How to Know If Your Social Media Is Paying Off

Last Updated Jun 8, 2011 10:20 PM EDT

One of the most exciting aspects of digital marketing is its measurability. From website visitors, to ad impressions, to geo-location of discounts, every digital marketing initiative seems to produce its own bountiful data--in sharp contrast to many aspects of the pre-digital world. (Anyone know how many customers saw your billboard?)

But just because you can measure your digital marketing does not always mean it is easy to know if your efforts are paying off. Sure, you've added a thousand Facebook fans, but how much are those Facebook fans worth? How much value is your blog generating for your firm? What about your online community for sourcing innovative ideas from customers? Much as we might wish for it, there is no single "silver bullet" metric to measure the impact of all digital marketing in a single bold stroke. Instead, businesses need to develop a variety of metrics to measure the return on their own digital marketing efforts.

Figure out your goal
The first key to developing good metrics is to know your objectives. Are you trying to support market entry and drive awareness of a new product line? To build a relationship and maintain loyalty among your existing customers? To reduce the cost of customer service by helping customers help each other in an online community?

Secondly, understand how close your metrics are to measuring a financial value delivered to your business. Some digital metrics measure firm value quite precisely, whereas many others are almost useless.

I find that it is helpful to think of digital marketing metrics as falling into one of three broad stages:

Stage 1: Activity Metrics This is the lowliest level of digital metrics. By definition, an activity metric is one that really only tells you that "something is happening." Classic examples are: number of page views, site visitors, Facebook fans, or members joining your online brand community. Not that you should ignore these numbers or fail to gather them (they can be helpful in tracking trends, and benchmarking). But you should never be satisfied with activity metrics alone. Don't get stuck on stage 1.

Stage 2: Engagement Metrics "Engagement" is one of the most over-used, and under-defined terms in marketing. So let me propose a definition here: an engagement metric is anything that measures the level of your customer's involvement, attention, and commitment. Examples could include: average time spent by members in your online community, percent of Facebook fans who "like" or comment on your wall posts, or the number of ideas actually submitted to your innovation sourcing site. Engagement metrics are much more meaningful than activity metrics. And in some cases, they may be the best measure that you can get. (It's hard to ever know how many cars were sold because 20,000 people "liked" your pre-launch product photos on Facebook). At the same time, it is hard to justify a major marketing investment on engagement metrics alone. So wherever possible, you want to reach beyond stage 2 to the next stage.

Stage 3: Business Metrics Business metrics measure the impact of digital marketing on critical business outcomes: your KPIs (key performance indicators), or ROI (return on investment). Business metrics could include direct sales through a digital channel, lead generation, or cost savings to existing business processes. If you are running an online forum to generate innovative business ideas from customers--how many of their ideas did you bring to market? What was the business value achieved, perhaps in terms of new sales, better customer retention, or increased market share? These may be financial measures, or established KPIs used across your business, such as a Net Promoter Score. Business metrics allow you to optimize your digital efforts, compare their results with traditional marketing activities, and decide how to best allocate budgets.

Books can be filled (and have been) with metrics for every kind of digital medium and every digital marketing program. But as you look at what's being measured in your own company, it's critical to make sure you know which stage of metrics you are operating at. Because only when you get to stage 3 can you actually answer the most important question: is my digital marketing paying off?

What are you measuring in your own digital marketing? What stage do your measurements fall into?


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David Rogers examines the five core strategies of successful networked businesses in his newest book, "The Network Is Your Customer: Five Strategies to Thrive in a Digital Age." He teaches Digital Marketing Strategy at Columbia Business School, where he is Executive Director of the Center on Global Brand Leadership. Rogers has advised and developed marketing and digital strategies for numerous companies such as SAP, Eli Lilly, and Visa. Find him on Twitter at http://twitter.com/david_rogers
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    David Rogers is a consultant, speaker, and author of The Network Is Your Customer: Five Strategies to Thrive in a Digital Age. He teaches Digital Marketing Strategy at Columbia Business School, where he is Executive Director of the Center on Global Brand Leadership. Rogers has advised and developed marketing and digital strategies for numerous companies such as SAP, Eli Lilly, and Visa.

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