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December 05, 2011

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Onqmarketing.wordpress.com

David, So true. Many times I use the example of email and ROI when talking with clients and prospects and use of new media tactics. Smartphone sand other mobile devices are great examples with Real-Time Marketing.

Really Social Media, and Real-time Marketing involves increasing ROR; Return on Relationships.

Richard Jurek

Right on, David! You can toss in there on the lack of ROI questions for things that are used for conversations/engagement but are no longer "measured": phones, faxes, business cards, the water cooler, stationary (if anyone writes a letter anymore, but I know they do - I get them all the time), etc. I'd like to see accountants give me the ROI of their calculators or spreadsheet software. And if they can't, I don't want them to have them. :)

CarriBugbee

Expecting to measure ROI for one element of marketing when there are no measurement methodologies for others (such as press releases), is not only hypocritical, it shows a lack of understanding about how the longevity of brands and the totality of their marketing ecosystems affects their success.

Given identical budgets and social media marketing plans for two brands, one that has been around for 40 years and one that just launched, I'd normally expect far greater success for the older brand. But even that doesn't tell us the ROI because it's probably impossible to calculate how much marketing money was invested in the 40-year-old brand over four decades. $1 million? $80 million? $2 billion? Who knows? So, how much more successful would that brand have to be in order to say the ROI was worth it vs. the success of the new brand? At that point, you'd be measuring incremental ROI (for the historical brand) vs. actual ROI (for the new brand), right? Given that type of calculation, the numbers would probably dictate that you should never market an older brand again because it's so costly, right? Or maybe the numbers would indicate you should never launch a new brand because you can rarely catch up to $80 million in marketing.

What other unintended (and free) activities might have impacted those brands for better or worse along the way? Who knows how to measure the upside (or downside) of Paris Hilton being photographed using your product? How much does it cost to regain confidence after your product caused an E. coli outbreak? What if your CEO spouted political beliefs on his personal Twitter feed that alienated (or resonated with) people? What if it happened 3 years ago? What if it was 3 days ago? That would change the supposed ROI of your social media (and any other) campaign, right? But how would you calculate it with any accuracy?

Even measuring click-throughs is pseudo-science. What if your website sucks and customers have never heard of your company? What if your company has crafted a stellar repuation for philathropy, giving customers a feel-good vibe?

Obviously, this notion that you can boil down effectiveness to a simple ROI number is lunacy. I don't think any marketers are capable of calculating every dollar spent to achieve positive brand recognition or even to sell widgets. Yet, I think that's exactly what you'd need to do in order to calculate an accurate return on investment.

David Meerman Scott

Onqmarketing & Rich -- thanks!

Carri - thanks for expanding on the lunacy. I appreciate you taking the time. My analysis as shown in the video definitely gets the executives attention!

Lindsay Southwick

Good post. Most of the time that I've talked to people in companies, I've tried to stress that the most I can guarantee with SM is more eyeballs and exposure.

If there's actual sales activity, that'd be great, but I can't guarantee it and I'm guessing it wont materialize for quite a while.

Fortunately, most people I've worked for have been receptive to my thoughts, so I've been lucky. Well, I'm also young and my work has often times been unpaid, so that helps, too.

Still, good thoughts.

Swoodruff

At one time, people had to think about the ROI of computers, internet access, and everything else that we now consider utilities. Digital networked communications (or "social media") really is a utility at this point - or should be. The question is, How can we use it alongside everything else to grow our business? -not some pathetic effort to isolate it from all other forms of communication and demand some ROI. Caveat - it's OK to look at the ROI of a specific social media initiative as a tactic. Just like anything else.

Indigopegasus

So true. Also, many seem to forget what Albert Einstein
said: Not everything that counts can be measured. Not everything that can be measured counts.

David Meerman Scott

Swoodruff - excellent point on "utilities"

Don Walsh

You can take this a step further: The traditional methods of communication that smartphones are built on carry no opportunity to track usage and study results accurately. At least no real way Marketing has access to. (Collecting business cards doesn't count either)

Social Media is built on digital communications systems that are inherently trackable. ROI may remain elusive, but the amount of information that you can get out of the system to understand your market and your customers is invaluable. Certainly, creating a digital strategy now can start with the implementation of a dashboard for marketing that will allow folks like us to have a really good look at the before and after.

This example is a great ice-breaker to get folks thinking in the right direction. Thanks!

Franklin_Adam

Hi David,

Here's a tweet that I like:

"When customers call we answer, when customers email we reply, when customers tweet we ask what is the ROI"

Thanks to my colleague @Angus_Russell for sharing this with me today!

Methodvsmadness

This is so common in digital marketing since everything is so new and budgets are always full.

It has always amazed me how rarely ROI's are re-visited to see if they still add up, and how low the allocation for innovation usually is.

twitter.com/RazChorev

David, although I like the thought provoking idea, I'm not convinced the word Hypocrisy is the most appropriate.
I think the executives are scared to get into any kind of new trend, and the easiest way to deal with any scary thing is to put hurdles in the way.
As you're well aware, social media isn't just about marketing, it's about the way people communicate in general, and has an impact on employee's productivity, PR and legal risks, can effect some serious IT issues (as I've learned from a major bank I'm working with, where the 1000+ employees in the building suck up the bandwidth with Facebook and youtube, and put the banks' system in jeopardy) - getting involved in social media has tremendous risks, and the return is not completely understood.
If we're focusing on marketing activities only - yes, it could be hypocrisy, as ROI from any branding activity (naming rights, sponsorships, events, billboards, business cards and stationary, to name a few) is seldom measured.

Nevertheless - I think the video is powerful :)

Tim Dempsey

David: Greetings after a long time. I can sense your passion -- it comes right through the video -- on this topic. Perhaps I'm just being thick... but I think a weakness in the reasoning here is to compare devices (blackberries, androids, iphones, ipads) to communication programs (blogging, twitter, etc). The former are typically treated as capital expenditures, the latter have all kinds of human resource costs associated with them. The devices don't deliver the message (and therefore can't be presumed to drive any impact among a target audience) -- the message does. I don't fear ROI conversations with executives about communication programs. I have a lot of educating to do every time I enter one -- relating to what objectives are realistic and achievable -- but I don't shy away from the conversation, or try to deflect it by calling it hypocrisy. My two cents.

Best,
/t

David Meerman Scott

Raz - I agree which is exactly why I compared social media to mobiles. It is about communications, not just marketing.

Don - excellent point on not being able to track with smart phones. I hadn't thought of that.

Methodvsmadness - right. Move on tho the next thing.

Adam - BRILLIANT. Love it. Thanks for sharing.

Chris Boudreaux

Hey, David,

There are two additional issues at play: (1) Blackberries and iPads are used for Knowledge Management and Collaboration -- two areas that have always eluded a compelling business case or ROI measurement; and (2) most organizations are simply not measuring social media appropriately -- especially in Marketing -- even if you leave the ROI question off the table.

(1) Knowledge management and collaboration is one area of social applications, but it is very different than social media marketing, and, too often, people still say "social media" and think of it as one big thing. Knowledge management and collaboration are very different than marketing -- especially when it comes to building a business case or measuring ROI.

(2) While I agree with your argument where it applies to knowledge management and collaboration, I still see too many companies who simply don't measure social media performance sufficiently. The pendulum is still too far to the side of "test and learn", with no accountability for any business outcomes. Most organizations should do a much better job of measuring social media, but they don't understand how. And they are afraid of what will happen if they try, because they might find out that that their past efforts really haven't been achieving as much for the business as they thought, or that the path to business value requires different skills than they have today. Too many marketers and communicators are simply afraid of being measured.

I worry that this post encourages marketers and communicators to claim that they should continue in their current, blind state, wherein social media are implicitly discussed as one big thing, with no accountability for business outcomes.

Thank you for starting the conversation.

David Meerman Scott

Thanks for jumping in Chris.

I'm all for measurement and advise people to measure. That's not the point. What I don't agree with is taking an old dusty offline concept "ROI" (which almost always means the number of "leads") and applying it to a new set of tools.

The products and services you guys are developing at Converseon are a great way to measure. Things like engagement and sentiment analysis as a few examples.

ProfessionalOne

I did a 30+ video series on "the ROI of Social Media" that was a great experience for me. Speaking personally, Social Media has created every large business opportunity I have going on right now (and there are several). Here's a video I made that features some of the largest names in my industry (real estate) talking about the ROI of Social Media: http://vimeo.com/26838994

Charlotte search engine optimization

I could not agree more, very interesting and helpful video!

Randyzwitch

From an executive point of view (not me, just playing the devil's advocate!), most of the devices that are being pointed out are intangibles for business as part of overhead (calculators/computers/phones, etc.), which does get analyzed/minimized to increase company ROI.

Even the smartphones do have an implied ROI calculation, the number of extra hours of work from a salaried employee divided by the cost of the smartphone & plan. That less than 100% of employees have smartphones shows there is some profit maximization attached to the choice to issue one.

But, social media needs a warm body to be part of it. The workforce by and large does have an ROI attached to it (as evidenced by layoffs), so why wouldn't social media have an ROI attached to it? Or, if you put social media into the "overhead" area as a general cost of doing business, you are tacitly saying it's worth minimizing. The opposite of your point.

Chris Reimer

I'm concerned about the ROI of billboards, magazine ads, radio, TV and direct mail. The ROI of social media is much more measurable.

One big problem is that executives don't want to BE SOCIAL. They don't want to get to know you, they don't want you giving them advice, and they have no interest in interacting with their customers. I once sat with the manager of a very fine banquet facility. He was incredulous that customers renting out his facility would have special requests. "The day I'm being told where the forks and knives go on a table is they day the banquet hall doesn't need me anymore." Really?

RobertaGuise

David, we need to approach social media much as we view public relations/publicity -- as practically impossible to get ROI.

Use SM for outreach, building relationships and generating goodwill.

David Meerman Scott

Randy - my exact point. I see a hypocrisy here -- smartphones = no ROI required. Social media = NO (unless proven first). Message here is that if a customer calls us on the phone or emails us, we will respond. But if a customer tweets us, we need to calculate the value of responding.

Chris - I agree that many (but certainly not all) executives do not want to be social. Great point.

Roberta - The PR industry has invented the "advertising equivalency" metric to calculate ROI. I did PR for nearly a decade - that measurement is deeply flawed. But it is used because of this obsessive need by businesses to measure that which is unmeasurable.

Randyzwitch

I think I'm arguing the opposite of you David, that just because the people in the room didn't know the ROI of their smartphones, someone in the company has already done the ROI calculation. If executives didn't care about ROI on smartphones, then all employees would have one (no company I've worked with had 100% of employees with a BB, just higher level managers).

On the social media side, once you attach one or more people to a task, it needs to cover its costs with an explicit return or be minimized as an overhead cost. When we don't provide an ROI for social media activities, we are relegating it to a "customer service" type of P&L, which is often minimized to provide the minimum acceptable level to keep customers from complaining.

So for those of us who believe that social media is worth doing, there needs to be some formalized business plan at minimum (lower customer service costs elsewhere, it's a form of display media, etc.) and ideally try and estimate it's value. I know for e-commerce sites, there are definitely ways to assign a monetary value to social media in the purchase path through attribution modeling (I'll refrain from plugging the tool my agency uses!). Social media tends not to be the "Closer" of a sale, but it definitely introduces in the same way a banner ad or paid search might.

David Meerman Scott

Randy - watch my video in this blog post again. Almost zero percent of people I asked all over the world have calculated the ROI of providing smartphones to employees in the company (only 3 people out of 20,000 asked have done the calculation). Many of the audiences I asked included CEOs, CFOs, Presidents and other senior executives. Specifically the Boston, Buffalo, Barcelona, and Rotterdam audiences were all senior execs (I was speaking at EO events).

I do agree with you that taking funding from another place that you cannot calculate ROI (such as billboards or TV ads) does make sense.

And yes, with an commerce site you can certainly calculate the source of traffic.

Thanks for this back and forth Randy - I appreciate your perspective.

Ddesk

Thank you for great post, David,
My comment in a form of a blog post http://kristoferbjorkman.com/2011/12/06/pr-and-marketers-time-to-show-roi-of-your-blackberry’s/ didn't show up though? Maybe it's just got stuck. Or maybe that's your intention?

If you're interested, please read it, and comment. I would appreciate that.

David Meerman Scott

Kristofer - I'm not sure why your comment didn't show up the first time. Must be a technical problem. Anyway, thanks for your thoughtful post. I commented.

Dalia

David, thanks for sparking this always opinionated discussion :) I was wondering what do you and other commenters see as the downsides of calculating ROI of social media? To me, measuring ROI is simply trying to answer the question on how does social media contribute to achieving my company's business goals - be it lower customer service costs, increased customer satisfaction, "earned" brand awareness (as opposed to bough), direct sales, lead generation. Are you worried that measuring ROI does not capture the full long term value of social media or what other downsides do you see?

In my view, the faster we learn how to properly measure ROI, the faster it will be possible to move SoMe from "experimental" to "essential" budgets, just where the Blackberries are.

David Meerman Scott

Dalla - I definitely think that ROI should be calculated. But it should not be based on traditional offline metrics (lead generation only). Also, ROI insistence should not be used as a smokescreen for fear and ignorance. I'd like to see consistency. If you want ROIU, fine. But don't be selective and only require it on things you do not understand.

Ann Handley

Great post, David, and a well-articulated position. And wow - I really like this quote from the comments!

"When customers call we answer, when customers email we reply, when customers tweet we ask what is the ROI?"

David Meerman Scott

Isn't that great Ann? Wish I coined it.

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