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January 07, 2010

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David Gammel

David, you rant and then list a bunch of measures for ROI at the end. I'm not sure what the beef is? Any exec should see value in those results.

David Meerman Scott

David, execs are insisting on a dollars and cents calculation.

"For me to invest $X in web marketing, I need to get $Y in return."

Then whatever ROI calculator is dreamed up becomes the only form of measurement. It is a holdover of things like direct mail that you could measure with a great deal of accuracy.

BethCochran

Interesting perspective. I must admit at first I thought it was a bit extreme, but it really does make sense. Measurement is important so you can track what is and is not working and continually improve. But where many CEOs and business execs fail is by not looking at social media (and other forms of communication) as an opportunity to engage and build meaningful relationships. Maybe we should change the meaning of ROI to something like Relationships Over Interruption...or something more clever.

Miss Publicity

David,

Funny you post something like this today...I just had a discussion with someone about this very topic yesterday. I often feel like I have to explain myself and answer all different "whys" for social media. Simply, they just don't get it yet. I am known as the "miss publicity" of our business unit within a large corporation. Turns out, I'm the only one doing these things in the entire company. I have made some headway, but I'm still feeling that it is not taken seriously. What can I do to better explain the "why social media" question to a 50 year old who has no idea how to Tweet, DM, or blog?

David Meerman Scott

@Miss Publicity - I ask these questions to executives
http://www.youtube.com/watch?v=6SyBWSFUrfM

Russ Somers

Awesome rant - this is your Howard Beale moment!

I do think it's worth questioning the value of Web marketing or anything else. You ask "What is the ROI of putting on your trousers in the morning." Trousers don't have an ROI per se, but if I begin showing up at work without them I'll soon be jobless.

Same with Web marketing. Depending on the Web strategy it may not boil down to a simple cost per lead or ROI calculation. But these days a company without Web marketing is showing up in the global workplace without pants, and will face the consequences.

David Meerman Scott

Russ -- I LOVE THIS. Great way to connect the several ideas in my rant. Thanks so much for jumping in.

Smithwill

Yep, you ranted alright. The difference between a billboard, TV commercial and other forms of advertising is that it's a one-time sunk cost. Social Mediatizing usually involves people's time which can be a distraction from getting other forms of work done. Or, if they're dedicated to promoting the company via social media, there still must be a productivity metric.

SMedia ROI is a valid question. That's why there are accountants.

Jack Daniel

A good, cathartic rant David, thanks for sharing it. The MBA ROI scourge permeates business today, it is also one we battle in information security. It is often similar in that people try to measure the intangible, or measure the tangible incorrectly. Just because you can assign a number, doesn't mean it makes sense. And the bogus metrics degrade the value of legitimate information because we end up distrustful of all data.

Gotta run, I'm going out with a yardstick to measure how blue the sky is.

Maria Reyes-McDavis

You are soooooo freaking on point! This is the best rant on ROI I've heard in a long time. Great points, great insights :-)

John Patella


Great rant.

Social media is much more measurable than traditional advertising, which ultimately requires a leap of faith.

I think we're just about at the end of the period when you have to explain or justify the value of social media.

Communications technology is always evolving, and social media is just that latest step.

The telephone was also once new and for a brief time people had to make the case about why it was valuable.

That time passed.

I think the key is to set expectations correctly from the start about what can be measured and what can't, and not to over-promise about what the efforts will deliver.


Andrew Everett

Love it!

My favorite line is about the ROI of spending a week calculating the ROI. The term "fools errand" comes to mind.

I had a conversation with a CEO who claimed her business makes data-driven decisions, but it took about two minutes of questioning to realize she didn't understand the data she was citing. This reinforces my belief that a lot of posturing about ROI is really just CYA, so an expenditure can be justified in case it is challenged. CYA is not a function of job level; it is a function of company culture.

Some things are measurable and should be measured, but statistics (smoke and mirrors?) is not a substitute for experience and intelligence.

Amber Avines

David,

I heard you on yesterday's podcast and became an immediate fan! Thank you for asking the smart questions and being such an articulate advocate for progressive marketing and PR (I also watched your YouTube video where you surveyed attendees across the globe about where they get information; I left a comment there, too).

I cannot wait to get a copy of your second edition book! And, I intend to play your rant on ROI for every Chief Marketing Officer I ever talk with about new media. It's golden!

Keep up the great work!

Amber
@wordsdonewrite on Twitter

Stephen Eugene Adams

I think we spend too much time trying to justify our ROI on marketing. Even when we can make the calculation, what do we do with it. If the calculated return is good, we love it, if the calculation is bad, we justify it. There are all kinds of ways to calculate ROI on direct mail, emails, special promotions, etc. if we use different contact points but what does it get you?
With all that said, we are living in a world of CMO's trying to justify their budgets with the CEO, so we still need to always be searching for a way to calculate ROI, even when it is meaningless.
I know that when I get people talking about my blog, my website, my articles, my postings, I have done so much more for my brand image than anything in the mass media arena.

Bruce Nunnally

I think that you are saying that it is good to measure the effectiveness of social media efforts, but it misses the point for many businesses to ask for a dollarization of that effectiveness. For example, improved social media may lead to greater product consideration. We would expect more consideration of our products to lead to more sales. We could focus on the $ value of the more sales in ROI terms.

But it misses the point of what we could be doing now that we have the customer's attention. We can gain greater interactivity, allowing us to improve our product, improve our messaging, re-invent our brand along the paths our Customers want.

So asking ROI on Social Media is like stepping into the spot light and then focusing on measuring how long a shadow you cast instead of on the rapt attention of your audience.

Account Deleted

Being a Fan of your work and the new rules of PR, I think you are bang on ranting here.

However,I am running a startup and I realize the importance of ROI. I have not spent even a single penny on traditional media and I am on track of breaking even in 4 months. However, for me to decide on which online activity to spend money on does require me to calculate the ROI.

I am hoping that your rant was primarily on the point where people argue Online Vs Offline ROI. However, I am still hoping that you do not mean to ignore the ROI completely for the online space?

David Meerman Scott

Thank you all so much for your comments and tweets.

I was out all afternoon and evening and am just now catching up with the great stuff here.

Should I get caught up in this rant again, I’ve added a few great lines:

@Jack Daniel: I'm going out with a yardstick to measure how blue the sky is.

@John Patella: What’s the ROI of the telephones in your office?

@Bruce Nunnally: Asking ROI on Social Media is like stepping into the spot light and then focusing on measuring how long a shadow you cast instead of on the rapt attention of your audience.

John Antonios

hats off David - it's really nice to hear a professional marketeer like yourself crush the idea of ROI! Ironically, I think the people who usually ask for it are people who don't really know what it is, and that is why i agree with you that they would believe anything an agency feeds them! Had they known what it was, they would question the numbers - I think it has become such a cliche question to ask with no intended purpose. just like when most people ask you how are you, they're not really interested in your well being, it's a just an expected question with an expected answer!
Would love to listen to the rest of the podcast!
Btw, how did the harvard thing go :)

Derekabdinor

Loved it.
the billboard on the side of the highway is like taking a shotgun to an elephant hunt. A pellet may hit some part of the target, but you're then only likely to be chasing a wounded animal or running from an angry one.

Not that I hunt..

Bill Royce

David,
Bjorn Edlund, who heads global communications for Shell, introduced the term 'Return on Relationships' to restate what ROI really means in a digital, networked age where engagement is the ultimate objective. The more you play with this concept, the better it works.
BTW, loved the rant.

Don McCauley

Just as there was never a measurement for billboards, there will never be a valid measurement for social media.

Social media creates awareness, not results. Various forms of advertising create results AND awareness and thus can be measured. How does one measure awareness? It simply cannot be done.

What is the answer?

"Mr CEO, over 70% of our potential clients are involved in social media. If we are not there, your company will potentially be completely invisible to over 70% of your potential clients. If over 70% of your clients are in the mall, you'd best have a storefront in the mall."

That should shut 'em up regarding ROI.

ilya

The comparison with landscaping and putting your pants on is cute (and effective), though I can imagine someone replying "well, I don't spend a million dollars on the landscaping or my pants."

But I think your point is that it's moronic to not do all these things, so of course you gotta do stuff on the web.

And the apples-and-apples reference to the things they DO spend millions on - advertising, direct mail, tradeshows - should hopefully drive the point home for folks that don't feel this in their gut.

Nice rant. But consider adding bleeps next time over the "freaking" - you'll sound more bad-ass...

Chris @ Rizzo Tees

David, you're dead-on here! It's a group of marketing people that KNOW HOW to run a billboard, KNOW HOW to run a TV ad, that continually go back to those forms of marketing. Not everyone knows how to leverage social media. They haven't read your books yet!

In a recent interview I did, I said, "It's not a question of 'How can we sell stuff using Social Media?' I couldn't care less about ROI - I'm building a community of people that believe in what I'm doing."

Glenn Taylor

Great rant! It's spot on.

The ROI issue is being used as a roadblock by many firms to easily block their entry to the opportunities available within these great new tools. To them, it's easier to stick their head in the sand and point to a lack of ROI data. They all use the web daily, but then state they see no reason they need to be reaching out and communicating there.

Relationship building doesn't have an ROI in the sense they are used to and feel they need to see. If most firms measured everything they do with this ROI yardstick, they wouldn't be able to justify their fancy sign out front, highly-stylized business cards, employee uniforms or coffee services.

Their is no ROI on pants! Classic!!

trish bertuzzi

First, great rant. I lost count of how many times you used the word freakin'.

Second, the rant needs to come with a warning label "children do not try this at home". A marketing exec who goes off on the ceo with this kind of rant will have plenty of time to go out and measure how blue the sky is.

Look, the ROI question for marketing has always caused people to go insane but it is a question that has to be asked to understand resource allocation. I went to 3 client sites and checked out their blogs. They blog frequently and guess what...there are ZERO comments. They are not engaging their audience. Writing blogs takes up time - can that time be better spent somewhere else?

Net/net - I think the ROI question is fair but I think the answer has to be different. Not # of leads or dollars but engagement and interaction with potential buyers. We all have that data so present it and educate the execs so they understand it. Just my .02 cents...

John Heaney

OK, I'll be the fly in the ointment and assert that your rant was specious and disappointing from someone whose writing I've admired and followed for some time.

Assets are allocated to those projects likely to generate the greatest return to the company. There is always an internal struggle between engineering, production, operations, and sales & marketing for limited capital to pursue their desired projects. How does management decide which projects to fund? They examine the potential returns in either increased sales or reduced costs. You either deliver one or the other.

Marketing managers have tracked the effectiveness of their campaigns for decades. Not a single commercial, but a tv campaign. Not a single billboard impression, but the results of thousands of impressions. They include special phone numbers, email addresses, promotion codes and a variety of other elements solely to track the effectiveness of their campaigns.

Why would social media efforts be any different? Should you devote your time to Facebook, LinkedIn, Twitter or blogging? Which reaches your target audience most precisely? What happens when they read or receive your message? How do you convert your new and strengthened relationships into increased sales or reduced costs? What's your ROI?

Insisting that SM will produce results without any evidence won't convince a single CFO or CEO to fund your project. Showing them case studies of successful SM campaigns and demonstrating how you intend to pursue similar strategies to reach prospects, clients and industry influencers and track the effectiveness of your efforts will give you the ammo necessary to justify your proposal. Ignore the necessity for ROI at your peril.

Staceysoleil

David, thank you for igniting so much passion within our ever changing industry. It was such an honor to have you join our round table this week. Here's to frequent flier miles and the soon to be infamous "ROI RANT" ;)

Adele Revella

Great rant David. But I love Trish's warning label about "don't try this" on your CEO. One of the benefits of being a consultant is that we can say things that might get us fired were we working in that company. Remember when we had real jobs?

Here's the problem with Harvard and all of the other B school degrees earned by the people who ask these questions -- the approaches taught in those schools are only relevant for B2C companies that have transactional sales models. In that world, its possible to build an algorithm (with all sorts of dubious assumptions) about the value of a certain number of exposures (TV ads), the value of the brand (the sign on the building and a raked garden), etc. And a 1/4% gain in market share translates into enough money to justify the week we spent measuring the ROI.

But in the real world of small companies and complex B2B sales processes, all that stuff falls apart.

In the real world, we need to measure what's having the most impact on the buyer's perceptions and decisions (not a blog that no one comments on) and then tweak everything constantly to get more impact. Call that ROI if you want, but its not the same version that any of the execs learned in "B" school.

David Meerman Scott

John Heaney: Thanks for the comments.

Below is a copy and paste of the comment I left over at Todd Defren's blog where I saw your comment first.

You’re obviously smarter than me on these things because I didn’t know what “specious” meant. Looked it up though and found the answer.

According to Marriam Webster dot com, my accusation is one of these things:
– having deceptive attraction or allure
– having a false look of truth or genuineness : sophistic

Okay, fine.

In my experience, the best web marketing efforts I’ve studied in the past 15 years are not like a radio spot with a call to action. It is not “spend X and get Y.” Instead what works, in my experience, is putting out some amazing content that educates and informs. People talk about you in the first few days. Blogger link to you in the first few weeks. Your search engine rankings rise over the next month. The content lives on for a decade.

People check you out and maybe buy something. You can measure what happens over time in sales, but it is not like a radio spot where it runs for a week, the call to action is an 800 number and we can find out how many people wanted the free alignment with the 4 new tires.

Can you measure the ROI of the Web site? I don't think so because it touches so much.

The “Epic ROI Rant” post took me one hour – 40 minute podcast plus about 20 to write the post up, tweet it and a few other odds and ends. The Amazon rank for “The New Rules of Marketing & PR” has jumped since I posted it, so I am selling more books now than 30 hours ago. But am I selling more books because of that? Or because I spoke to 220 people at Harvard Business School last night? Or because I participated on the VisibleGains live TV show yesterday.

Dunno…

And I have no intention of running my business in a way that I can measure that level of detail. And I recommend to people that they not do it either.

If my wife says to me “why didn’t you have time to go to the bank?” And I say “cause I was working on a blog post that I felt was important” I don’t expect her to say “What was the ROI of that post?”

BTW – I am not against measuring marketing. I measure all the time and recommend in my talks.

However, I do say that when starting a web marketing initiative involving offering content to buyers (blog, YouTube vids, ebooks, etc) that they NOT have registration and therefore to start, we just CANNOT measure in the way that you are used to.

If they say “NO” to starting something without ROI details in place, I think they are fearful, shortsighted, and resistant to new ideas. And that is who I was ranting to.

David

David Meerman Scott

Thanks Adele - great point. I actually said something similar when I spoke at Harvard Business School yesterday.

And when I asked if they teach the sort of things that I write and speak about, they answer was "no. "

Thebrandbuilder

I can't seem to be able to play your rant, so I have no idea what your argument is (yet).

Based on the comments so far though, I have to throw in a word of caution: An R.O.I. calculator in this instance WILL NOT WORK. It just doesn't work that way.

That said, R.O.I. can be calculated for ANY and EVERY business activity. Is it sometimes difficult? Yes. Does it sometimes take a lot of tedious work? Yes. But it can be done.

More importantly, it should be done.

Whether a manager has to justify a portion of her budget to herself or her boss, being able to make sound investments within the organization requires serious P&L management.

The question is ALWAYS: How is the best way for me to invest my budget dollars?

Always.

If I think I can increase net new customers by X% or buy rates by Y%, and the values of X and Y are greater than what I have been trending at doing the same thing for the last 8 quarters, then I need to try.

That means setting specific targets, which in turn means creating a sound measurement methodology, the basis of which will be $$$. Dollars invested and dollars earned.

Dollars earned can be in the form of cost savings (reducing head count and speeding up processes by incorporating SM into customer support, for example) or in the form of increased revenue.

Simple ways or increasing revenue are to acquire net new transacting customers, increasing buy rates (frequency of transactions) or the average $ amount per transaction (yield). These things are measurable. They are finite.

Intermediate metrics connect the dots between the investment > the tactic > the public's reaction > the public's action(s) > and finally the transactions.

It's hard work, yes, but it isn't brain surgery. And with all due respect, ranting against the importance of R.O.I. to any business decision is about as productive as ranting about the importance of falling rain to an ecosystem.

If you cannot convert engagement, conversations, community activity and shifts in sentiment into net transactions, you've just invested your entire marketing budget (social media included) into nothing more than a whole lot of noise. Period. It might look good to show your bosses all the cool "engagement" metrics you've generated, but in the end, if you cannot tie that intermediate activity to a financial outcome, you've accomplished nothing.

The R.O.I. question is vital to ensuring that marketing activities impact the bottom-line. It's that simple. You can rant all you want, but the reality of business management is that if something doesn't improve that bottom-line, it'll get cut faster than you can say "economic recovery."

www.smroi.net

Michael L. Cougill

I must admit to being ignorant about many of the finer points expressed in the comments, but it seems to me that we are right in the middle of the transition from old school practice to new school ideas. I don't wonder that many would argue for the "old" ways (perhaps traditional would be a better term), of doing things versus the new: social media, web marketing, content marketing and on.

The magazine I work for, O Scale Trains Magazine, is facing many of these issues as we develop our online presence and try to integrate it with our print version. How do we measure ROI? By how well we engage our readers.

John Heaney

Despite the fixation with corporate types on justifying social media marketing expenditures with Business 1.0 anachronisms like ROI, the MBA scourges are doing things right, for the most part, by insisting on facts, data and analysis to support requests for capital investment.

Even though we all know that social media is good, strong relationships are beneficial, and any effort we can make to become closer to our clients should be pursued. Unless you do it wrong.

You see, there’s a burr under this social media saddle. If you do it wrong, you can irritate your prospects, alienate your clients and permanently damage your personal and company reputation.
When your CEO asks for an ROI of your social media marketing program, what he is asking for is a strategic plan and analysis of likely outcomes. Without the plan, you and your marketing/social media staff may simply leap into the social media void and flail around aimlessly, without clear objectives or measurable goals. Sure, you’ll be able to brag about the number of Twitter followers you have and the percentage of retweets you generate, but what have you really accomplished?

I admire many of the marketing activities that David has pursued over the past several years. And I agree that his approach – creating interesting, entertaining and highly useful content and then giving it away – is successful for many people and companies. But not all.

It obviously works for David. How do we know? Because he tracks the ROI of his activities. He knows that when he posts a controversial blog entry that gets commented upon across the web he generates more traffic, increases his search engine visibility, receives more comments, and sells more books. Activity = increased revenue. ROI.

The straw man in his argument is his assumption that establishing ROI requires that one track the value of every tweet, blog post, Facebook entry or YouTube submission and then generate a value of that singular activity. No one is asking that anyone do all that to prove the effectiveness of a social media program. No company can get that granular in their analysis.

However, we can demand that marketing departments have a strategy in place and mechanisms established to measure the success of that strategy. If you are going to produce and disseminate free content, you need to know what type of content you need to produce. Videos? Podcasts? Slideshows? Webinars? White papers? Interviews? And where will they be available? On your corporate website? On your blog? On your Facebook Fan Page? On all of them? Then you need to track, analyze and adapt. If the downloads of your white papers overwhelm the views of your online videos, then get busy producing more white papers. But how would you know any of this if you didn’t prepare to measure the effectiveness of your efforts?

And then what are your next steps? How do you extend the relationship with the individual who downloaded your white paper? Do you ask them to become a Twitter follower so you can engage them online? Do you ask that they join your Facebook Fan Page so they can gather even more useful content? And to what end? At some point, your actions/their reactions/the non-financial impact must convert into a financial impact or what’s the point? (hat tip to Olivier Blanchard at http://thebrandbuilder.wordpress.com/)

If you can’t convince your CEO that you have a plan to increase revenues or reduce your costs, then you don’t deserve the investment. Don’t blame their fear of your social media prowess or resistance to trying something new. Their understanding of business fundamentals hasn’t changed. Prove the value of your ideas. Something David’s Harvard Business School audience should understand, even if David doesn’t.

Mark Willaman

David,

Wow. This was AWESOME!!! Good for you. Made my day to know there are others out there who think like we do :-) Seriously, the whole ROI thing is way overblown and you are correct - MBA programs place way to much ephasis on it. Typically, once a sales discussion gets to ROI you're doomed. It's over. You say it is fear but it is also laziness.

You'll enjoy a blog post we recently wrote at HRmarketer on this very subject (before we heard your rant - promise). It's called How is [insert marketing tactic] going to help generate sales? and can be read here:

http://hrmarketer.blogspot.com/2009/11/how-is-insert-marketing-tactic-going-to.html

David Meerman Scott

This really is an excellent discussion - much more than I had expected. Thank you all.

John Heaney: I really appreciate you taking the time to comment again - all valid points.

How would you "prove" the value of a series of YouTube videos if the organization you work for has never done them before and the CEO and sales VP think videos are frivolous?

That's the sort of thing where many people get hung up. The resistance to doing something new.

David

Kevin W. Grossman

I think it would've been even more effective if they had to bleep you, David.

Seriously, we fight the good fight along with you. You can measure your visibility, traffic, relationships, sales conversations and the like quite easily when it comes to online marketing (including social media).

But when the ROI question comes up, the conversation is really over. I don't know how many times I've had the conversation about one-time silo spends on online marketing that don't lead to sales, which must mean the activity was crap and the money was wasted. One stupid Tweet don't mean a damn thing.

I didn't read all the comments above, but to Trish's point, We don't solicit many comments on our blog, but we've seen our readership increase dramatically in the HR marketplace in the past few years. And we can measure where and how many times our blog and other social media efforts and making an impact with our buyers and influencers.

Marketing isn't simply the dollar for dollar slippery slope to sales. It's the educator and facilitator for the sales conversation.

David Meerman Scott

Kevin - especially true in your case because you are a pioneering blogger in your space. Keep up the good work. David

David Meerman Scott

Consider two decisions by a company:

1. Should we equip every salesperson with a Blackberry?

2. Should we shoot videos and post them on the company Web site?

Is there REALLY someone who sits down and CALCULATES (actually calculates) the ROI of investing in Blackberrys?? NO WAY.

At every company I've worked for and with, it is a casual decision where executives get together and say: "We can make the salespeople more productive if we give them all Blackberrys. It will cost $2,000 a year each. They will sell more because they will be more efficient. Let's do it."

Nobody actually calculates the ROI by measuring salespeoples' increased productivity rates (REALLY CALCULATES WITH REAL DATA the increased productivity) during the year due to having the Blackberrys vs. not and compare against the assumptions made during the original decision, do they?

I say bullshit on that - they don't.

And if a company actually does, I want to know about it. Please comment here!

So why, I want to know, do the same executives hold feet to the fire for MBA-driven spreadsheet analysis for something equally fundamental like having YouTube videos on the company Web site???

Answer is simple. They understand Blackberrys and go with their gut.

But they are ignorant and fearful of YouTube and say no.

David

JDeragon

I find the whole emphasis on Social Media ROI is nothing more than a reflection of stinking thinking from the neck up.

While conversing with my wife I was measuring the ROI from our social media. The conversation ended quickly and now she won't talk to me :)

When was the last time firms measured the ROI from email, cell phones and lunches with clients or prospects? Social media is nothing more than a communications channel and all this "social stuff" has made the intent of our communications transparent. An intent is reflected by motivations of sellers. Buyers intent is different than sellers. Buyers aren't selling anything accept their intent to buy. Try measuring the ROI on intent. You can't but the buyer can :) That is the problem with today's marketplace....

Diane Hessan

I'd like to give a different perspective here. As a CEO, if I agreed to fund everything that people said was a good idea, just on a leap of faith, I would not being running a profitable business. When people ask for investment dollars -- whether it be for adds to our staff, new systems, OR increased marketing expenditures -- I expect them to lay out SOME sort of business case. It doesn't need to be an ROI calculation, but there needs to be a way to make business decisions other than "whoever has the best emotional argument". My company is in the social media space and so I certainly understand the power of it, but even in our world, not all social media investments have equal impact, and thus the argument that executives should just trust us is silly.

Joseph Ratliff

I wonder what the ROI is for the time wasted in figuring out ROI for "posture's" sake?

Right on David.

Even if a Fortune 500 exec could answer the question "What is the ROI of social media?"...does that mean they would stop building an audience of dedicated followers on the web altogether if ROI wasn't satisfactory?

To me that would be stupid...that's like saying...

"Buying public, since you're not producing the ROI from our social media efforts we feel is necessary, we're not going to do this anymore."

Great rant David.

Amelia Vargo

Ha ha, great rant! That's all the same stuff I rant about in my head but don't have the guts to say to anyone else (Or to publish online) Fantastic!

Russ Somers

Trish Bertuzzi, your 'don't try this rant on your CEO' line made me laugh. I sent my CEO the link to the rant and dropped a copy of the 'lose control of your marketing' ebook on his desk. Next up: running with scissors!

David Meerman Scott

Russ - cool - what was the reaction from your CEO??

Mark Smiciklas

Wicked rant David!

I definitely believe there is value in metrics and connecting measurable social media objectives to business goals. But not everything that adds value to your organization can be measured...and put into tidy little boxes for the accountants to check off.

Your point about fear is so true - those that choose not to understand social media tend to hide behind the ROI argument...all the while never calculating the REAL return on the investments they make in old marketing.

It's all about balance. Here is a visual you might find interesting (inspired by your post) - it illustrates the politics of social media ROI and how the middle ground is the most fertile:

http://www.intersectionconsulting.com/blog/?p=510

p.s. Love the part about calculating the ROI of putting your pants on in the morning :)

Rhappe

Love it - measure performance but don't try to calculate direct ROI. Measurement and performance tracking is not the same thing as ROI. Furthermore... in tracking behavioral outcomes you see huge off-sets between spending/investment and the outcomes. I have a similar rant against linear modeling that is the traditional modeling approach. Systems dynamics or network dynamics is a much better way to track actual triggers and behavior patterns... and their results.

Vaspers aka Steven E Streight

I have written extensively on the topic of Social Media and ROI -- on blogs and Twitter! LOL

Hear now the parable of the Telephone ROI, ye seekers of technological behavioral innovation justification!

Imagine an ROI on the telephone when it was invented and introduced to businesses.

Bell Labs: "Would you like a telephone installed in your store to drive customer traffic and provide better service?"

CEO/Business Owner: "Who wants to be interrupted by phone calls? I don't want customers yakking at me on a telephone. I want them to jump on their horse and visit the store. Time spent on the phone is time away from physically present shoppers. Besides the costs cannot possibly justify the hoped for sales results. No thanks!"

I love your book on the New Rules and wish you much unROIable success David my lad!

P.S. Do they do ROI on new carpet, golden parachutes (hush money), conference attendance, business cards, or email?

LOL

David Meerman Scott

Steven - Love this parable. Thanks for sharing.

Howard Wahlberg

What's tragic for me in all this is that we seem to have lost sight of the greatest marketing invention of the 20th century: Direct Response. Lester Wunderman asked the same freakin question in the 1940s: what's the ROI on that fox stole (and if you don't know what a fox stole is, then stop reading right here, I've got tee shirts older than you) ad in the New York Times? He answered that question by inventing Direct Response! Why is it so hard for these soc_med whackos to understand that if we as custodians of our members or our shareholders money want to be able to measure the money that comes in based on the money (that's real and labor money) that we spend on these efforts, then that's a GOOD thing? It's just another channel, people--I get it, the customers are talking about your brand to millions of people now, right. So, based on that United Airlines music video, did United go out of business? NO. No one in the association management community would stand by the statement that soc_med is not an important component of your recruitment and retention strategy. But dammit, why is this channel exempt from the same damn thing that every other channel has to be responsible for? If it ain't delivering a return on the investment, you can very quickly lose opportunities that your people should be focusing on (like, um, let's see, that radio ad? That Billboard?) that DOES deliver a return.
Sigh. Rant over. --Howard

David Meerman Scott

Nice rant Howard. My argument is that those other forms of marketing are not measured either in most companies. Nor is most things in business (like the salespeople's BlackBerrys).

Diego Guadarrama

Hi David,

I agree that we don't have to measure the ROI on everything. But everybody wants measurements, they don't feel safe without them. For these people and businesses I propose PERPETUAL OFFERS.

Just put coupon codes on everything you make. Billboards, commercials, twitter posts, trade show offices, business cards, everything. Even if it is a minimal discount you will at least know what motivated customers to buy your product.
Of course it won't be accurate, nothing is, but you'll have an idea.

What do you think?

David Meerman Scott

Diego - I cannot imagine putting an offer on every tweet. You'd be laughed out of town. David

Deni Kasrel

David,

Totally agree with you, and in fact I wrote a post for my blog in December stating many of your same points, though my word choice was not as colorful as yours:) FYI, this post is titled The Social Media Smokescreen. Here's link to it: http://thecommunicationsstrategist.wordpress.com/2009/12/07/the-social-media-smokescreen/

Here's a quote by Albert Einstein (noted in my post) that relates to this topic: "Everything that can be counted does not necessarily count; everything that counts cannot necessarily be counted."

Please keep on ranting about this subject. It's a message that needs to sink in at some point.

David Meerman Scott

@Deni - Love the Einstein quote. Thanks for sharing.

Alex Papastamatis

I like the term “Return on Relationships” mentioned above in the comment by Bill Royce. You are right that Digital Marketing can be measured – it just needs to be measured in a different way.

I remember reading an article in an AMA publication stating that CMOs need to be talking ROI if they want to be taken seriously at the (overused term) “C-suite” table. I believe that using some of the measurements you mentioned – search engine results, monitoring online chatter about your company and products, website content views and product purchases (if applicable) – are more appropriate. When you share this information, you will be taken more seriously as a revenue contributor than simply as a cost of doing business.

Your YouTube video, “Do the new rules of marketing work worldwide?” is great! People use the internet for research and validating their buying decisions – it’s a fact. You have rightfully said time and time again, consumers are looking for information and expert advice that can be turned into a purchase (or other call to action) by effective marketing. It is amazing to me that we still need to CONVINCE others about this.

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