In a previous post I talked the importance of understanding that ROI is not only about a financial return but also about strengthening a brand. Today I want to cover some some metrics that companies should really pay attention to if they want to be able to understand the ROI from their social media efforts, or for that matter, any other marketing efforts that they are involved in. I decided to put together a starting list of important metrics that companies should have at hand to help them measure and understand ROI.
Keep in mind that these are ROI specific metrics and that they may differ depending on your organization. Before reading this post please go back and read ROI is About Making Money AND Strengthening Your Brand. Some of the metrics below are going to be number specific; other will have to do more with brand strengthening.
- Average cost per transaction. Pretty self-explanatory here; how much are your customers spending on average during each of their transactions. The goal here is to increase that amount.
- New customers that the organization is getting during a particular period (quarterly perhaps). Again, we want to increase this number.
- Costs associated with retaining customers. We want to decrease this number.
- Customer loyalty. Perhaps the users engaged with your brand through social media remain customers for a longer period of time.
- Depth of the customer purchase. Are customers buying the red widget but are now also buying the green one? We want to increase the depth of purchase here, perhaps for complementary goods or services.
- Time spent (aka money) for customer service. The goal here is to decrease the amount of time required to help a customer, thus reducing the amount of money needed to service every customer.
- Time spent for any other business activity that you seek to decrease with the use of social media.
- Customer surveys that measure brand loyalty, brand awareness, and brand perception (or other). You want to make sure you do this on a continuous basis (quarterly perhaps) to be able to measure changes, you also want to make sure you put yourself up against your competition.
- Customer surveys to measure what impact social media has had on their purchase decision. Did they buy your product as a result of your social media efforts? (Questions like this will help you understand the ROI from your efforts.)
- Look at how a particular product or aspect of the business performs vs. the competition during tough economic times, cyclical cycles, holidays, overall increase in consumer spending, etc. This will help you understand the strength of your brand and how it performs in various scenarios.
Did I cover everything? No, but I certainly feel that these are 10 very important things to consider to understand ROI and can prove to be a good starting point for many organizations. The challenge is that a lot of companies around the world don’t have any of the (or very little) information mentioned above, thus it makes it quite difficult to calculate any sort of ROI or value from social media efforts.
Another thing to consider is that it’s going to take time to obtain benchmark numbers/information for all of the above and to then implement a systems/process to help measure them on a continuous basis (1-2+ years). The aim here is not focus just on short term campaigns but to also show the long term value of social media. This starts internally first with establishing an infrastructure that is capable of showing ROI and value. Once that is in place the outward reach, campaigns, and strategies can be developed. There is no sense in using social media if you can’t show some sort of value, ROI, impact, etc. from your efforts.
So the point is? Make your organization ROI ready first otherwise you’re going to be measuring a whole lotta nothing!
I’m sure you have something to add, so let’s hear it!
