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Social Metrics: To Calculate Social Marketing ROI You Need a Social Value Equation

I get a lot of questions about social marketing ROI from dealers these days. (Such as:  “How the heck do I calculate it?”)

Before delving into these questions more deeply, I suggest to them that it is a good idea to take a pass at establishing some basic metric for determining “Social Value.”

The conversation then typically evolves (or devolves, depending on your perspective) into one concerning the value of a social follower (e.g., a Facebook fan, Twitter follower, YouTube subscriber , email recipient, etc.).

Not to be outdone by Douglas Adams, in the case of a Facebook fan, the wizards at the WSJ ($1.07),  Vitrue ($3.60) and Syncapse ($136.38), have applied their unique forms of algorithmic legerdemain to arrive at an answer. 

Whereas my earlier formulation of a Social Velocity Equation might arguably give us an measure of social media marketing productivity, agreement on a measure for social value might theoretically license one to go out and answer the “what is the ROI” question by explaining to a client that 10,000 net new fans per month x $136.38 = a $1,363,800 value. At a mere $75,000 per month, that’s a bargain, right?

I recall one dealer group Internet manager who wanted to know how she could “trim the fat” from her social media marketing spend without losing too many social followers. She had determined that each had a value of $4.37.  I did not bother to ask her how she had arrived at that figure.

I must give props to one Olivier Blanchard for exposing the ludicrousness of the notion that one can assign an arbitrary (one might say “cookie-cutter”) value to social followers (e.g., Facebook Fans) in general, and then somehow averaged out over the complete breadth of the business spectrum.

He does so eloquently, and at great length I might add, with his 5 basic rules of calculating the value of a Facebook fan. Here are the five rules without the lengthy explanations for each:

  • Rule #1: A Facebook fan’s value is not the same as the cost of that fan’s acquisition.
  • Rule #2: A Facebook fan’s value is relative to his or her purchasing habits (and/or influence on others’ purchasing habits).
  • Rule #3: Each Facebook fan’s value is unique
  • Rule #4: A Facebook fan’s value is likely to be elastic
  • Rule #5: A Facebook fan’s value varies from brand to brand and from product to product.

This view underscores the folly of assigning a “value” to a Facebook fan absent the context of purchasing habits, brand affiliations, fluctuations in buying power, market forces, shifts in interests and even value perceptions.

Social CRM incorporates social analytics to calculate all of the variables but the tools are not quite there.

In our view, a simpler approach can be taken to calculating the value of an automotive dealer social follower.  We would propose that the value can be approximated as a function of a) the follower’s present lifetime purchase value, b) the present lifetime purchase value of any influenced followers and c) the average social follower conversion rate.  The resulting Social Value Equation can be expressed as follows:

According to Forrester Research, social value is a holistic measure of results that are more substantial than mere ROI. Forrester recommends a balanced scorecard approach to assigning social value. 

In my view, with automotive social media marketing, there should be clear financial metric to measures social media's impact on sales.

What is your view?  How do you measure social value?  Let’s keep this important topic in view as we begin to execute on our social marketing strategies in 2013.  Employing metrics such as those we’ve defined here for Social Value and for Social Velocity, which we explored in a previous post, is clearly a best practice for making pragmatic digital marketing budget allocation decisions.


Views: 208

Tags: Calculate, Equation, Marketing, Media, Metrics, ROI, Social, Value, joe, schwartz, More…


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