SMROI- Social Media Return on Investment

Have you ever wondered how many of the posts, likes and tweets about a particular product convert into sales? Such a question perplexes even the top executives at big corporation who are trying to use Social media to enhance their company’s value proposition as explained in the article below.
It is not surprising that Social Media helps a company in many ways but there is no effective metric to understand the ROI on the Social Media investment. Many large corporations use third party companies to measure the effectiveness of Social Media but again all the data collected is inconclusive and always overwhelming. To maximize the potential of Social Media, companies need to understand many factors such as why this particular product is trending, which segment of the customer base likes that particular product, why they are attracted to it and the most important of all what percentage of all these social media responses convert into sales in order to justify the investment. Many large corporations can have dedicated social media departments but what about smaller companies who have to squeeze out every penny to make an investment for Marketing and Advertising. Having a separate department can be a huge investment and then monitoring the social media effects can add more to the expenses. Almost every small company uses Social Media in a limited way but cannot maximize the potential because they don’t want to hire people or use third party companies to monitor the relevant data. For example in India many production companies try to use Social Media but fail to justify the use in the larger context. To create a Facebook page, teasers, YouTube channels etc., for a new movie is often times not difficult but the tricky part is to get people to like it and post comments, tweet about it, get as many views as possible and get consumer insight. There is a downside as well because you can never measure how many likes; tweets and views translate into ticket sales. Often times the movie buffs are the one who post comments about new movies, and give ratings and write reviews. This segment of people will invariably watch a movie even if there was no Facebook page, You Tube channel or forum for discussion. And there is a larger segment that watches a movie just because a friend posted a comment about it via Facebook. I have watched many movies just because one of my friends on Facebook recommended me to see the movie. So there was no direct effort from the production company to lure me to go and see the movie, nonetheless Social Media was involved.
What about attracting a newer segment? The problem gets more complicated in India, which has only 10.2% of the population using Internet and out of which only 60% use Social Media, making it even more difficult to justify the investment. So it all boils down to whether the content is appealing or how can it be made more appealing using Social Media. There is a lot of planning and resources that can go into how to market a movie through Social Media and often times Production Companies find it difficult to understand how much is too much or how little is too less. Big production companies can spend considerable amount of time and money to try and ensure that content is made appealing and released in bits and pieces through various Social Media outlets before the movie hits the movie theater. But smaller production companies cannot take full advantage of Social Media because of many factors mentioned earlier. Well, everyone knows that there is a positive effect of using Social Media but the ROI cannot be properly quantified.

Thus, my questions are:
1) How can small companies especially small production companies measure data relating to the conversion rate?
2) And how can all the other data collected make sense and be used effectively by Marketers of these companies to take full advantage of Social Media?


One thought on “SMROI- Social Media Return on Investment

  1. This is a really interesting question – I think more and more companies that maybe bought into social media as a tool of measurement are either now realizing that a) it’s not that easy to measure in real terms and b) the metrics don’t really mean anything in terms of translating into sales or interest. Maybe it’s just a matter of time until a new measurement tool is developed – for example many social media “sentiment measurers” are starting to crop up – to show not only the activity on social media but also the sentiment surrounding the topic/product. I guess this could help you tell whether your product is being positively received or negatively, which could be useful from a marketing standpoint. Of course, that may also not be totally sufficient in terms of measurement, as people tend to be more active on social media when they’re mad about something (at least in the case of sports teams, politics, etc – although that may be a bit of a generalization).

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