Often, our industry can appear complicated, and yearns for simplicity. One such technique to glean simplicity is to develop frameworks which the corporate social strategist can then apply to achieve their business goals. I’ve been working on this “ROI Pyramid” framework for a few months now, and am ready to share in greater detail than on my keynote at LeWeb (slides and video) where I introduced this to the public for the first time.
[The novice provide executives with engagement data –causing themselves to be stuck in the churn of obtaining more followers and fans –without a clear business goal]
140 social strategists around the globe at enterprise class size companies indicated their top internal objectives for 2011 is to “Create ROI Measurements”
Measurement, the Number One Priority, Is Important to Social Business
In our recent research report on the buyer of social business, (read research report: Career Path of the Corporate Social Strategist) we learned that measurement is one of the most important aspects to social business, in fact the top priority stated by 48% of corporations was “Creating ROI Measurements” for internal programs, (see data).
- Experimental mediums require proof they work. The corporate social strategist is constantly being challenge as they grasp more budgets to prove their efforts and teams are making a difference. In addition to proving these new mediums are worth the time spent, the corporate social strategist is being challenge by their peers in incumbent positions who may be giving up effort and budget to support social efforts.
- Down markets put greater scrutiny on spending. As spending across the board reduces in a recession, focus on proving new efforts is required by all parties involved. Those that can effectively measure improvements can make the business case they can truly obtain more budget.
- The Corporate Social Strategist Must Develop Frameworks Now. Most corporations are already forming in the “Hub and Spoke” formation (see data) which means a small cross-functional team is helping a variety of business units. Establishing a standard way of measuring now is important before corporations move into “Dandelion” where measurement strategy fragments into spokes.
[The seasoned professional provides executives with business metrics first. They know fans and followers aren’t a business goal, but what you do with them is]
Yet, Measuring Social Media Is Challenging
While we learned that measurement is the key, we found (see data in slide 20) that 65% of corporations are using engagement data as the top used metric, with only 22% using product revenue as a metric.
- Excess variety of data options, and disparate platforms. Due to the thousands of applications, dozens of social networks, and millions of combinations corporations are stymied by how to make sense of this disparate space. In addition to the variety of choices to deploy, each has a different set of ways to measure from fans, engagement, followers and the like.
- Technical limitations vast in a fast changing environment. As if the choices weren’t staggering enough, there are significant challenges to measuring. Corporations are unable to apply web analytics tools on third party sites they don’t have ownership on, and therefore are often relegated to manually counting data, or relying on one of the 150 brand monitoring platforms to scrape it for them.
- Hard to tie engagement to bottom and top line efforts. In addition to being a new program, understanding of this disruptive set of technologies causes friction. Additionally, social media is frequently known for driving awareness (second to ads) through WOM then through customer engagement through interactions –yet rarely tied to transactions or ecommerce which often occur on a disparate platform.
Apply the Social Media “ROI Pyramid” In Your Measurement Strategy
(Above: First, recognize there are three types of role, all who need different types of information about your social business efforts)
(Above: Secondly, understand the high level types of data they need in order to be actionable)
(Above: Finally, assemble this information using the metrics and creating formulas. The above are just examples, as customization within every corporation is required)
Matrix: Understand the Social Media ROI Pyramid
| Who it’s for | How to generate | What no one tells you | |
| Business Metrics | Executives, and everyone else who supports them, which of course, is everyone. | This is a roll up formula of Social Media Analytics. Use tracking software or referral traffic to infer how customer engagement moves down marketing funnel. Existing CSAT methods should also incorporate social channels, and measure a sample of sentiment from customer communities. Cost reduction is a formula based on reduced costs and time in these lower-cost channels. | The pyramid is smaller at top as their are less metrics to give to busy executives. There’s really only three: increased top line, reputation, and reduced costs. Compare these lower cost channel to existing marketing efforts to get additional budget, and benchmark over time. |
| Social Media Analytics | The Corporate Social Strategist and the internal stakeholders and internal clients (leaders of the ‘spokes’ in the hub and spoke model) | This is a formula based on Engagement Data (the tier below), there are no industry standards, so pick one and benchmark over time | We’ve identified there are 16 analytics, but there are many more in existence, you’ll have to create these formulas on your own |
| Engagement Data | Those who are deploying social media: community managers, developers, designers, agency partners, IT. | This data is already created by many social tools, and a variety of analytics are already available to gather this info from brand monitoring to the analytics provided by Facebook and Twitter and others. Don’t forget to include traditional web analytics. Read our research report on Social Marketing Analytics to learn about the existing formulas. | Don’t ever give this to executives until you’ve first given them business metrics or expect many months focused on ‘more followers’ without a business purpose. |
(Above: Here’s a single slide with all three columns of info on it which you can use as an instant reference)
Five Steps To Start Using the ROI Pyramid Now
Corporations must develop a standardized way to measure first based on business goals. Next developing a standard way that the entire company and agency partners can think about measurement is key in 2011 as social business will fragment to every customer touchpoint.
- Start with a Business Goal in Mind. Expect significant challenges to occur if your social media efforts don’t have a business goal, so clearly you should first start with a purpose. It’s easy to spot when this happens as the goal will be on getting ‘more fans and followers’ rather than moving the business needle forward. Start with a clear business goal and define ‘what success looks like’ or don’t start at all.
- Give the Right Data to the Right Roles. Not all roles require the same types of data, and be sure to give the right type of data to the right segment. While all the formulas of the pyramid should be accessible by the corporation, understand the viewpoints needed from each vantage point.
- Frequency and Quantity of Data Varies in Pyramid Tiers. Recognize that executives need reports less frequently that the deployment teams, hence their size on the pyramid. Also, there is more data needed at the bottom tiers than at the top, remember the top tiers are roll-up formulas from bottom tiers.
- Know the Customization of Formulas is Required. This industry lacks any form of standards, so don’t wait years for an industry wide formula to appear as it likely won’t even apply directly to your business needs. Invest the time to create the social media analytics needed to support your business goals now, which you should expect will take massaging over a period of time.
- Benchmark Over Time and Cascade to All Spokes. The specific numbers aren’t as important as the trend lines over months, quarters, and years, yet in order to obtain these, you must start now. Looking at how these numbers trend over time will provide more insight to the teams involved.
I look forward to hearing how you implement this framework in your measurement efforts, let’s open up the discussion in the comments below, please share this with your teams, agencies, partners, and staff. Thanks to Christine Tran and Asha for design help. Feel free to use these slides, flickr images, just provide attribution to Altimeter Group.
This is an awesome framework Jeremiah.
From the standpoint of someone on the provider side — this can really inform how those building analytics/measurement tools can think about data presentation to their users based on user roles. Some of this mirrors our current product design, but I've shared this with our team to further consider.
Two items I keep in mind:
1. Narrative: remember that the KPIs you select and the reports you give to the top of the pyramid should tell a good narrative about the current status and trend of your efforts and how they affect the business more broadly. People (IME) really look more for the story behind the data and what trends this exposes.
2. Social Media teams should be able to iterate on their approach by setting aside some purposeful budget on “R&D” — allowing them to test new platforms, campaigns, etc. Because the landscape moves fast, it makes sense to release more budget to teams as they learn more lessons from trial and error about what does and doesn't work. Don't invest in setup / infrastructure until you've started figuring out what works for you and what you need/want to track.
Jeremy, this is a great post. We're adopting it as a framework. I'll report back to you as we learn from experience with this approach. Thanks for sharing your insights.
When it comes to providing the right data, let's also keep in mind that 'dataset' or 'KPI' will change and evolve as the social medium evolves. Keeping in mind that context is the key here.
+1 on Iterate and Test. Repeat.
Great framework for outlining the notoriously-difficult-to-gauge ROIs of social media in the corporate world. As a graduate student, I'm signed on to be a social media intern at Procter & Gamble-Europe next semester. This could be very useful stuff.
That's right, agreed Bilal. This is why social business is different than other 'standard forms' of measurement as it can be used in a variety of ways
Advertising really has only two goals: awareness, and click through. Support has a standard set of metrics from CSAT to NPS.
Social business can be used in both of the above ways, as well as numerous other ways, so it's really variable in deployment and to you point, KPIs.
I would love to learn more about your experience, I have calls with P&G folks here and there, as you may know they scored well on their Pampers Facebook ranking we did on the market.
Joseph, I can't wait to hear how your implementation goes.
Jeremiah:
Thanks for sharing. Like most things in business, if social is going to be a big deal (and it is) it needs to deliver real business results – measured in $$$.
I guess the evergreen argument about SM ROI is really just one of perspective. The higher you sit on the pyramid, the less realistic any argument that ROI doesn't matter becomes.
@tomob
Executives are weighing budgets between 'traditional vs new media spend' at the top of pyramid.
A very different decision than 'spending more money on blogging vs facebook' at the lower tiers.
@Tyler thanks for the comments.
Agreed on iterative, this also happens more frequently at bottom tiers, hence point three.
Thanks for sharing Jeremiah.
I feel that 2011 will be a big push on data collecting and making sure that your social media efforts are truly working and measurable. I always feel that keeping things simple and lined to your business goals are key to showing results.
Thanks for the post Jeremiah! I've been reading your posts for awhile and I'm a big fan! I love how the industry is moving to something we call “the Now What” of Social Commerce. Your framework is right on about needing to understand detailed metrics that facilitate Business goals, such as transactions and revenues. We believe strongly that the best social commerce solutions provide the analytics of what works, what doesn't and how do we create more transactions. Thanks for leading the charge on bringing up this topic.
Blair Heavey
CEO
Moontoast
Jeremiah…this is one of your best posts. Thanks for putting in the effort.
For the mid tier and smaller biz, the middle tier is the focus. P & L is where true ROI matters and purely gathering listening points of 'likes' or 'shares' or 'comments' is not substantial enough.
For the small business it's less about budget and communications than about resource allocation and the mystery of assessing value from social media actions is still a leap of faith.
Who, in your opinion, is working in the small biz arena that you think has a methodology for the mid tier that truly makes sense and is not just hyperbole?
Very, very helpful. A great framework for the overall organization. It seems to me that it gets even more complex if/when different stakeholders (marketing, PR, customer service, sales) within the company have different social media analytics and priorities. How is senior management to make sense/prioritize disparate, overlapping or conflicting indicators to measure social media ROI that are rolled up to them?
Jeremiah – thanks for sharing this. Your point of right data for right roles is critical. Too often we get stuck on engagement numbers and report those to everyone. We have taken engagement numbers further to track action and outcome. What was learned from the engagement and what action was taken. From there we can extrapolate that to a business outcome of contribution to revenue or pipeline progression and create a tighter tie to those numbers that are critical to the business.
One other area we are experimenting with is creating shared metrics with the community members. This is powerful as they are measurements that the business needs to hear since they come from the customer, but they require the same level of tie-in to the business that you are showing in your pyramid. I'm interested in whether others are collaborating with their communities to establish ROI metrics. Thanks again.
Jane it's always great to hear from you. Great point on sharing data with customers in the community.
@awaldstein I really don't know 'who' is doing this well yet in the mid tier in the small biz arena, but maybe they'll chime in here in the comments. I'm very focused on the larger corporations at this time although the content can cascade to others.
A great post as usual Jeremiah.
As a Head of Digital Marketing with 4 years of Social Influence Marketing strategy & execution experience, my only points of feedback:
At the enterprise level there are in fact three primary social influence marketing roles/responsibilities and I would never combine Community Managers & Agencies (in some cases the social media roles might be consolidated roles) –
1. Social Media Strategist – Create/develop marketing strategies using social media tools and then evangelize those strategies to other marketing teams. Manages support from executives. Mitigates risks with legal. Coordinates with corporate communications and PR. Educates key stakeholders. Manages budget/resources.
2. Community Manager – Support, grow and evangelize Advocate Community. Advocate for the Community, building relationships and finding new ways to encourage discussions and promote the needs of the members. Manage MVP program for your Community.
3. Social Media Marketing Manager – Works with the agency using social media tools to create innovative, engaging social marketing campaigns. Will test different tactics with clear success goals identified resulting in differentiated campaigns with strong ROI. Develop regular reporting cadence on Social Media campaigns.
4. Agencies – two types (but can be combined) A/ Strategy, Management & Execution (Spring Creek Group, Wunderman, Ogilvy 360 etc). B/ Engagement & Outreach (M80 is a good example)
In relation to 'Metrics' far too many people are measuring the wrong things or completely unnecessary things. It is important to understand that popularity and volume don't necessarily relate to influence. There have been many studies to prove this. Ultimately focusing on measuring retweets, followers or stuff purely about volume is pointless if you can't attribute that activity directly to influence (sentiment, end actions etc).
The primary concept of social influence marketing is the ability to influence someone. This could be (directly or indirectly) their opinion, sentiment, satisfaction or an action of some kind. But ultimately the KPI's depend entirely upon your goals and objectives whether that is awareness, consideration / engagement or conversion etc.
One of the other mistakes people make with measuring Social Influence Marketing (SIM) is that they haven;t even implemented a digital marketing measurement taxonomy or broader digital marketing measurement framework. So how on earth are they going to measure any impact from SIM?
The organisations that get this space have developed an alternative value for outreach, activity and engagement across Social Media.
For example:
Blogs, Spaces & Forums Channel
131 Outreach & Engagement Activity Driven
44,239 Estimated 'Brand Engagement Impressions'
$17,500 Engagement Programs Cost for this Channel
$0.40 Cost per 'Brand Engagement Impressions'
2.168 Additional Value Weighting of Engagement for Channel
$2.25 Alternative Brand Impressions Costs Basis (Avg of Display Ad & SEM Click)
$215,796 Value of Engagement Events
$4.88 Value per 'Branded Engagement Impressions'
= 1,113% ROI
The principle concept is that you must determine an alternative equivalent media for each Social Media technology or channel and therefore come up with an equivalent comparable value. Other 'Channels' might be 'Answers / QnA / Support / Communities', 'Social Networks', 'Bookmarking / Sharing / Aggregation Sites', 'User Uploaded Video Sites' etc.
I could go on and on but nobody likes reading really long comments! 🙂
Thanks Martin.
I agree with those roles, I see these roles that you listed out working in the following way:
1) Social Media Strategist is responsible for the measurement strategy.
2) I see the community manager leading the measurement in the engagement data, and working closely with the strategist.
3 and 4) Both these roles move up and down the pyramid, with a strong focus on second and third tier as they're closer to implementation.
2) Community manager goes into the third tier, where engagement data makes them actionable and able to refine
3)
Thanks for this incredible post Jeremiah! This really got my week to a great start as I am trying to get a similar message out there, as someone who works in a social media analytics company.
Where I see Social Media Measurement and Analysis right now, especially for companies just getting into utilizing Social Media outlets as a new method for them to get their message across, is helping out with understanding each company's Social Media Environment.
With a clear map of where your brand stands among competitors and within your category (i.e. your Social Media Environment), it is easier to set clear objectives, design a strategy to obtain those objectives, and keep track of your goal-setting with a coherent set of social media measures. Before you know it, the return on your investment starts to emerge as you go by either achieving your social media objectives, or re-thinking how you could achieve them.
Thanks for this incredible post Jeremiah! This really got my week to a great start as I am trying to get a similar message out there, as someone who works in a social media analytics company.
Where I see Social Media Measurement and Analysis right now, especially for companies just getting into utilizing Social Media outlets as a new method for them to get their message across, is helping out with understanding each company's Social Media Environment.
With a clear map of where your brand stands among competitors and within your category (i.e. your Social Media Environment), it is easier to set clear objectives, design a strategy to obtain those objectives, and keep track of your goal-setting with a coherent set of social media measures. Before you know it, the return on your investment starts to emerge as you go by either achieving your social media objectives, or re-thinking how you could achieve them.
It has been always a debate whether social media ROI is really measurable and what should be measure in social media marketing. Your strategy looks very interesting and I would test it to see how the graph fits to our model. Thanks for the share!
Amazing review, one of the best social media ROI post out there!
We can learn so much from it… THANK YOU!
How do you see the funnel described above correlate with ROI that business will pay for like lower conversion rate, or higher customer life time value over time?
Thanks,
Sharel
Awesome framework Jeremiah!
Just one question, I'm working on connecting the traffic from our social channels back to the web site and then through the sales funnel… what can I use to tie to actual sales when a company does not have an existing CRM? …I know what you're going to say, go and get one! 🙂
This is a great chart that makes tons of sense Jeremiah.
I really like that your framework for showing ROI actually has no real formula to it. Too many people are sitting around and waiting for someone (like you or maybe even me) to come up with some magic bullet formula that will magically blanket the industry and say “this is how ROI is shown”. Instead, I love that it highlights that every companies' goals are going to be different for using social media and that they should create their formula based on their business goals and that different pieces of information are going to be of different levels of importance for different roles within that company.
My only problem with it, and it was pointed out in the comments earlier by Martin Walsh, is that community managers and agencies are quite different from each other, both in what they do and how they do it. While some metrics may be valuable to both, they will be used and looked at in different ways. Aside from that though, I really enjoyed in seeing this.
Cheers,
Sheldon, community manager for Sysomos (http://sysomos.com)
Awesome post, Jeremiah! Defining roles and defining goals is still an obstacle in social business, but with refreshing clarity you have helped us do both.
To extend the goals of the ROI Pyramid, I put together a blog post to recommend some tools for each level of the Pyramid. The ecosystem of tools is rising up to specifically track the metrics you prescribe.
http://oneforty.com/blog/tools…/
Hope this is helpful!
Janet Aronica
Community Manager
oneforty
I think this is a great pyramid showing how social media could definitely contribute to ROI in a company. So many people say you can't measure ROI but yet there it is. I'm printing this out and showing my doubters 🙂
I must say that's a very good point you have made over here. There are things that should be termed as something that will without a doubt have better chances to make it big in the world of marketing. Things are just that you will have a better chance to have a better response to a better prospectus. Especially the pyramid is something that does speak a lot about the Hierarchy involved in the process.
Hi Jeremiah,
As a strategist and one of the people developing the social media analytics framework for a US Fortune 20 brand I wanted to provide validation that your model here is spot on.
We too have broken our framework into 3 levels that a. map to business objectives and goals — strategic; b. track line of business metrics specific to each department and division; and c. engagement level specific to the channel and market strategy. Another way we think of this is timeframe, frequency or when working with toolsets in terms of SLA: Engagement level is acted upon in minutes to hours; Social level is focused on projects, products and programs and is acted upon over hours, days and weeks; lastly Business level is strategic (brand level decisions, may require capital investment, seasonal such as Arbor Day/holiday shopping) and takes months to see the full effect.
We have taken 6+ months to develop ROI our models based on both hard dollars and “value” generated (that as our metrics and reporting infrastructure improve should be mapped to dollars) — and we feel are just getting started. The time it took was due to seeking validation from finance and socializing the model to gain stakeholder buy-in person by person, department by department. Consider 'validation, agreement, refinement and re-socializing' a 6th step to using the pyramid — other commenters have noted this as well.
Glad to see you outline a thoughtful approach that has been put into practice and is defendable. It looks from the comments that you have solid support here.
I really appreciate this comment, thank you for the validation. Thanks for leaving a comment.
Good reminder and a great post, as always.
An additional thought — so many CMOs are measured by their “brand funnel” metrics. They have studies that they fund that deliver changes to awareness, brand preference, and consideration every quarter. I think it’s critical that social marketing initiatives work as hard to show changes in brand preference as they do to drive social engagement, and ultimately hard business results. Especially for some products that fall in a longer considered purchase cycle (autos, hard goods, etc), it will get social marketing into the standard rhythm of the CMO.
Jeremiah…thank you…your time and effort is self-evident. The frame work is rational & logical however, I really think that at the end of the day, there needs to be an algorithm which can translate Social Media metrics( integrating all communication portals) into quantifiable/tangible business results to feed the top of your pyramid. Similar to what you suggested in your matrix. To make this a bit more complicated there are 3 revenue business models to address: recurring revenue, non-recurring revenue, and of course the blending of both. It appears that you and many others are working on this….many companies are correctly increasing their budgets in this arena, but like any other media channel,(and as you indicated from your research) if a logical and direct line can not be demonstrated to roll up to the objectives, those dollars are vulnerable. I’m keeping the faith…innovation is on the horizon.
Thanks Jeremiah, I will be referencing this in my class tonight. As always, great work.
Jeremiah, may I make two comments about this post?
First, let me say that ,ost of these graphics and the concepts they communicate are spot on. I like what you’ve done here. But… respectfully, I have to point out a couple of key problems with your definition of business metrics as they relate to social media. Let me show you what I am talking about:
1. You state that “this is a roll up formula of Social Media Analytics. Use tracking software or referral traffic to infer how customer engagement moves down marketing funnel. Existing CSAT methods should also incorporate social channels, and measure a sample of sentiment from customer communities. Cost reduction is a formula based on reduced costs and time in these lower-cost channels.”
Here’s the problem with that: First, business metrics are not a roll-up of social media. If a metric is a “roll up” of social media, it belongs in the Social media analytics section of that table.
Business metrics as they relate to performance are measured outside of social media, and THEN related back to social media (or other ecosystems). They are things like buy rates, net transacting customers, operating costs (which you mention), revenue deltas, etc. They are media-agnostic. That is what makes them business metrics.
Metrics like “sentiment” (which you mention alongside cost) are measured mostly in the social space with social media measurement tools. They are therefore not business metrics.
2. You also add that the only 3 ROI metrics you should communicate to executives are “increased top line, reputation, and reduced costs.” No.
If you are reporting to an executive on ROI, “reputation” does not belong in that conversation. An ROI report deals with the relationship between the investment of resources (assigned to the social media program) and ensuing financial outcomes. This means one of three things: A) A cost reduction. B) An increase in revenue. C) Both. That’s it.
The cost piece is pretty simple. No need to get into that. The revenue piece is a little more complex. Though this is by no means the only way to approach the subject, the FRY (Frequency, Reach and Yield) breakdown of net new revenue figures seems to work with every exec I talk to:
Frequency = Buy rate. (How did our social media activity result in a shift in existing customers’ buy rates? Add metrics to support this. Social CRM is ideal, but there are ways to get answers without sophisticated tools.)
Reach = Net new customers. (With social media, this is tied to digital reach through social platforms. How did our social media activity result in the acquisition of net new transacting customers? How many? Where did they come from? What did they buy? Etc.)
Yield = Average value of transactions. (How did our social media activity result in a change in yield? What specific products were touched by this change in behavior? What channels were used? What conditions led to the change? Etc.)
This is an in-depth ROI discussion that touches on business metrics. That is what belongs in that top part of the table. With respect, items like “reputation” and “sentiment” either belong in the Social Analytics part of the table, or as a separate subset of that executive reporting. One that also touches on broad metrics like market share, share of voice, brand preference, etc.
The rest of this piece is excellent. 😉
Cheers,
Olivier
Thanks Jeremiah for presenting these ideas in the Social Media Success Summit today. We will be sharing your information with our business associates.
Tanks for a great article @je. It is actually a part of my curriculum at BI Norwegian Business School i Norway. I have one question: What are the 16 analytics you have identified? Best regards Tore
There are great discussions on this post. I do believe the next evolution of the ecosystem is how to bring the consumer closer to driving home the business matrix of conversion and then a step further how are they getting others to convert to actually paying money for products and or services. Some how a company is going to need to ask nicely “Hey we want to partner with you on your data to help us make better products, right size our supply chain, make us more recommendable, How can we do this Mrs or Mr. Consumer?”
I think the next step in this process to truly get the convertible numbers from actions taken by consumers is VRM (Vendor Relationship Management). This will help complete the picture and make the ROI question be answered or people will have to answer for it. Customer Development & Retainment should be the path!
I guess Martin got a bit excited after reading your awesome post.
The debate around the use of Social Media Marketing is like the debates of the 1980s around whether brand or direct-marketing based strategies were better. Direct marketers made great strides by defeating competitors that relied solely on hard-to-measure, intangible brand advertising because direct marketing inherently focused on delivering measurable results. But, the debate was landed on the position that you need to have a mix of both brand and direct marketing with each type complimenting each other. Social media now seems to be passing through this same phase. But, much money is going to be spent like we saw during the COM era learning how to use Social Media.
The debate around the use of Social Media Marketing is like the debates of the 1980s around whether brand or direct-marketing based strategies were better. Direct marketers made great strides by defeating competitors that relied solely on hard-to-measure, intangible brand advertising because direct marketing inherently focused on delivering measurable results. But, the debate was landed on the position that you need to have a mix of both brand and direct marketing with each type complimenting each other. Social media now seems to be passing through this same phase. But, much money is going to be spent like we saw during the COM era learning how to use Social Media.
Jeremiah…I’m in Silicon Valley too. Would absolutely LOVE to connect with you!