like product samples, T-shirts and
gift certificates. On the surface, the blogs looked impartial and
did not appear to be affiliated with the company or the drink,
except for a few obligatory links to the Raging Cow site. But
closer examination by a group of suspicious bloggers revealed
that the company was behind the blogging effort. The marketing campaign was
subsequently attacked in the blogosphere. Bloggers started a boycott, and the
product disappeared.
Case Study: Motrin. Johnson & Johnson’s Motrin
brand launched a video campaign in 2008 targeted to
“baby-wearing” mothers. This was a 45-second commercial in which the voice-over of a supposed mom
talked conversationally about the burdens of wearing
your baby in a body sling. A number of mothers were so
offended by the video, which was viewed as both condescending (“Wearing your baby seems to be in
fashion” was the opening line of the spot) and exploitive in promoting Motrin as a cure for the back-breaking pain of baby wearing,
that they took to Twitter and the blogosphere to criticize the brand in real time.
Riding off the momentum of enraged tweets from baby-wearing defenders,
the “Motrin Moms” debacle immediately became a top trending topic on Twitter Search. But instead of quick damage control, Motrin did nothing. Only after
mainstream media coverage, during which countless social media experts
weighed in and branded the effort with a unanimous thumbs down, did Kathy
Widmer, McNeil Consumer Healthcare’s vice president of marketing, finally
offer a limp apology. What’s particularly relevant here is that the bulk of these
events unfolded over the course of 24 hours on a weekend.
have unique opportunities to develop social media
programs that tackle awareness, engagement and
word-of-mouth objectives. Social media applications can fulfill any of these objectives, where the
appropriate set of metrics depends on the objective.
(See “Relevant Metrics for Social Media Applications
Organized by Key Social Media Objectives,” p. 44.)
To get an ROI estimate, managers would link
the social media metrics to an additional set of
proxy benchmarks (e.g., the likelihood of future
FALL 2010 MIT SLOAN MANAGEMENT REVIEW 43
MARKETING
RELEVANT METRICS FOR SOCIAL MEDIA APPLICATIONS
ORGANIZED BY KEY SOCIAL MEDIA OBJECTIVES
This table organizes the various social metrics for social media by classifying them according to social media applications and social media performance
objectives. While it is not exhaustive, it should give marketers a useful starting point for measuring the effectiveness of social media efforts because all
of the metrics listed are easily measured.
SOCIAL MEDIA APPLICATION
BRAND AWARENESS
BRAND ENGAGEMENT
WORD OF MOUTH
Blogs
•number of unique visits
•number of return visits
•number of times bookmarked
•search ranking
•number of members
•number of RSS feed subscribers
•number of comments
•amount of user-generated content
•average length of time on site
•number of responses to polls,
contests, surveys
•number of references to blog in
other media (online/offline)
•number of reblogs
•number of times badge displayed
on other sites
•number of “likes”
Microblogging
(e.g., Twitter)
•number of tweets about the brand
•valence of tweets +/−
•number of followers
•number of followers
•number of @replies
•number of retweets
Cocreation
(e.g., NIKEiD)
•number of visits
•number of creation attempts
•number of references to project
in other media (online/offline)
Social Bookmarking
(e.g., StumbleUpon)
•number of tags
•number of followers
•number of additional taggers
Forums and
Discussion
Boards
(e.g., Google Groups)
•number of page views
•number of visits
•valence of posted content +/-
•number of relevant topics/threads
•number of individual replies
•number of sign-ups
•incoming links
•citations in other sites
•tagging in social bookmarking
•offline references to the forum
or its members
•in private communities: number of
pieces of content (photos, discussions, videos); chatter pointing to
the community outside of its gates
•number of “likes”
Product Reviews
(e.g., Amazon)
•number of reviews posted
•valence of reviews
•number and valence of other users’
responses to reviews (+/−)
•number of wish list adds
•number of times product included
in users’ lists (i.e., Listmania! on
Amazon.com)
•length of reviews
•relevance of reviews
•valence of other users’ ratings of
reviews (i.e., how many found
particular review helpful)
•number of wish list adds
•overall number of reviewer rating
scores entered
•average reviewer rating score
•number of reviews posted
•valence of reviews
•number and valence of other users’
responses to reviews (+/−)
•number of references to reviews in
other sites
•number of visits to review site page
•number of times product included
in users’ lists (i.e., Listmania! on
Amazon.com)
Social Networks
(e.g., Bebo, Facebook,
LinkedIn)
•number of members/fans
•number of installs of applications
•number of impressions
•number of bookmarks
•number of reviews/ratings
and valence +/−
•number of comments
•number of active users
•number of “likes” on friends’ feeds
•number of user-generated items
(photos, threads, replies)
•usage metrics of applications/
widgets
•impressions-to-interactions ratio
•rate of activity (how often members
personalize profiles, bios, links, etc.)
•frequency of appearances in
timeline of friends
•number of posts on wall
•number of reposts/shares
•number of responses to friend
referral invites
Video and Photosharing
(e.g., Flickr, YouTube)
•number of views of video/photo
•valence of video/photo ratings +/−
•number of replies
•number of page views
•number of comments
•number of subscribers
•number of embeddings
•number of incoming links
•number of references in mock-ups
or derived work
•number of times republished in
other social media and offline
•number of “likes”
44 MIT SLOAN MANAGEMENT REVIEW FALL 2010
SLOANREVIEW.MIT.EDU
purchase by a user engaged with the company’s
brand through a specific social media application,
or the reach of a specific word-of-mouth element
and subsequent conversion to future sales). For
example, a popular personal care brand ran a largescale integrated ad campaign on MySpace in the
second quarter of 2008 and used matched consumer panels to link online social media behavior
to survey measures of purchase intent as well as
actual in-store sales. The results showed an ROI of
28% for the ad campaign.4
As this example shows, companies are starting
to see some success measuring the ROI of their social media experiments, including some that offer
the consumer a relatively complex social media experience. For example, in 2007, Kellogg created an
integrated digital media experience for the “Special
K Challenge” featuring a support website that
offered consumers the opportunity to customize a
diet using Special K cereal, participate in online
forums with pointers from experts, join a Yahoo!
e-mail support group and click through to Amazon.com to purchase the cereal. Kellogg, which was
able to translate those website interactions and
click-throughs to market response over 18 months,
found that the online ROI for Special K cereal was
twice as large as that from television.5 Vocalpoint,
Procter & Gamble’s social networking site, has over
350,000 members who talk about P&G products;
by linking these customer investments in brand
conversation to sales, the site is credited with market response increases of up to 30%.6
To be sure, there is some complexity involved in
calculating the ROI of a sophisticated social media
campaign, not necessarily limited to determining
the size of the test and control samples and the
ability to match online customer profiles with
offline purchases. However, even small-scale social
media efforts can benefit from plugging in segment-level estimates and proxy measures to
quantify how the customer investments from brand
awareness, brand engagement and word of mouth
affect the purchase decision funnel and, ultimately,
the bottom line. We expect that over time the number and quality of the necessary inputs will increase,
but marketers can find even rough proxy estimates
useful in the meantime to generate the calculations
necessary to link marketing investments to cusSLOANREVIEW.MIT.EDU
tomer investments and market response.
Below we discuss three social media objectives
and provide several examples of each.
Brand Awareness Traditionally, brand awareness
is measured through tracking studies and surveys.
Online, however, marketers have a number of ways
to track brand awareness.
In the social media environment, every time a
person uses an application designed by or about the
company, the company gains increased exposure to
its brand, often in highly relevant contexts. For example, several days before Election Day 2008,
Starbucks ran a spot on the “Saturday Night Live”
show as well as on YouTube, promoting a free coffee
giveaway. Twitter mentions of Starbucks skyrocketed, averaging a mention every eight seconds,
which translated into a sizeable increase in brand
exposure.7 Such usages enhance and strengthen
associations of the brand in customers’ minds
through increased exposures. Thus, brand awareness is a key social media objective.
Another example is Naked Pizza, a New Orleans,
Louisiana-based business catering to health-conscious pizza lovers, which tweeted about its pizzas
in 2009 and successfully drew around 4,000 followers in just a few months. The company also kept
track of sales that were spurred by a billboard outside its shop encouraging customers to follow it on
Twitter. The microblogging campaign’s success culminated in the company breaking its one-day sales
record, with more than 68% of its s…
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