The Social Media ROI Cookbook: How Brands Measure the Revenue Impact of Social Media

Everyone talks about the challenges of measuring the revenue impact of social media, but how are top brands actually doing it? And are they successfully measuring ROI?

My colleague Andrew Jones and I spoke with 16 brands, 38 vendors, 3 agencies and 4 ecosystem contributors, and surveyed 71 social media and analytics practitioners to answer this question and provide pragmatic recommendations.

The result is our  “Social Media ROI Cookbook,” which aims to identify and describe the most effective “recipes” for measuring the revenue impact of social media that we have seen adopted to date. Here’s what we learned:

Only 30% of brands we surveyed consider themselves to be “effective” or “extremely effective” at connecting social media to revenue. The top three challenges: Inability to tie social media to business outcomes (56%);  Lack of analytics expertise and/or resources (39%); Poor tools (38%).

To be fair, we are in a period of transition: Jeremiah Owyang’s “A Strategy for Social Media Proliferation,” published earlier this year, showed that “companies average 178 corporate-owned social media accounts.” At the same time, the research for this report found that 63% of measurement organizations surveyed have 1-2 people focused on social data. That’s not a healthy ratio.

While revenue is important, it isn’t everything. 84% of survey respondents reported that the primary business impact of social media was not revenue generation, but “insight that helped us meet customer experience goals.”

Altimeter Group identified six primary top-down and bottom-up approaches and developed three case studies that illustrate how organizations measure the impact of social media on revenue. The best practices blend top-down and bottom-up measurement methods to provide a holistic view, informed by granular evidence.

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While these six ingredients are consistent, the emphasis each company places on them depends on the nature of their business. There is no “one-size-fits-all” approach. The four most important criteria for determining the measurement mix are:

  • Business: the nature and structure of the business
  • Product: the nature and type of products or services offered
  • Media: type of media being used
  • Customer: the nature and type of customer(s)

Where’s it all going?  There are four main themes: mobility (to connect the online and offline worlds); digital identity (to connect the consumer wherever s/he may be); More, bigger, faster data to demonstrate as well as predict influence; and, finally, integration, integration, integration: with other social data, with enterprise data and with external data.

The truth is, we’ve only just scratched the surface of what we will be able to know and understand about the impact of social in the years to come, and the process of writing this report emphasized the gaps over and over. But we have to start somewhere. As Ken Burbary, Chief Digital Officer at Campbell Ewald admits in the report, “I feel like we’re all data chemists at this point, trying to put a bunch of stuff into our beakers to see if it works.”

As always, we’d love your ideas, questions and thoughtful disagreement; after all, this is an ongoing project. Please leave a note in the comments, or if you choose to post about the report, we’ll link back to you.

Many thanks to all the ecosystem contributors and colleagues who made this report possible.

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Trackbacks

  1. [...] Media Stat of the Week (This week: The Altimeter Group released the public report, The Social Media ROI Cookbook. It’s six ingredients, top brands used to measure the revenue impact of social [...]

  2. [...] to measurable outcomes is interesting, because the research that we looked at, jeez, even recently, last week from the previous Altimeter Report, showed that CMOs really had a hard time making that happen. That they believe it works, but have a [...]

  3. [...] Susan Etlinger outlines another method to calculating ROI. There are six ways of measuring revenue impact of social media which is grouped into two different approaches: the top – down approach and the bottom -up approach. This is demonstrated in the figure below. [...]

  4. [...] Here’s the link Steve mentioned to a a paper put out by the Altimeter Group on Social Media ROI. [...]

  5. [...] Uprising at its best) and paid media (advertising), relying on Charlene Li’s Altimeter agency report to break it down further: Excerpt “The Social Media ROI Cookbook” Susan Etlinger July [...]

  6. [...] un estudio de Altimeter Group, sólo el 30% de las marcas que encuestaron se consideran ser “eficaz” o “muy [...]

  7. [...] un estudio de Altimeter Group, sólo el 30% de las marcas que encuestaron se consideran ser “eficaz” o “muy eficaz” [...]

  8. [...] And then I hit upon the problem, neatly summed up in this chart from a report about how brands measure social media by The Altimeter Group. [...]