So why do so many sane, rational marketers think they'll get a pass when it comes to social media?
Since social media first stormed into town and changed the rules of marketing, some of the savviest marketers have believed that they needed to change the rules of measurement to quantify its impact on business. On the surface, it makes some sense. "Social" was a new conversational media that marketers couldn't control. Peers, not marketers, were a primary influence on brand perceptions and purchase decisions. A brand could create positive buzz by doing something outrageous online or by pushing out viral videos and hope they took off like the next subservient chicken. How do you apply traditional measurement metrics to that ?
Marketers said it was the "engagement era" and traditional marketing measurements practices were no longer sufficient. New measurements were needed and it wasn't long before metrics on conversations, engagement, influence, fans, followers and "likes" were the ROI justifications on every marketer's media plan.
Social marketing has come a long way since then. Brands are effectively cultivating communities, engaging with advocates and developing shareable experiences to influence product sales. Social is a serious marketing focus -- it requires investment in resources and partners to do the job.
The problem is that CFOs aren't impressed with engagement. Likes, and the like, represent value, but not ROI. ROI is a financial metric and it must be stated in dollars and cents. There's no column on the balance sheet for likes. Likes are the new click-through rates –- an abstract statistic that really makes sense only to the resident digital-media guru.
Engagement is a wonderful thing and it should be measured, but for marketers it's simply a means to an end. Marketers using social media to promote a product need to track how their efforts are driving people into the store to buy it. What gets measured gets funded. If you think social is driving sales for your business, you'd better start measuring it in a way that CFOs care about so you can do more of it.
Correlating social to sales and revenue isn't easy. Neither are radio and TV, but they are evaluated every day by the most sophisticated brands in the world using measurement practices that have been proven over decades. Two of these practices, Matched Panel Tests and Market Mix Modeling are perfect for determining the sales and ROI of social for consumer products sold at retail.
The Matched Panel Test concept is simple. Two similar U.S. markets are selected and people living in one of the markets are exposed to a social-media program. A measurement firm like SymphonyIRI measures sales of the product in the market and removes the influencing variables to isolate the sales lift caused by the social marketing. This type of test can be applied to many different types of social-media programs, provided the marketer has some geographic control over where the program will run.
Some emerging practices incorporate retailer loyalty cards into Matched Panel Tests and analyze purchases right down to the individual household level. This can give you a precise view of ROI, as well as a wealth of insights on who buys your products, what else they bought at the same time and if they've returned to buy it again.
Another time-tested method is Market Mix Modeling, considered by some to be the gold standard in media measurement. It's usually conducted annually by firms like Nielsen to determine the financial impact each marketing activity has on sales. With the right level of data granularity, social marketing can be picked up in the model for an apples-to-apples comparison alongside every other marketing tactic.
Based on BzzAgent's experience using these practices over several years for some of the biggest CPG companies, we've seen that social marketing is highly cost effective. On average, it generates a return of $1.50 for every dollar spent. In some cases, the ROI from social marketing has been the most effective component of a brand's media mix.
With these practices, your social-measurement strategy can be exceptional, not an exception to the rule. Trusted measurement companies such as Nielsen, SymphonyIRI, dunnhumby (BzzAgent's parent) and others are applying the same sophisticated analysis to social that is being used on all other media investments. Not only does this prove you can measure the business impact of social marketing in financial terms, it proves that when it's done right, social can be a very profitable sales channel. And that 's something that will make even the most hardened CFO smile.