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Social Media Marketing ROI - To Be or Not To Be!

This blog posting is an edited and revised consolidation of a series of posts written by

Dag Holmboe

as an ongoing discussion on whether or not, and if so, then how to generate Return on Investment (ROI) calculations and performance metrics accountability to be used in evaluating Social Media Marketing campaigns, initiatives and the wisdom of making the investments they require.

Social Media Gurus - ROI Measurement... NYET!

As many of us in the automotive digital marketing and social media marketing communities have observed and witnessed, there are generally two perspectives put forth by two groups of social media marketing fans, users, service providers and practitioners concerning ROI calculations. One group argues that the primary reason ROI should NOT be part of Social Media Marketing operations and management is because the development of Social Media and related Marketing practices is so recent that a valid set of widely accepted Key Performance Indicators (KPI) that would be used to calculate the ROI have not yet been defined. Moreover, this "ROI-Not Yet" Group argues that trying to force ROI measurement practices upon Social Media Marketing investments would be counter productive and hurt the rate of strategy and tactics "Best Practices" development. This argument is further extended to support the idea that there is no valid reason to slow down the work on Social Media due to lack of ROI metrics. They argue that the right measurement metrics will emerge on their own and be generally accepted at some point in the future after strategies and tactics are more clearly defined and established.

Social Marketers - Those That Some Would Call "Car Guys"

Them there is the other group of Social Media Marketing practitioners that demand a more focused approach to measurement and ROI calculation. This group argues that even though social media is a recent phenomenon, the fundamental businesses principles that apply to all business investments need to be applied to Social Media Marketing – when car companies or dealers invest in a marketing strategy, they expect a return.

According to Dag Holmboe,

the idea that something is so recent, so new, so different that you cannot calculate the ROI is simply hogwash. Holmboe argues that measurement tools and techniques must be implemented to justify the headlong rush into implementing social media marketing, while pointing his finger back to the Internet bubble of 1990’s. In regards to Holmboe's perspective, Ralph Paglia agrees and is likewise committed to keeping an open and frank discussion on Social Media Marketing ROI, what it looks like, the measurements needed and how it can best be tracked, going within the Automotive Digital Marketing Professional Community.

Purpose of this ADM Blog Posting

To share Holmboe's ideas, recommendations, tools and insights while opening up a discussion amongst ADM Professional Community members that will further clarify the discussion. This post will explain and define different types of ROIs used for different social media marketing campaign purposes, and that there are multiple ways of calculating an ROI based on various sets of metrics. This revised article uses three different sections to make its case, and there will be follow up posts with updates and new tools as we find or create them...

In any automotive marketing campaign, dealers and car companies expect their returns in the form of profits to be more than the amount they invested within a pre-determined time frame. This type of ROI is used when dealers are seeking to determine which types of marketing investments yield the most amount of revenue and profits. In other words, where is the best marketing channel for the dealership to invest their budget

Is Reducing TDS a Valid Form of ROI?

There is another side to utilization of ROI analysis, which we have seen become quite popular during the past two years of recession and sales decline in the American auto industry. Dealers can also use the analysis that comes from an ROI calculation when deciding which types of marketing to cut in order to lower costs.

Hybrid ROI Calculations - Best of Both Worlds?

Then there is the hybrid of both ways to use Marketing ROI analysis. For instance, in the case of Service Reminders, you may use an ROI calculation to see the estimated savings on using Email and Social Media Messaging as a replacement for traditional "Snail Mail". Even though you are not able to measure an increase in service Repair Order written to those receiving the electronic reminders, since the response rate is the same, you are reducing the Total Dealer Spend (TDS) for that marketing function. Your service reminder marketing costs have been reduced, so you have a positive ROI.

What About Social Media Marketing Risks?

What few professionals have been willing to discuss within the subject of automotive social media marketing, is that when calculating the ROI of social media, you need to factor in any additional risks that are being taken by the dealership that are inherent to social media and absent from other uses of marketing budgets. Until FTC releases guidelines, and States Attorney General issue briefs outlining a dealer's responsibility with respect to advertising and disclosure regulations such as "Adverse Action Notification" and payment based, cash rebate or lease payment promotions communicated to consumers on dealer-sponsored social networks or within automotive community forums, the auto industry, and dealerships in general, will need to assess how risk-adverse they are. Those that are the least aggressive and most risk averse should resist using Social Media Marketing until their perception of risk has been reduced.

This Month, This Year and From Now On

As there are different ways best suited to calculating the various types of marketing campaign ROI, there are also different types of social media marketing campaigns. Let's use three types for the purpose of creating ROI categories:

  1. Short term
  2. Long term
  3. Ongoing

There will also be social media campaigns that may not easily fall into an ROI analysis category, such as fund raising efforts, community outreach programs, public service messaging and even recall campaign and product launch support. Each of these non-ROI measurable types are defined by reach and messaging delivery rather than more traditional leads and vehicles sold.

In the following section we outline ways of calculating the Social Media ROI. Links included go to Jeremiah Owyang and Charlene Li of Forrester Research, Bill Johnston of Forum One Communications, and Lithium Technologies and Powered Social Marketing.

Social Media Marketing ROI – Debunking the ROI Myth

From the previous section, we read that there is a group of professionals who argue that Social Media ROI can NOT be calculated. And there is an opposing group that argues the point that Social Media Marketing ROI can, and must be calculated. This article is based on the blog posts and argument put forth by Dag Holmboe that Social Media ROI can be calculated. We will use Holmboe's logic, explanation and recommended tools to describe and outline several different ways of calculating the Social Media ROI.

First up is Forrester’s Social Media duo Charlene Li and Jeremiah Owyang. In 2007, Charlene and her team conducted a study on the ROI of blogging where they saw that it is fairly easy to calculate the ROI of blogging. They did not calculate a direct profit based ROI of their blogging campaign. Instead, they calculated the replacement value and the comparable cost of key functional objectives achieved with social media to equivalent advertising, PR and word of mouth marketing if these objectives would have been achieved using traditional media. They then transposed the value metrics to the blogging calculations and compared the cost between traditional media and social media based on the same values. The value and the cost of traditional media is well known so based on the same value but difference in cost, the ROI of blogging can be accurately determined.

Charlene quotes a Social Media Marketing ROI example: “FastLane has about 100 people commenting on the blog each month, which is equivalent to gaining customer insight on products and brands from a traditional focus group. We estimated that the value of this was equivalent to running a focus group every month at the cost of $15,000 a month, or $180,000 a year. Voila – there’s the value of the blogging benefit laid out in black and white.”

This method can be extended to the ROI of Social Media with similar results.

For better visualizion of the study, refer to Shwen Gwee’s slide deck called “Can Pharma Make a Business Case for Social Media.” The study metrics start at slide 60.

So one way of measuring the Social Media ROI is by comparing the value and the cost of key metrics from traditional media with similar key metric from Social Media.

Another way of calculating the ROI is doing what Powered, a social marketing company, did. They asked the customer!

Powered is a social marketing company that builds managed online communities for their clients. The clients invite their customers in to the online communities for building stronger B2C relationships. The managed online communities “provide the benefits of social networking with engagement marketing, which result in a high conversion to product purchase, greater affinity for the brand and key insights into consumer behaviors.”

A research company, New Century Media (NCM) conducted a study of Powered’s social marketing programs. NCM asked customers questions in regards to purchase intent, brand affinity and brand loyalty, and then compared the results direct marketing and mass marketing.

Based on the NCM’s study, the Social Media ROI using Powered’s techniques where 60:1. This compares very favorable to direct marketing at 11:1 and mass marketing at 2:1 (download the report forSocial Media ROI details and references – it is a great read).

The last comment is from Bill Johnston at Forum One. Bill has compiled a set of publicly available data that are related to Social Media ROI:

  1. Community users remain customers 50% longer than non-community users. (AT&T, 2002)
  2. Community users spend 54% more than non-community users (EBay, 2006)
  3. Community users visit nine times more often than non-community users (McKinsey, 2000).
  4. Community users have four times as many page views as non-community users (McKinsey, 2000).
  5. 56% percent of online community members log in once a day or more (Annenberg, 2007)

We have discussed a few ways of calculating the Social Media ROI; Charlene and Jeremiah compares value and cost of key metrics between traditional media and social media, while NCM simply asks the consumer and then compares the ROI with direct and mass marketing. Both cases lead to big advantages to social media over traditional media – and that does not include other online social media advantages like detailed measurements.

Social Media Marketing ROI – Tools and Directions

From the previous two sections; Social Media Marketing ROI – To Be or Not To Be and Social Media Marketing ROI – Debunking the ROI Myth, we have seen several different different ways of calculating Social Media Marketing ROI performance metrics.

In this third section, titled Social Media Marketing ROI - Tools and Directions and which is based on (and linked to) Holmboe's third blog posting in the series he wrote about Social Media Marketing ROI, we introduce a down-loadable Excel spread sheet (link is at end of article) for calculating the ROI on a Social Media Marketing campaign. The spread sheet is based on the following:

  1. Work that Charlene Li and Jeremiah Owyang of Forrester Research did in 2007 on the ROI of blogging.
  2. Work that Bill Johnston of Forum One has done for Online Community ROI.
  3. The remaining work is based on un-sourced research.

General comments

For this research, we identified 13 parameters that play a role in determining the ROI of Social Media. It is not necessary to include all parameters in a ROI calculation – pick the parameters that make sense.

The general idea is that for each parameter and calculation, we need to determine the offline cost. Then, comparing the offline cost with the estimated cost of gaining the same results (increased revenue, decreased cost, more customers etc) using online Social Media, we can determine the ROI (re-read post Social Media ROI – Part 2 for more info). Note that this spread sheet does not estimate the offline cost.

If you, the reader, know these values, I will be happy to add them into the spreadsheet as additional calculations.

A few notes about the Social Media ROI spread sheet

  1. First, the walk-through is long so you might want to download the spread sheet first (the link is at the bottom of this post).
  2. The spread has two sections, a data input section (for entering data) and a results section (for viewing the results).
  3. Field colors
    • Yellow fields are for input. The spread sheet is already filled with example data. As you work through the calculations, just erase the example data and add your own data.
    • Blue fields are calculated output fields used in the results section
    • Green fields are used both for input (like a yellow field) and in the results section (like a blue field). We use green fields where we enter a number that will be used in the results section but there are no additional calculations based on the entered number.
    • White – a calculated field not used in the summary.
  4. The spread sheet calculates all number on a monthly basis.

So, let’s walk through the spread sheet

  1. Traffic (unique visitors) - the spread sheet allows for more than one market.
    1. You enter the total population of your market(s) and the % of that market you believe will register on your site. Then you enter the % of the registered users that will become active users (users that log in at least once a month). The active user base is normally about 25% of the registered user base.
    2. You now arrive at your total number of active users on the site.
    3. Now, estimate the cost of advertising to the same number of users in a similar content channel, on a monthly basis, and you have your ROI.
  2. Traffic (page views) - also used for ad revenue calculations below.
    1. Estimate the number of visits per active user per month, then estimate the number of page views per visit, and you arrive at number of page views per month.
    2. Use this number to estimate your brand visibility and cost for advertising in similar channels on a monthly basis.
  3. Ad revenue
    1. Take monthly page views from above, estimate % of monetized pages, and average CPM revenue, and you arrive at your monthly ad revenue (don’t forget to divide the page view with 1,000 because CPM is cost per thousand impressions).
    2. Note, in the spread sheet example, the ad revenue is not great. However, it is important for the ROI calculations to include that the Social Media can increase your revenue if you include ad revenue. On sites with more traffic and more homogeneous user base etc., the ad revenue becomes very healthy.
  4. Demographic data
    1. Each registered user is asked to add demographic data in a member profile. Based on this data, you can target your audience differently.
    2. Estimate the cost of gathering the same demographic data offline and you get your ROI.
  5. Search engine positioning
    1. This is a bit tougher – estimate a percentage of search results that will land on the first page of a search query driven by the social network.
    2. Now, estimate the cost of search engine optimization, AND the cost of paid search for getting the same search results. As you see, in this case we are not comparing to offline costs, instead we are comparing two different types of online costs; one driven directly by better keyword search and higher page rank (based on users linking to your site), and the other driven by paid SEO and paid search.
  6. Member value – ‘recommenders’ and ‘approvers’ user profiles.
    1. All users are not created equal. By company guidelines, some employees are only allowed to recommend a product purchase (eg workers, manager, directors), while other employees are allowed to approve product purchases (directors, VP-level and C-level). We call those ‘recommenders’ and ‘approvers’.
    2. In this case, enter a percentage of your user base that you estimate are allowed to recommend a purchase. The remaining number will be automatically calculated.
    3. Estimate the cost of getting these numbers offline, and you get your ROI.
    4. Note that the user base can be broken down much further than only two sections. You also might want to break down each market in different types of user profiles.
  7. Responsiveness to ads – based on a study by Media6, a consumer who is connected with a customer of the firm (“network neighbor”), is 2 – 30X more responsive to ads.
    1. Estimate the number of active users that are also a current customer of your firm. Then estimate the number of network neighbor that are non-customers (ensure you are not double counting) – I estimated 1.2, meaning that out of all connections (friends) that one current customer has, 20% are non-customers. I estimated a multiple of 5, meaning that a network neighbor is 5 times more likely to be response to an ad.
    2. The number you arrive at; I call “units of responsiveness.” The higher the number, the more responsive users are to purchase.
    3. Now, estimate finding the same number of units of responsiveness using off line channels, and you have your ROI.
  8. Trade media mentions
    1. Estimate the number of times the trade media will mention the product or company per month because of your social network.
    2. Estimate the cost of advertising in similar channels and you have your ROI.
  9. User mentions – Word of Mouth marketing
    1. Estimate the % of active users who will mention the product or company, per month, on average once (on average only one time) to someone who is not yet a customer.
    2. Based on the resulting number, estimate the cost of hiring a buzz agent that can generate similar result, and your have the ROI.
  10. User insights – unsolicited comments
    1. Again, users are not created equal. In this case, we break down users by the amount of content a user generates (UGC), and we do that by the 90-10-1 rule.
      1. Consumers of data (90% of active users) generate no content.
      2. Enrichers of data (10% of active users) enrich other user’s content.
      3. Creators of data (1% of active users) create own content.
      4. Yes, it does not add up to 100%, and also different social networks have different numbers. Other organizations define more user types, for instance Forrester define 6 user types.
      5. It really does not matter how you define it, as long as there is some distinction between users with respect to UGC.
    2. Then enter the number of insights you think an enricher and a creator generates a month. Note that you are not entering the number of contents that they generate, instead we are looking for the number of real and valuable insights.
    3. You now have an estimated number of insights generated by the community on a monthly basis. Estimate what an offline focus group would cost, per month, to generate the same type of insights (Charlene Li estimates $15,000/month or $180,000/year).
  11. User insight – solicited comments
    1. Using the social network, we can generate polls and surveys to an engaged user community.
    2. Specify the number of polls and surveys per month, average number of questions, and the % of active user taking the poll, and also the % of answers that you estimate will give you beneficial insight. The result is the number of insights you will gain based on requested feedback from the user community.
    3. The number of insights can again (as with unsolicited comments) be used as a base for estimating the offline cost of using focus groups.
  12. Increased sales efficiency
    1. This is a tough one again. Compare the cost of selling to the same user group outside of the social network to selling to the same community inside the social network, and you should see increased sales efficiencies selling to the social network user group (see the above point about “responsiveness to ads”).
    2. Enter an estimated increase in sales efficiency. Based on current sales, use this percentage as a guide to calculate the total amount saved.
  13. Reduced impact from negative UGC
    1. By monitoring the social network, you will quicker find disgruntled users. Even if the negative UGC does not start on your social network, eventually your users will start chatting about it and you will quicker pick up on it, and can therefore quicker answer it and hopefully diffuse it.
    2. How do you quantify the reduced impact of negative UGC? Estimate a percentage that seems reasonable – it is a tough one again.
    3. Estimate the offline cost of reducing impact with the estimated number using the social network, and you should have your ROI.

Use this link to download the Social Media ROI Spreadsheet.

Two things before you download

  1. If you use the Social Media ROI spread sheet, please link back to this blog post and source credit Dag Holmboe.
  2. If you change the Social Media ROI spread sheet, please email Dag Holmboe the changed spread sheet together with a note describing the changes (email:

Above edited from 3 original articles written by Dag Holmboe




Social Media Marketing ROI – Which Group Emerged Victorious in 2010?

During the past year a few things have changed in the Social Media ROI world. The most important thing – and the very best – is that the discussion whether we “should or should not measure Social Media ROI” have changed to “how do we measure Social Media ROI?”

The difficult part of measuring the Social Media ROI has been to define the return. Some people aruge that the return should be return on engagement or return on innovation however that does not make the return useful in a ROI calculation. Many blog postings use application or web analytics to calculate the Social Media ROI but again those numbers are not useful in the ROI calculation. The idea is that you need to ensure that the value of the return is in dollars and cents otherwise, very simply, you cannot calculate the Social Media ROI.

The return on Social Media ROI is actually an aggregate of many return channels.

For instance, a return channel can be the value of a consumer insight. We know that insights are good – insights are used by the company to enhance its products and services – so therefore an insight has an intrinsic value (when we put a dollar value on a return channel, we say that we normalize the return channel into dollars and cents). If your social media campaign generates insights, then your social media campaign generates value and that value is your return channel for insights.

Another return channel is trade media mentions. If your social media campaign is good enough to be written up by the trade media, then that write-up is marketing value and that value is a return.

By combining the returns of all return channels, you get the total return of the campaign. Now, to calculate the ROI, you also need investment. The investment should be easy – it is just the cost of the technology and the cost of the campaign.

The ROI formula is simply ROI = (return – cost)/cost% = your return on investment.

Nevertheless, without each return being normalized into to dollars and cents, the ROI calculation becomes meaningless.

Bottom line is that for each return channel, you first need to define the return channel and then you need to put a dollar value on return channel. It’s tough but doable.

Now, once this has been done, you get to the fun part which is to play with the numbers.

Social Media ROI Calculator Dashboard

Social Media ROI Dashboard

As mentioned in the previous post, Social Media ROI – Part 3, we have created a Social Media ROI Calculator, in Excel format, that handles the work for you. The image shows the full version’s dashboard. Download the lite version of the Social Media ROI Calculator.

So the trick is to normalize return channels into dollars and cents.

This is HUGE because from the normalized return channels, you can a) compare each return channel and if required, shift the social media campaign strategy in mid-stream from what doesn’t work to what works, and b) forecast the total campaign return and calculate the social media return on investment (ROI).

Normalized return channels benefits you:

  1. You get better estimated returns and thereby the Social Media ROI using different worst and best cases. Simply, a solid realistic forecast dramatically increases the success rate of a project.
  2. Because returns are normalized, campaign stakeholders start to communicate using a common language and thereby avoiding costly misunderstandings.
  3. Going through the effort of normalizing returns greatly decrease sales cycles by providing faster and better estimates for a social media campaign, both internally and externally.

Social Media ROI – Explain Social Media Value – Video

Dealership managers and marketing directors keep asking us “How do we explain the value of Social Media to our Dealers and General Managers?

The short answer is: show them the numbers… measured in dollars and cents. Using returns measured in dollars, you can prove that you bring in real quantifiable value to the dealership. This is extremely powerful. Web metrics like followers, page views and click-throughs are no longer good enough.

Their next question is inevitably, how do we show return numbers measured in dollars and cents?”

The following video answers how Dag Holmboe's clients are using his Social Media ROI Application to show social media returns measured in dollars and cents and how to maximize these returns.

Source: Social Media Video Marketing ROI

Social Media ROI – Value of a Twitter Follower

Dag Holmboe added Consumer Insights as a return channel to the Twitter campaign return and ROI calculator. Consumer Insights are invaluable to a company’s products strategies and thus a heavy value is placed on consumer insights. Using non-social media technologies, a company would use expensive focus groups to gather insight.

This is a very useful online Twitter Social Media Marketing campaign ROI calculator. You can enter your own real-world numbers and see the ROI you have been getting by using the online application accessible here. The Twitter ROI calculator figures out your reach, the return on your brand awareness, and the return on your click-throughs. Together with the social media investment, the calculator also returns the monthly ROI.

In addition, the Twitter online ROI calculator gives you the value, average investment and ROI generated on an average per Twitter follower basis. For instance, in the screenshot below, a Twitter follower is worth $2.38/month, the cost is $1.67 with a total individual ROI of 43%.

The Twitter calculator is best used to make adjustments and assess marketing costs of acquiring Twitter followers so as to maximize your Twitter campaign ROI. By testing different campaign models, you pick the model that yields the highest return.

Leverage your community

It is important to note that if you engage your community (send more posts), the value of your community goes up. For instance, in the calculator, try to enter one Twitter post per month, then enter 30 Twitter posts per month and see the difference in total and individual return and ROI. It is quite dramatic.

Warning – remember that if you send your Twitter community too many messages, the calculator will tell you that the value of the community goes up, while in fact, you are turning off your community by spamming them. So use caution, common sense and be a bit careful, right?

Another important thing to remember is that these values are estimations. Even though the online Twitter calculator gives you a reasonable sound foundation to maximize your Twitter campaign return, each Twitter campaign and each community and network of Twitter followers is different.

Increase our understanding of the return and ROI of your social media campaign

This version of the calculator gives a lower return than the true return on our Twitter campaign. The reason is that this light version does not take into account things like the return on consumer insight, the return on avoided support calls, or the return on trade media mentions among other things.

Dag Holmboe
can supply you with the full version of his Social Media ROI calculator which reports the return and ROI of your automotive community, online forum, blog, Twitter, Facebook, YouTube and SlideShare communities.

This Twitter ROI application calculates your Social Media Return and ROI for five return channels based on standard web and social Twitter metrics.

The full version of the Social Media ROI application allows input from community forums and blogs, Facebook, YouTube and SlideShare. In addition to 18 return channels, the full version also gives you a complete set of awesome tables and graphs to help you maximize your Social Media ROI.

Download a free light version of the Social Media ROI application on Klurig Analytics. For more information, including a video introduction, go to Klurig Analytics or contact Klurig directly at

Social Media Input

Data Entry


1st generation twitter followers

Find this number on the twitter profile page.

2nd generation twitter followers

The average Twitter use had 800 followers. Different communities are different. We use default 500 followers per user. We have tools to get an exact number.

Twitter posts per month

Normally, you tweet once a day so estimate about 20 or 30 tweets per month.

Click-throughs per month

By using or other URL shortener, you can get a very good feel for number of click-throughs.

CPM for cost comparables

CPM ranges from less than $1 to over $70 depending on site and targetness and other factors. If you don't sure what to enter, estimate $5.

Investment in the social media campaign

The number should include both setup costs (eg hardware, software) and ongoing cost (eg hosting, professional writers, graphic artists).

Campaign duration in months

Just simply enter the number of months from start to finish.

The online app used to generate reports available at: Twitter ROI Tool

Social Media ROI – Maximize the Return

The Social Media ROI discussion has gone through a number of growing pains in the last year.

Dag Holmboe has

spent a fair amount of time discussing the SM ROI evolution and he has come to the point where he thinks there are three steps that will move Social Media ROI to the importance it deserves.

Step 1 – Social Media ROI – understanding

Based on the last year’s back and forth, I think (hope) we all agree on the following:

  1. ROI is a financial calculation. Social Media ROI is not a stand-in for Return on Relationships, Return on Engagement, Return on Innovation or even Return on Inaction.
  2. The Social Media ROI can be calculated or at the very least, the ROI can be estimated.

Step 2 –Social Media ROI – calculating current return

Today, we are starting to estimate the return and the Social Media ROI. There are a few different approaches where one approach is to launch your social media campaign and after a period of time, you look at sales data. If you see a bump in revenue at the time of the start of the campaign, you can guess that it could be because of your social media effort.

Another approach, which we are using, is to estimate the return of your social media campaign using off-line and non-social media cost comparables. For instance, if you know that you receive 10,000 page views per month directly linked to your social media campaign, you can estimate the number of banner ads (impressions) that you would require in order to generate the same number of page views. For instance, assume that the average click-through rate is 1%. In order to reach 10,000 page views, you need 1 million impressions. At a cost of $1CPM, your return is $1,000. This return might not sound like a lot but it all adds up.

The important take-away from step 2 is to start estimating your social media campaign return. Based on the return and your investment, you can quickly calculate your Social Media ROI.

Step 3 – Social Media ROI – maximize the return

Because you can estimate individual returns per return channels (eg impressions, member value, insights etc.), you can maximize your Social Media return in a couple of ways:

  1. Playing what-if with different sets of criteria per return channel, you get a better feel for your return per return channel and thereby helping you to optimize the return.
  2. Continue to use what-if games while comparing return channels, you can maximize the total return on all your return channels.
  3. By entering data on a monthly basis, you get a 360 view on your return, investment and ROI with simple drill-downs for better understanding of your social media campaigns.

Conclusion – as competition heats up, it is imperative that social media agencies and in-house social media groups work really hard to a) measure and estimate the return on social media and b) even more importantly, ensure that they are receiving maximum amount of return on their social media efforts. The return has to be in dollars and cents so that it can quickly be incorporated in a ROI calculation.

Social Media ROI – Quantifying the Social Media ROI

All of us who do anything that utilizes Social Media Marketing get asked can you really quantify the Social Media ROI? The answer should always be “yes, of course you can.” We will look at three different ways to quantify the Social Media ROI.

A quick comment about quantifying the social media ROI

The ROI, as we by now know, is a business formula that calculates the ratio between an investment and the return. To quantify the social media ROI, we need to determine both the return and the investment in dollars and cents, and we need to ensure that the return has a direct correlation to the investment, ie the return was generated based on the investment.

Please Click Here for an in-depth discussion on the three types of Social Media returns.

So lets look at ways to quantify the Social Media ROI

  1. During or after you have run your social media campaign, you look at when and where the investment was made, you look at when and where the return were made. If you can determine and quantify the correlation between the return and the investment, you can quantify the Social Media ROI.
  2. By physically link each of your sales back to a social media campaign, you can quantify the Social Media ROI.
  3. Before, during and after a social media campaign, you determine the total return from different return channels. Using the total return and the investment, you can quantify the Social Media ROI. Examples of return channels are cost savings from not having to purchase impressions, or savings on focus groups because your social media campaign generates consumer insights, or savings in support calls.

In our application, we use the third way to quantify the Social Media Return. Please see here for a discussion and here for a video.

Social Media ROI – Analytical Social Media Strategy

This post is in response to a question posted by Priya Ramarkishnan (CMO AXIS) to

Dag Holmboe

on LinkedIn:

“What is the best way to find a Social Media Strategy and how does one find the ROI on Social Media.”

Dag Holmboe
thought it was a good segway into how to use his Social Media ROI application from more than an ROI justification, to use it as an analytical tool.

Normally you start with the strategy and then you estimate the ROI on the strategy. I would like to suggest a different approach in that you start with the ROI and then based on the ROI you select and execute on a social media strategy. What do I mean with that?

Like Robert suggests (see question to see what Robert Burns wrote), do your required upfront research. A solid understanding of your customer base is absolutely key to move forward into the next phase. You also need to figure out your goals; for instance is your goal to increase short-term sales, increase long-term brand awareness and purchase intent, support call savings, increase consumer insight, increase SEO, increase media mentions and word of mouth?

Next you need to decide if you want to optimize your social media strategy based on social media return or social media ROI. There is a difference here. You might be able to achive a higher return but it might cost you more thus lower the overall ROI. On the flip side, you might be able to raise your social media ROI by lowering the investment but the return might suffer. In our example, lets try to raise the social media ROI.

Now, based on your understanding of your customers, you need to create a few different social media strategy scenarios to estimate the best ROI. For instance, should you go all out with a Facebook-only approach, should you do a combination of Facebook, Twitter and Youtube? Should you do blogging and/or community forums? Should you post once a day or many times a day? Say your goal is to raise the number of useful consumer insights, you then want people to talk to each other a lot and therefore a community forum might be a good idea. If you are looking for short-term sales, then Facebook and Twitter posts with discount coupons might be another idea. Or a combination of approaches.

Using social media ROI applications, you can play different social media strategy scenarios until you find the strategy that seem to generate the biggest bang for the buck, eg highest social media ROI. As you select your social media strategy, you can create best, worst and anticipated case scenarios to see where you land.

As you execute on the social media strategy, you would periodically go back to your social media ROI application to plug in the correct numbers to see if you are tracking accordingly and based on the calculations, you can make mid-course changes.

So you see what we are doing; instead of starting with a strategy and then checking the ROI;

  1. Start with several different social media strategies.
  2. Compare each strategy based on our goal of higher social media return and/or higher social media ROI.
  3. Select your social media strategy knowing that we used analytics to select this specific strategy based on your client or dealership’s maximum bottom line net profits.

About the Author

Dag Holmboe – An executive in high-tech with over 20 years of research and development, operations and executive management in Internet-related companies, including Internet start-ups.

Dag at ESPN headquarters

Dag at ESPN headquarters

Holmboe's first 10 professional years were as a software developer for several companies building hospitality systems, financial research data, biotech and consumer goods products on UNIX, Linux, and Windows using C, C++ and Java.

Holmboe moved to a VP of Technical Services role managing the commercial delivery of a VPN management product.

His role changed to SVP of Commercial Operations where he managed all post-sales functions including delivery and configuration of secure VoIP to business and residential customers via direct and reseller channels.

Next, Holmboe moved to another company building telecom billing system where he served as COO, and ran their Research and Development operations.

Holmboe Changed companies in 2007, when he accepted the role of COO for Nuovomedia, an online media company.

He spent the majority of 2008 focused on raising funds for an online news and social networking product. With the global economic climate damping his results, Holmboe changed focus in 2010. Nuovomedia is now directing their efforts towards the sale and support of their flagship product Social-smart – described as being a smarter way of managing Social Media Marketing campaigns. These sales are combined with revenues generated by Nuovomedia's social media marketing services to complete a financially viable and dynamic new social media business model.

Holmboe says he is a bit competitive so his past includes winning two US nationals in sailing boat racing and a Swedish National Championship in one of the Frisbee disciplines.

Commenting is a fundamental part of social media, so do your automotive digital marketing social duty and add a comment with your thoughts...

Views: 1225

Tags: Marketing, Media, ROI, Social, Social Media Marketing ROI, Social Media ROI


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Comment by Ralph Paglia on October 13, 2010 at 2:46am

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