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Measuring ROI: The Social Media Problem

Return on Investment is an important term to business people. It tells them if they are making good investments…ROI can be a little more difficult to understand in social media. There is a lot of skepticism toward measuring the ROI of social media because of the difficulty in analyzing online interactions. Most companies even chose not to measure ROI. However, by breaking down some processes of calculating ROI, it doesn’t seem to be such a daunting task.

To figure out ROI, it’s important to first find out what it is the company wants to know, or in other words, the goals and expectations it has regarding social media. Goals that are clear and concrete create a starting value or baseline to make the end result (the ROI) measureable. These goals are typically either quantitative (website traffic, sales, search engine optimization ranking) or qualitative (conversation, engagement, relationship building).

Metrics are very useful for measuring ROI quantitatively. Traffic counts, number of comments, and followers/users are important when using metrics. Some tools available to analyze those numbers are: Google Analytics, PostRank Analytics, Omniture, and HootSuite. A company should also be able to identify how the numbers compare to other companies and correlate with other aspects of its social media marketing. For example, the company may want to know if sales are increasing due to website traffic increasing.

On the qualitative side, Sentiment Analysis is important. Metrics can tell you how many people posted comments on a topic but cannot tell you if the comments were positive or negative. As with the metric tools, there are also tools to analyze sentiments: Viral Heat, Twendz, Crimson Hexagon, and Sentiment Metrics are just a few. Measuring ROI using Sentiment Analysis is more difficult than crunching numbers, so it’s crucial for a company to understand what they want to measure. Benchmarking questions, such as “What do people say about us versus our competitors?” and “Are people saying anything about us?” can create a starting point to measure ROI. Then the company knows its success can be measured by increasing conversation, or whatever the goal may be. The reason a company would want to measure its ROI gained from qualitative data is relationships add value. Without analysis, consumers’ use of social media and online conversation may seem to be useless. However, a company can gain a lot of value from online interactions, especially if it satisfies the customer.

Finally, there are Social Media Product Suites that encompass everything needed to calculate ROI in one package. Some of these are: Virtue SM, ContextOptional, and These products are primarily designed for larger companies.

In a nutshell, ROI is not an elusive, magical number. It can be calculated using a wide array of available tools. The data that comes from finding ROI should be understandable in order to create value. If a company puts effort into customer interaction, does an increase in sales result? Did website traffic increase because of a Facebook post? A company should be able to identify what kind of trends can be found in the data and what those trends mean to the company and its investment in social media.