Some 38% of large consumer companies report a positive return on their social media investments, more than double the number of companies with a negative ROI (18%), according to a recent report by Tata Consultancy Services (TCS).
However, 44% of consumer companies haven't yet measured the return on investment of their social media efforts: 32% haven't measured ROI but plan to, and 12% have no plans to measure the return.
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Below, additional key findings from the report, which was based on data from a survey of 655 large consumer companies located in North America, Europe, Asia-Pacific, and Latin America.
Return on Investment by Industry
Industries that benefit from social media tend to sell products and services consumers are passionate about. Those industries—media, retail, high tech, travel, and telecom—have products and services that are easier to create avid "tribes" of loyalists around, accofding to TCS.
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Regional Variations
The ROI of social media varies markedly by region of the world:
- Asia-Pacific respondents were the most likely to report a positive ROI: 55% claimed they had gained.
- By comparison, only 35% of North American and 29% of European respondents said their social media efforts had resulted in positive ROI.
- Asia-Pacific respondents were also less likely to have negative returns.
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Social Media vs. Big Data
- Average spend in 2013 on social media was $10 million per respondent.
- This is significantly less than what they spent in 2012 on Big Data ($88 million).
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About the research: The report was based on data from a survey conducted in in June and July 2013 of 655 large consumer companies located in North America, Europe, Asia-Pacific, and Latin America (average revenue of $15.6 billion; a median of $4.9 billion).
COMMENTARY: Social Media campaigns are uniquely measurable but not all measures are equal and indicate true effectiveness. Different social media actions or online conversations have different values and influences upon consumer behaviour.
Multiple metrics, from number of followers and fans, to positive or negative sentiment, to reposts and influencer mentions, can be difficult to distinguish from one another. In effect we can become trapped in a state of analysis paralysis where there is too much social media data and too little understanding.
An agreed industry standard is needed but, until a consensus arises, we've developed a structure to categorise the value of different monitoring tools/metrics and start building an measurement and tracking model.
Spectrum of Online Relationships (Click Image To Enlarge)
By classifying social media conversations into three categories:
- Exposure
- Engagement
- Collaboration
Based on the Spectrum of Online Relationships that underpin them (fig 1), we can group their associated metrics and monitoring approaches. Then by examining the overall performance of the activity in each category we can begin to establish the effectiveness and conversion rate of social media campaigns and ongoing activity.
The idea is to simplify all the different effectiveness measures out there so comparisons/trends can be made and then these can then used alongside true Social ROI calculations.
Social Media Monitoring, Metrics and measurement tools by category (Click Image To Enlarge)
Categorising social media activity this way means it is possible to take a holistic approach and use aggregates of the different monitoring techniques – and metrics that will vary according to the nature of every campaign and its platform type – to compare the performance between each category and hence work out the relative success of the social media activity. The ultimate goal of this approach is to be able to compare the effectiveness of different social media campaigns when comparing like with like is often difficult.
Using this structure means that the results of the Exposure, Engagement and Collaboration categories can be compared to identify performance and trends.
We’ve arranged an example of this way of thinking as an equation (which is sure to attract the wrath of certain social media guru's who rightly point out the falseness of the different social media “ROI metrics” and silly equations out there, but it is not meant to be a magic bullet or mathematically sound – it is a visual way of structuring thinking about the principles at play.
For example, one measure of a social media campaign’s momentum – Social Media Traction – would be to compare the ratio of Engagement performance to Exposure performance where a +1 would indicate success and social media momentum as people moved from being merely exposed to a campaign to becoming more engaged.
Any measure/inputs of Exposure or Engagement (or even Collaboration) would differ for each campaign and organisation – as I said earlier the idea is to simplify the different effectiveness measures and monitoring techniques so comparisons can be made and trends identified.
Formula for Measuring Social Media ROI or Social Media Traction (Click Image To Enlarge)
Equally using this approach to define Social Media Conversion and Advocacy would require a focus on activity and metrics within the Collaboration category. Indeed, the ratio between Engagement performance and Collaboration performance could be seen as being an indicator of people moving from discovering, sharing and “playing” with content to acting upon it – whether making it their own passion or hopefully even changing purchasing behaviour.
Ultimately this proposed approach to Social Media monitoring/measurement will need to be linked back to ROI. Can we prove whether good results in either category – or a good Social Media Traction or Social Media Conversion and Advocacy score – can relate to a lower Cost per Acquisition or an increase sales?
This will require someone much better at maths than me but I believe that some agreed structure and model is vital to proving the long term value of social media and the real web to the board and CFO.
Encapsulated in the above is this simple graphic which explains the how to measure the ROI of social media:
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Courtesy of an article dated October 16, 2013 appearing in MarketingProfs and an article dated October 1, 2011 appearing in David Carr | Digital Fragments And Brand Reality Creative
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