Two of the most frequently asked questions about social media, especially by hard pressed senior executives are: – How do we measure the performance and business impact of this ‘stuff’? How can we show real Return on Investment (ROI)?
These are legitimate questions to ask. Responses range from the condescending ‘how do you measure the ROI of a telephone’ to detailed lists of 35 plus Key Performance Indicators (KPIs) (see our previous article on this topic – Social Media KPIs)
While detailed KPI checklists can be a useful starting point, they can often result in ‘paralysis-by-analysis’ through over complicating things. The majority of senior executives require a simple but robust performance measurement framework to justify the time, effort and resource invested in social media; ensuring tangible business benefits and high ROI.
Building on our previous post ‘Selling Social Media to Your Boss’, Part 2 explains our ‘6Is’ approach to measuring social media performance and business impact.
The framework, shown graphically in Figure 1, derives logically from our use of a Balanced Scorecard approach to Social Media Strategy Development and Implementation. It is ‘balanced’ because it takes into account:
- Financial and non-financial performance measures
- ‘Lag’ and ‘Lead’ measures – in other words your ultimate business objectives (‘Lag’ measures) together with the main ‘drivers’ (‘Lead’ measures) that help you get there
- The three main levels of performance measurement – individual channels, overall ‘buzz’ and core business objectives
Figure 1: The ‘6Is’ Approach to Social Media Performance Measurement
The core premise of the ‘6Is’ approach is that your Social Media Strategy should be fully aligned with and supportive of the overall strategic goals and objectives of your organisation. It is critical, therefore, that Key Performance Indicators (KPIs) are agreed for measuring on-going performance and business impact.
The first two of the ‘6Is’ are Insight and Impact. These should be considered as the main ‘Lag’ measures underlying your social media activities; in other words, your core business goals. The ultimate objective of your Social Media Strategy should be to deliver:
- Actionable customer ‘Insight’ from social media engagement and active listening (see our previous post on the importance of Social Media Listening)
- Positive business ‘Impact’. As argued in Part 1, there are only three real reasons why companies should invest time, resource and effort in social media – to increase sales, to reduce costs, to build a quality customer base – a strong online network of high value, high growth potential customers. Measuring the impact of social media on sales, costs and customer quality should be a key element of a good performance management system
While ‘Lag’ measures refer to your ultimate business goals and objectives, ‘Lead’ measures are the main ‘drivers’ that help you to get there.
- Involvement: the number and quality of people in your various online networks
- Interaction: actions they take – the level of interaction in terms of posts, replies, comments, reviews, ‘likes’, retweets etc
- Intimacy: levels of affection or aversion to the brand, community sentiments (positive/negative), opinions expressed
- Influence: advocacy, viral forwards, referrals and recommendations
It should be noted that a core premise of the ‘6Is’ approach is that a direct ‘cause and effect’ relationship exists between ‘Lead’ and ‘Lag’ measures. In other words, organisations with high customer Involvement, Interaction, Intimacy and Influence will outperform others in the two main measures of ultimate success – Customer Insight and Business Impact. There is emerging evidence that this is indeed the case – see http://www.altimetergroup.com/2009/07/engagementdb.html – which shows a strong positive correlation between social media engagement and overall business performance.
The ‘4Is’ listed above are not abstract, difficult to measure criteria. Indeed, the complete opposite is true. Involvement, Interaction, Intimacy and Influence can be measured to a very high degree of accuracy. Part 3 will review the wide range of tools available for doing this at two main levels: – individual social media channels/platforms and overall ‘buzz’ across social media generally
As usual, comments and feedback are very welcome.
How do you measure social media performance and business impact in your own organisation?
Jim, Alan, Vincent