Social Media ROI: Forrester Delivers the Voice of Reason and Reality

By on in , with One Comment

All sorts of agencies, social media technology companies, and analyst firms have hit on a lead generation gold mine: write a paper, conduct a webinar, or host an event that includes “ROI” and “social media” in any combination with any set of connecting articles and prepositions, and the masses will come! The beauty of B2B marketing is that the title and description of any such content is all that really needs to be compelling to get someone to fill out a registration form — the content itself can totally under-deliver…and it’s too late for the consumers of it to remove themselves as leads when they realize that’s the case!

Of the dozens of webinars I’ve attended, blog posts I’ve read, and white papers I’ve perused that fall into this “social media ROI” bucket, not a single one has actually delivered content about calculating a true return on investment in a valid and realistic way based on social media investments. That’s not to say they don’t have good content, but they all wind up with the same basic position: have clear objectives for your social media efforts, establish a set of relevant KPIs/metrics based on those objectives, and then measure them!

When a paper titled The ROI of Social Media Marketing (available behind a registration form from Crowd Factory — see the first paragraph above!) written by Forrester analyst Augie Ray (and others) came across my inbox by way of eMarketer last week, I had low expectations. I scanned it quickly and honed in on the following tip late in the paper:

Don’t use the term “ROI” unless you are referencing financial returns. ROI has an established and understood meaning — it is a financial measure, not a synonym for the word “results.” Marketers who promise ROI may be setting expectations that cannot be delivered by social measures.

Bingo! But, then, what is up with the title of the paper? Was there intense internal pressure at Forrester to write something about calculating social media ROI? Did Ray protest, but then finally cave and write a spot-on paper with an overpromising title…and then slip in an ironic paragraph to poke a little fun? I don’t know, but I loudly read out the above when I saw it (to the mild chagrin of everyone within 50 feet of my desk; I’m known in the office for periodic rants about the over-hyping of ROI, so I mostly just generated bemused eyerolls).

The idea the paper posits is to take inspiration from the balanced scorecard framework — not taken to any sort of extreme, but pointing out that social media impacts multiple differing facets of a brand’s performance. Ray neither presses to have a full-blown, down-to-the-individual-performer application of balanced scorecard concepts, nor does he stick to the specific four dimensions of a pure balanced scorecard approach. What he does put forth is highly practical, though!

The four dimensions Ray suggests are:

  • Financial perspective (the only dimension that does map directly to a classic balanced scorecard approach) — revenue and cost savings directly attributable to social media
  • Brand perspective — classic brand measures such as awareness, preference, purchase intent, etc.
  • Risk management perspective — “not about creating positive ROI but reducing unforeseen negative ROI in the future” — a social media presence and engaged customers improve a brand’s ability to respond in a crisis; in theory, this has real value that can be estimated
  • Digital perspective — measuring the impact of social media on digital outcomes such as web site traffic, fan page growth, and so on; Ray points out, “In isolation, digital metrics provide a weak assessment of actual business results, but when used in concert with the other perspectives within a balanced marketing scorecard, they become more powerful and relevant.” Right on!!!

The paper is chock full of some fantastic little gems.

Which isn’t to say I agree with everything it says. One specific quibble is that, when discussing the financial perspective, the paper notes that media mix modeling (MMM) is one option for quantifying the financial impact of individual social media channels; while Ray notes that this is an expensive measurement technique, that’s actually an understatement — MMM is breaking down with the explosion of digital and social media…but that’s a subject for a whole other post! [Update: I finally got around to writing that post.]

At the end of the day, social media is complicated. It’s not measurable through a simple formula. It can strengthen a brand and drive long-term results that can’t be measured in a simplistic direct response model. Taking a nuanced look at measuring your social media marketing results through several different perspectives makes sense!

One Comment


  1. Thanks for the blog post. Glad we agree so much!

    As for the name of the report, I was under no pressure to use “ROI.” I am guilty of shamelessly exploiting the term ROI to get attention (which I figured was the way to attract those folks who misuse the term.)

    I’ll look forward to your future post on Media Mix Modeling!

Leave your Comment


« »