Over the past few weeks I’ve been asked the same question by different people, assuming it’s not the voice in my head again. The question is, “How can I prove that social media is profitable?”
I don’t like this question – what do you mean by profitable? Do you mean net profit after all costs (including labour) have been deducted? If so, how do you calculate the involvement of all the departments in your social media activity, such as the Customer Service team that fields an email/call centre enquiry generated off the back of your Twitter updates?
I much prefer the approach of measuring the impact of social media investment on your commercial goals. How you measure success will differ to other companies, so you need to establish your success criteria and then learn how social media works in conjunction with other marketing channels to support them.
Establish goals and measure outcomes
What I do advocate is defining your success criteria and then putting the tools & processes in place to measure outcomes against goals. At the heart of this has to be a web analytics tool (Google Analytics, Omniture etc). Behind this has to be a carefully constructed tracking program that ensures that every link that appears anywhere across your social networks includes a relevant tracking code. These tracking codes need to be logically segmented to ensure you can evaluate the impact of Twitter v blogs v forum presence v social networks etc. An example would be to set a goal in Google Analytics that targets increasing revenue for Category X on your website – monitor what % of the revenue increase is contributed from social media activity via the tracking codes.
Understanding sales attribution online
Another important step is to ensure your campaign stacking is working. What do I mean by campaign stacking? The ability to see which campaigns have influenced the final click. Your last click secures the sale but earlier clicks influenced it. Very much like raising brand awareness via TV advertising, a sale generated by email might have its origins in PPC or Affiliate. Prior exposure to your brand could have driven email sign-up and subsequent conversion when the time was right. Multiple channels working together to drive your revenue base. Therefore, you need to ensure your analytics reports can deliver the granularity of reporting needed to identify these interactions; otherwise you will end up making the wrong investment decision based on partial information.
What should my success criteria be?
You tell me! I am a strong believer in setting both financial and non-financial goals. Why? Very much like a holistic PPC strategy, there is the short and long tail impact of social media. The short tail is activity that immediately generates website traffic and purchases, such as a special promotion to your Twitter followers (Accessories Online does this very effectively). This can be measured by key metrics like visits / orders / revenue / average order value / conversion.
The long tail is the increase in customer engagement that builds brand loyalty and drives elements like newsletter sign-up and word-of-mouth. In the long-term, these elements can lead directly to generating new orders and driving incremental revenue. An example of this is using the Facebook fan page tabs to incorporate a newsletter sign-up option for your main eCommerce website. What monetary value do you assign to a newsletter subscription from your social media presence?
Measuring social media is never 100% accurate
Why? You can’t track everything. For example, just before Christmas I found a tweet from a fancy dress/jokes/games retailer about Space Hoppers. We loved these at school, so I posted the link to my Facebook wall using Add This. Next time I met up with some school mates who live locally, Jimbo brought up the post on Facebook and we started talking about how cool Space Hoppers (and other things like Pogo sticks!) were. A few of them shared the link with other contacts in their social networks. I turned up at Jimbo’s New Year fancy dress party in my Superman outfit and was handed a surprise gift. Inside was a brand new Space Hopper! He had gone direct to the website but he did not use the original Facebook link to click through.
The retailer could not have associated that sale with their Twitter activity. They could run a post purchase question for “What brought you to the site today” – still no guarantee it would be filled in accurately or you could effectively cover all options.
From an evaluation perspective, treat social media the same as any other investment: define your goals and success criteria, implement a measurement program and regularly evaluate performance and fine tune your program to focus on what drives the most value (however you define value).
But do me a favour – make sure you enjoy it. Social media is more than brand marketing, it should be exciting, fresh, engaging and most of all, you should have a real passion for this, not just treat it as the next great thing for online marketing. It’s not a toy, it’s a community waiting for your involvement, step in and say hello!