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.
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.
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 – 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.
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! 🙂
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 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.
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.
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. Â 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. Â 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. Â Social media now seems to be passing through this same phase. Â Â But, much money is going to be spent like we saw during the COM era learning how to use Social Media. Â Â
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. Â 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. Â 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. Â Social media now seems to be passing through this same phase. Â Â But, much money is going to be spent like we saw during the COM era learning how to use Social Media. Â Â