ROSI - Return on Social Investment


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This thought piece, authored by strategists from the Proximity network and presented by Digital Lab, examines the empirical need for social media investment by brands and explores the frameworks for measuring the...

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ROSI - Return on Social Investment

  1. 1. 1 ROSI: Return on Social Investment
  2. 2. 1 Table of contents The Necessity of Social Investment 2 Future Shock 3 The Advertising Anachronism 4 The Limitations of Social Media 6 • In the age of social media, you do not control your brand 6 • Social media is nothing but a tool 7 • The value of fans is debatable 8 • Advocates are hard-won 8 • Social media requires basic math skills 9 • Word-of-mouth (WOM) is not a cure-all 10 • Social media will cost you 11 Measuring the Effects of your Social Media Efforts 12 Social media measurement is immature 13 A framework for measuring social platforms 14 Measuring individual engagement 16 The payoff of measuring engagement 19 Being pragmatic about Social Investments 20 Losing control 22 So what’s the difference? 22 In practice 24 Takeaway Tweets 26
  3. 3. 2 The Necessity of Social Investment
  4. 4. 3 Future Shock When it suddenly strikes you that the culture is changing so fast it feels foreign to your own, you go into shock. It’s a very peculiar kind of shock which is called ‘culture shock’. This kind of shock has also been referred to as ‘future shock’ for some time now. It also happens to be the title of a very influential book by husband-and-wife futurists Heidi and Alvin Toffler, who introduced the phenomenon. ‘Future shock’ was promptly added to the lexicon, as were the words ‘information overload’ and ‘prosumers’. And in case you may be wondering who quoted ‘Change is the only constant’, well, they did. In 1970. What is wrong with us advertisers and advertising agencies? Are we suffering from ‘future shock’? Because, forty years later, we still don’t seem to understand that the old rules don’t apply to the future. ‘Future shock’ is probably the only plausible explanation for this very persistent phenomenon we’d like to call ‘the advertising anachronism’.
  5. 5. 4 The Advertising Anachronism Look around today in any randomly chosen advertising agency or marketing communications department. Compare it to the way of working in ‘Mad Men’ and the most fundamental difference you will notice today is the presence of computers. Apart from that, basically nothing much has changed. How come? Well, no consumer ever died as a direct result from out-of-sync and inefficient marketing communications. “Once in front of a screen, be it a desktop, laptop, or increasingly a handheld device, we ‘log in’ – not into a system, but into a community.”
  6. 6. 5 This is not a quote from ‘Future Shock’. It is not a quote from a marketing communications handbook either. The quote is taken from “War 2.0, Irregular Warfare in the Information Age” by Thomas Rid and Marc Hecker. The army, as opposed to the advertising world, is not suffering from ‘future shock’. The army does not adhere to a belief of how the world works which prevents one from seeing how the world really works. Daniel Kahneman, Noble Prize winner in Economics, calls this effect ‘theory-induced blindness’. Why not? Dead simple: you would surely be killed if you do. Once in a while, a company which adheres to a certain belief of how the world works runs a campaign that says one thing, while their actions are quite the opposite. And once in a while, these actions do cause harm and make people suffer. When this happens, the company learns in no time how the world really works. How consumers who, just like insurgents in warfare today have access to very accessible means of communications and cheap technology, can easily bring any huge company to its knees.
  7. 7. 6 The limitations of social media In the age of social media, you do not control your brand. Ask Comcast, Domino’s Pizza, Toyota or GAP. Ask BP. After these companies experienced this first and foremost limitation of social media, they acquired social media skills and learned to use these very same accessible means of communications and cheap technology to their benefit remarkably fast. BP proved that you cannot promise the world that your company is all about renewable energy (“Beyond Petroleum”) and heavily under-deliver on that promise (while heavily over- delivering on petroleum in the Gulf of Mexico). BP proved that branding today is a fundamentally different game. A game where the value of any elaborate campaign is reduced to zero in a snap if your message is untruthful. If it is all words and no action… Because in the age of social media, consumers will give you exactly what they think you deserve. “In the age of social media, you do not control your brand.”
  8. 8. 7 Social Media is nothing but a tool. The misunderstanding that quite often prevails today is that when you think you are actually practising ‘social media marketing’ you are merely practising ‘social media check marketing’. Do I have a Facebook Fan Page? Check. Do I have a Twitter account? Check. Do I have a blog and a channel on YouTube? Check. Check. If this is what your social media marketing plan looks like, don’t even bother. It will most certainly be to no avail. What you first need is a story. A story based on facts. And if the facts are all wrong, you will have to first iron out this problem (remember BP). If you’re ready to tell your story, then definitely do so. If you don’t, somebody else will do it for you.
  9. 9. 8 The value of fans is debatable. Advertisers who are more familiar with traditional media often are extremely critical with regards to social media. Whereas theoretical values with regards to traditional media (which are sometimes seriously flawed) are met with a much less critical attitude. That being said, the value of a fan (or a ‘liker’ in today’s terms) is at the very least debatable. Fans and followers compare best to what traditional advertising calls ‘eyeballs’, ‘traffic’, ‘targets’ or ‘potential reach’. They are ‘the people formerly known as the audience’. They are however more valuable: they have knowingly clicked a button which said ‘like’ or ‘follow’, designating that they are interested in your brand and want to hear from you. On the other hand, clicking a ‘hide’ button is just as easy. And not everyone is aware of each and every post. So, even if you have a huge number of fans and followers, you may still be talking to an imaginary audience. Although this still trumps commercials which are more often than not a signal to hurry to the bathroom or start time-shifting, it is not merely the fans and followers you should be after. As an advertiser, you should be predominantly occupied with going after the advocates. Advocates are hard-won. According to McKinsey, consumers have become overloaded and increasingly sceptical about traditional company-driven advertising and marketing. They increasingly prefer to make purchasing decisions largely independent of what companies tell them about their products. This is where your advocates will make the difference. Word of mouth is – and always has been – the most powerful form of marketing. It is the only form of marketing that can make a consumer change his mind completely or even make consumers consider brands they would never have considered otherwise. But when do consumers start talking actively about your product or service to their social networks? When do they become your advocates? There’s only two occasions. Either when
  10. 10. 9 you over-deliver and give them a better experience than expected. Or when you under-deliver and give them a worse experience than expected. What you have to do is as simple as it is hard: you have to over-deliver in order for people to start sharing positive news about your brand with the people they socially engage with. ‘Social media’ requires basic math skills. According to McKinsey, “word-of-mouth equity” is an index of a brand’s power to generate messages that influence a consumer’s decision to purchase. Word-of-mouth equity basically is a formula: volume times impact. Volume is easy enough: are there few or many messages that may influence my purchase decision? Impact is somewhat more complex and determined by the following factors: • Where: messages shared within a closed or trusted network create more impact compared to messages shared within a large or dispersed network. • What: if the message addresses important product or service features, it is more likely to influence consumer decisions. • Who: is the sender a trusted person and is he/she influential? • Source: is the message based on one’s own experience or on hearsay? Research by McKinsey showed that a high-impact recommendation – from a trusted friend conveying a relevant message for example – is up to 50 times more likely to trigger a purchase than is a low-impact recommendation. From “A new way to measure word-of-mouth marketing”, McKinsey “Marketers tend to build campaigns around emotional positioning, yet we found that consumers actually tend to talk – and generate buzz – about functional messages.”
  11. 11. 10 WOM is not a cure-all. One can never argue that what is wrong is right. If your product or service is not up to par, cross out any budget you’re spending on marketing communications and use it to get your act together first. The best way to eradicate a bad product or service is to advertise it. And this is certainly true today: consumers trust anonymous peers more than they trust advertisers. Systematic negative word-of-mouth will put a stop to your business. But what can positive word-of-mouth do for you? Well, there are all kinds of word-of-mouth — and these are the ones you should understand. • Experiential word-of-mouth results from a consumer’s direct experience with a product or service if that experience deviates from what’s expected. • Consequential word-of-mouth occurs when consumers directly exposed to traditional marketing campaigns pass on messages about them or the brand they’re publicising. • Intentional word-of-mouth is e.g. when marketers use celebrity endorsements to trigger positive buzz for product launches. From “A new way to measure word-of-mouth marketing”, McKinsey “To turn consumers into an effective marketing vehicle, companies need to outperform on product and service attributes that have intrinsic word-of-mouth potential.”
  12. 12. 11 Social media will cost you. If you stay away from social media, it will cost you. Remember BP: if you don’t tell your story, somebody else will do it for you. But getting involved with social media will cost you as well. And there are three ways of investing in social media. Investment in culture Social media is all about trust and engagement. If you build your company on these pillars, your first and best advocates will be your employees. As of today, the people from Zappos have not spent one dollar on marketing communications. They have a fire-and-hire policy based on the company’s core values. And they have made Zappos a company where everyone wins: company, employees and customers. Investment in good ideas You don’t have to be Coca-Cola to come up with a good idea everyone starts talking about (‘The Happiness Machine’). Albion’s Oven, a London-based bakery, started sending automated tweets whenever something absolutely tasty had just been taken out of the oven. That’s the only marketing it ever needs. Investment in data No matter what your company does you should start seeing your activities as an ‘information-based service’. You have to get to know your customers if you want to be able to deliver them a better experience. It is ‘better experiences’ that will turn each and every one of your customers into advocates.
  13. 13. 12 Measuring the effects of your Social Media efforts
  14. 14. 13 Social media measurement is immature Marketing investment in social media is increasing, yet marketers continue to struggle with the methodologies for validating these investments. A lot of excitement accompanies the development of social media marketing ideas because the majority of marketers and agency representatives prefer to work with their creative right-brain functions. However, we need the decidedly less sexy left-brain analytics skills to measure and prove ROI. Just like any other medium, measuring the effects of social media is a critical component to success. Social media measurement is quite immature, just as web analytics was a few years ago. To determine how capable marketers are at measuring the results of their online direct response, branding and social media campaigns, we surveyed almost 100 Belgian marketers. When asked to rank their measurement capabilities on a scale of 1 to 3 where 1 is novice and 3 is expert, we found that marketers consider themselves to be (cf. Figure 1): • Best at direct response. Marketers rate their ability to measure the effect of direct response campaigns at an average of 1.29 out of 3. Not surprising considering marketers have more experience with direct response tools like email and paid searches compared with newer online tools like online video or blogs. • So-so at brand marketing. Belgian marketers are a little less confident when it comes to measuring brand campaigns, averaging 1.05 out of 3. • Novices at social media. Marketers rated themselves the least mature with measuring social media efforts at 0.85 out of 3. We find this average ambitious compared to the other two disciplines, considering that social media is only a few years old. Figure 1
  15. 15. 14 A framework for measuring social platforms The online marketer is overwhelmed by the number of metrics available through (free) web analytics software. Many of these marketers suffer from the Google Analytics syndrome: “measure everything”. Just because you can measure something, doesn’t mean you should. In fact, the amount of available online data can paralyse marketers who try to track it all. It’s better to focus on a small subset of metrics that align closely with clearly-defined business or campaign goals. Not all metrics will be equally relevant to all marketers; not all metrics are equally relevant to all campaigns. It’s not surprising that marketers have so much trouble measuring social media well. Every social platform and vendor offers its own metrics, and there are literally hundreds of ways to measure the success of social initiatives. “Just because you can measure something, doesn’t mean you shoulD.”
  16. 16. 15 We can easily classify all available social media metrics into four categories: User reach describes how far and wide your messages spread. Volume of participation describes how many consumers interact with your social initiatives. User impact describes how your efforts change consumers’ actions or opinions. Quality of participation describes the strength and depth of consumers’ interactions with your social initiatives. Measuring user reach is easy but imperfect. It’s so easy, in fact, that it’s the most used metric. Counting Facebook fans, Twitter followers, and blog feed subscribers can all give you insight into how many consumers you’re reaching. But keep in mind that not everyone who follows or likes your brand in social media will see every message you post. Click-through rates on the links you post — as measured through traditional web analytics — can tell you what portion of your social media audience are effectively reached. Volume of participation tells you how engaged consumers are. The number of comments on your blog posts, the number of @replies you receive on Twitter, and the number of likes and comments on your Facebook fan page quantify how many consumers are interacting with your efforts. But as much as some marketers fixate on this category, it’s not the best way to measure success for any of your social media objectives. Both fore-mentioned quantitative metrics should be complemented with qualitative metrics to assess the full impact of your social media investments, such as user impact and quality of participation. When measuring user impact, you might look for returning visitors per month or active visitors per month, which give an indirect indication of user impact. If direct response is your main objective, conversions such as subscriptions, leads or sales derived from your social initiatives should be your focus. And if you’re hoping to make a brand impact, an online survey is still your best option to measure the effect. Perhaps complemented with sentiment tracking via listening platforms, a survey is the best way to find out if your followers, subscribers or fans are more eager to purchase from you, or to refer your brand to their peers.
  17. 17. 16 Quality of participation is a subjective metric. You’ll know high-quality participation when you see it. In support forums it means your customers are satisfied and support call volume drops. While in user innovation initiatives, it means you have lots of great, new ideas in your development queue. Likewise, if the video entries you generate from a contest are good enough to use on your website or on TV, then you’ve succeeded. To have a holistic view of the impact of your social platform, it is best to measure across both axes: quality vs. quantity and users vs. usage. This requires a set of measurement tools and metrics that go beyond the ones provided by the social platform itself such as focus groups, online surveys and social listening tracking systems. Measuring individual engagement The above-mentioned framework still only measures first-degree impact of social platform(s): i.e. the participation volume and quality of the users present on the platforms. It does not yet measure the all-encompassing impact, taking into account the reach and influence of these users. So, how can we measure the impact of your subscribers, followers or fans and their interactions with your social initiatives on others? The answer lies perhaps by putting the individual at the centre of the two axes.
  18. 18. 17 Engagement measurement encompasses quantitative and qualitative metrics. It comprises concrete individual metrics from website visits and online purchases to the softer insights from brand awareness studies, sentiment, loyalty, and advocacy. Forrester’s definition of engagement is: Engagement is the level of involvement, interaction, intimacy and influence an individual has with a brand over time. Four components make up the engagement framework — the four I’s: • Involvement — the presence of a person at various brand touch points. Metrics include website visitors, time spent per page, and pages viewed. The main data source is web analytics. • Interaction — the social actions people take while present at these touch points. Metrics include comments, reviews, ratings, uploaded photos or videos, etc. Data sources include mainly social media platforms. • Intimacy — the affection or aversion a person holds for a brand. Metrics include sentiment measurement in blog posts, blog comments, discussion forums, etc. Data sources include brand monitoring services, survey responses, etc. • Influence — the likelihood a person is to advocate on behalf of the brand. Metrics include Net Promoter, satisfaction ratings, forwarded content, etc. Data sources include market research services, surveys, web analytics, etc.
  19. 19. 18 Measurement of individual engagement is complex. And requires a set of tools: The most fundamental tool required is a central customer data repository providing a consolidated view of an individual customer or prospect’s relationship with your brand. Analytics tools work off this central database such as web analytics to map individual research, browse and purchase behaviour. But online isn’t just about transactional relationships. Consumers use your social channels to share feedback, create and distribute content and broadcast opinions. You’ll need more sophisticated monitoring tools beyond traditional web analytics to capture this type of feedback. Social monitoring tools help marketers to understand how consumers perceive and interact with the brand in channels not controlled by marketers. Consumers have numerous venues outside the organisation’s control to voice their attitudes and preferences. These tools collect, organise and deliver information on the strength and type of consumer sentiment. This allows marketers to answer important questions like: “What are consumers saying about us?” or “Who’s influencing their peers in a positive or negative manner?” Finally, the often-neglected but utterly invaluable customer surveys (satisfaction survey, brand research, etc.) are extremely important in providing additional insight into brand affinity and influence of customers. And to get a complete picture of the state of the 4 I’s at an individual level.
  20. 20. 19 The payoff of measuring engagement Measuring engagement is not an easy task, and measurement vendors don’t yet provide unified services to help tie it all together. To get started, you’ll need to take the first steps alone. But consider the payoff of your hard work. You’ll be able to: • Gain much deeper insight into customer behaviour and beliefs. And translate this insight into marketing strategies that target customer segments with more relevant and persuasive messages and innovative products. • Measure and learn from things you currently ignore. Qualitative metrics like feelings, affinity and sentiment historically have been difficult to track. But social media makes it easier for customers to offer their opinion, and as a result, all that data is sitting out there waiting to be mined. By tracking commentary in discussion forums, you’ll get insights that no survey would ever detect since they come straight from the minds of the customers. • Identify customers who influence others to buy. A person who contributes content, such as a product review or a video of the product in use, may be far more valuable than the average purchaser. As a result, your idea of who you would consider the most valuable customer will change. Identify customers who make significant product reviews that influence other peoples’ purchases, and then initiate programmes to encourage these customers to contribute more content. This will become your focus.
  21. 21. 20 “The Whirlpool case: Twitter user @dooce complains about her MAYTAG washing machine after a customer service agent tells her it doesn’t matter she’s got 1.5+ million Twitter followers.” Being pragmatic about Social Investments
  22. 22. 21 Let’s imagine for a second that you’ve decided social media should be a part of your communications strategy. You created policies, bought monitoring software, hired a social media expert and thoroughly discussed and outlined all possible scenarios. You’re ready to enter the promising world of social media conversations. And yet, you aren’t. In as much as you have all the processes defined, ultimately it’s up to the customer to decide what is going to happen. You can probably already guess what this means. He will likely stumble upon a problem on an early Sunday morning, try to contact your customer support service and find out it is only opened during office hours. This is when he starts to share his problem (and frustrations) with his online friends, followers and the worldwide web. It’s a problem we’ve had to deal with in the past — before online/social media — as well. However, as the consumer doesn’t have the means to solve the problem with anyone else but us, we managed to teach him to respect our rules (our office opening hours, expensive phone number, etc.) and thus call us on Monday morning. An entire Customer Relationship Management (CRM) business was built around this idea, making it as easy as possible for companies to manage interactions with customers, prospects and suppliers. A brilliant idea really, that only recently started to show some weaknesses. The advent of the internet — and social media in particular — allowed the customer to entirely circumvent the company. He now has access to a wide range of tools to get in touch with other customers, ask them about anything he wants to ask and complain about anything he feels you, as a brand, did wrong. Moreover, “customers” are no longer only limited to people you have a financial relationship with; your best customer in this new situation isn’t necessarily the one who buys the most.
  23. 23. 22 Losing control In no time at all, the company moved from a central position in control of interaction to an isolated entity, desperately trying to regain relevancy. Paul Greenberg describes social CRM as “the company’s response to the customer’s ownership of the conversation.” It’s up to the brand to become a relevant part of the conversation again. It goes without saying that a traditional inside-out CRM approach is not the kind of relevancy your customer expects. One could therefore wonder if social customer relationship management is the best term to describe this new discipline. We’re no longer talking about customers only, and relationships today are quite different from what they used to be. And let’s not even touch on the subject of management, which is in fact quite the opposite of what is happening. We’ll leave the challenge of coming up with a better name to someone else. Yet to take away any confusion, let’s first define how social CRM relates to traditional CRM. So what’s the difference? We already mentioned the consumer is in control of the conversation. Opposite to the traditional inside-out approach, social CRM is all about outside-in. No longer pushing messages, but rather monitoring, listening and responding. Which already indicates a typical SCRM flow is far more decentralised: as consumers prefer to consult with their friends instead of brands, it’s up to these brands to actively look for conversations (in any channel the customer prefers). Company Customer TRADITIONAL CRM: INSIDE OUT SOCIAL CRM: OUTSIDE IN
  24. 24. 23 There’s no need to mention that this is a rather drastic switch for businesses and the way they interact with their customers: • Rather than the CRM department only, everyone needs to be involved and aware of both the opportunities and threats of social media. You as a marketer might be well aware of all this, but your primary customer-facing departments (such as your outsourced customer service team) should be even more so. • The customer will take the initiative, which means it’s up to you to make sure you’ve got all the tools and processes in line to react adequately. • There’s no need to say this is not limited to business hours. Expect the worst on a Friday night. On a side note: in no way does social CRM replace traditional CRM. In fact, both can be perfectly complementary. Anything you’ve learned while monitoring social media can be applied to traditional sales, marketing and customer support CRM flows and vice versa. “Twitter has changed the culture of our company.” Brian Roberts, Comcast CEO Assigned departments company-defined process business hours defined channels transaction inside out who what when where why how everyone customer-defined process customer sets the hours customer-driven dynamic channels interaction outside in
  25. 25. 24 In practice There’s no one-size-fits-all solution as every applicable situation, target group and goal will be unique. However, every social CRM implementation will somehow need to take into account the five M’s of social CRM (as defined by Altimeter). Monitoring (obviously) requires you to scan the web for relevant content and listen to whatever people are saying related to your brand or product. In a typical second mapping phase, online and offline profiles and identities should be mapped and connected in order to provide relevance. Not too many — if any at all — complaints on Twitter today clearly indicate the user’s customer ID. In order to effectively solve an issue, we’ll have to know who’s talking to us. This is certainly not the easiest thing to do, yet by offering the right benefits and rewards users can actually be encouraged to do the mapping themselves. Which leads us to the third phase: if we know what’s being said and we know who’s saying it, then it’s up to us to (possibly) respond. Who’s going to respond and how? The management phase will define the process and dispatch information to the right people (remember SCRM is about the entire organisation). Closely related to this is the fourth M — middleware — as we not only need to dispatch messages to the right people, we’ll also have to save this information in our database in order to integrate it with any other corporate data. “The five M’s of social CRM”: - Monitoring - Mapping - Management - Middleware - Measuring
  26. 26. 25 Needless to say, our last M is about measuring. We already stressed the importance of metrics in a previous chapter, yet we can’t stress it enough: what you can’t measure, you can’t improve. Based upon the 5M model, Altimeter defined 18 different social CRM use cases applied to sales, marketing and customer support. Depending on your organisation and needs, these can be used as a framework to get started with social CRM in your organisation. Pick one and try to apply it to your situation. You’ll be surprised to discover all the different opportunities social CRM offers.
  27. 27. 26 Takeaway tweets
  28. 28. 27
  29. 29. 28 See your company as an information-based service. Get to know your customers, offer a better experience # FollowFridays 10:58 AM Nov 3rd Branding today is a whole different game: you need to make sure you’re backing it up in the market place # FollowFridays 1116 AM Nov 3rd You have to overdeliver in order to generate WOM! # FollowFridays 11:03 AM Nov 3rd Experiential WOM beats Consequential WOM! # FollowFridays 11:25 AM Nov 3rd AdNerds AdNerds AdNerds AdNerds
  30. 30. 29 Marketing dollars will shift from outbound communication to data analysis # FollowFridays 09:36 AM Nov 4th Measuring engagement means measuring and learning from things you currently ignore # FollowFridays 10:08 AM Nov 4th Identifying and targeting “evangelists” rather than only new customers becomes relevant # FollowFridays 09:52 AM Nov 4th Measure beyond volume, i.e. engagement # FollowFridays 10:21 AM Nov 4th AdNerds AdNerds AdNerds AdNerds
  31. 31. 30 Polar organizations focused purely on analytics or creative are destined to fail # FollowFridays 10:46 AM Nov 4th It’s a solution to business problems that have always existed. # FollowFridays 10:13 AM Nov 7th Social CRM is not a replacement for traditional CRM, or for social media. # FollowFridays 10:02 AM Nov 7th AdNerds AdNerds AdNerds
  32. 32. 31 There’s no such thing as one-size-fits-all. # FollowFridays 11:29 AM Nov 7th We’re just scratching the surface. And you should do that too. # FollowFridays 11:56 AM Nov 7th SCRM is a (long-term) strategy. Technology is only the enabler. # FollowFridays 11:08 AM Nov 7th AdNerds AdNerds AdNerds
  33. 33. 32 authors Tijs Vrolix Franky Willekens Jan Algoed
  34. 34. 33