Correlation: How to Judge Successful Social Media Marketing

Mar 14, 2012   //   by Netword Plus   //   Our Blog  //  No Comments
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I was reading an article about Kodak’s Chief Marketing Officer (CMO) Jeffrey Hayzlett, and his new book, Running the Gauntlet. Hayzlett talks about using social media to achieve what he calls “Kodak’s 4 E’s: Engage, Educate, Excite and Evangelize.”

That struck a nerve with me. Partially because it reminded me of Netword Plus’ own mantra of COPCA: Content, Optimize, Promote, Convert and Analyze. But even more, I realized that the 4 E’s were all values of social media that were difficult to define in terms of ROI.

ROI – Return On Investment – is a cornerstone of the traditional business model. “I paid out money; I want to know what I’m going to get back in return.” Calculating ROI for social media activities isn’t always as straightforward as all that.

How do you calculate the value of an existing customer that has become an evangelist for your company due to a good conversation through Facebook? Or the loss of a frustrated customer on Twitter who never received an answer to their question?

It has become the great debate in social media marketing: “What’s the ROI? How do you measure it?” Or more directly put: “Does it work? How can you tell?” Beyond being a hot topic for pundits to debate, social media ROI is something we address with every one of our clients on an ongoing basis.

There are four main forms of ROI: Direct, Correlated, Relative and Proxy.

Without going into things too deeply, Direct ROI is just what it sounds like. Direct ROI is where you directly track the impact your social media activities have on increasing revenue, reducing costs, or both. On the revenue side, Direct ROI can be used for social media initiatives that directly drive customers to purchase a product or service, often while passing through tracking links. Examples include pushing coupons or discount codes through channels such as Twitter or Facebook, driving early-bird event registration via an exclusive offer through a blogger outreach effort, and so on.

But I wanted to talk about Correlated ROI, as I feel that this is the main form of Social Media investment that will impact your businesses. And it’s also harder to track.

Correlated ROI is a function of tracking measurable social media activities over a given time – a focused blogging effort, launch of a new community site, a Facebook campaign, etc. – and comparing it to the performance of key business or marketing metrics, such as website visits, sales volume or customer service calls over the same period.

You’re looking for statistically significant correlation between the two data sets. For a given investment in social media efforts, or a given level of activity, you attempt to identify a corresponding impact on a key business metric like sales.

Correlation may not give you a definitive  measure like direct ROI will – invest $1, get $1.50 back, and so on – but it can be very useful as a general indicator that tells you if all that online conversation and activity you’re driving is generally good, bad, or irrelevant to the bottom line.

So when I’m asked by a client, “What’s the return on my investment?”, and I answer, “That depends”, I am not trying to be evasive. It’s simply that Direct ROI is not always possible with Social Media marketing. However, using Correlation, we might determine the impact of a Social Media campaign has increased your company’s website traffic or elevated your company’s brand awareness on social platforms, eventually creating on impact on sales.

The analytics we provide help our clients understand Correlation by comparing their Social Media campaign against Google Analytics for their website, as well as reporting on growth on the social platforms over time.

Let Netword Plus promote your company through Content Marketing and Social Media Marketing. We’ve got you covered.

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