As of 2018, business owners are slowly coming to terms with the fact that social media is indeed the future of marketing around the world. Businesses and organizations have arrived at the conclusion that social media is the ultimate way of reaching out to existing and potential customers (Tuten and Solomon 2017). It must be kept in mind that the purpose of any marketing or advertising strategy is ROI or return on investment (Westcott 2016). Keeping an eye on the current economic scenario, it is important to ensure that businesses are investing in a practice where they are getting their return on the market investment. With budget cuts being rolled out in corporations around the globe and the extensive reach of social media, ROI within social media marketing must be analyzed. However, a report released by marketers show that more than forty per cent brands are unable to measure ROI when it comes to social media (Fisher 2009). The barriers standing in the way of ROI measurement are the main reasons why social media adoption is still in the developing phases.
The ultimate purpose of any business is to ensure that the shareholders or the ones investing in a particular business get their money’s worth; in other words, there has to be some kind of return on the investment that has been made (McCann and Barlow 2015). In the case of social media, it would be difficult to define ROI in exact terms because there a number of variables at stake here, including brand awareness, trust, customer loyalty and interaction and visibility; none of these technically have a definite numerical value. Thus, if these cannot be measured using definite metrics, it would be impossible to evaluate the performance of a particular campaign, highlight its flaws and optimize the strategy for enhanced results. It is evident that businesses lack understanding of who their target customer is, and what they want; it is not sufficient to simply carry out market research, metrics like influencer measurement and APIs will also have to be utilized. Similarly, an inadequate knowledge of the various platforms of social media and their functioning further makes it impossible to reap the benefits of social media marketing.
According to reports, nearly 40 per cent of companies have not been able to pinpoint the impact of social media on their revenue; while some brands have successfully been able to conduct a qualitative analysis of the effect of social media marketing, it has been deemed almost impossible to translate that into numbers (Clark and Melancon 2013). Going by the same poll which claimed that inability to measure ROI was the chief reason behind failure to successfully implement social media, it can also be said that this is because marketers are more inclined to resort to tactics which are measurable, instead of assessing their effectiveness (Kumar et al. 2016). Marketers are not particularly keen on opting for qualitative analysis, and would be more comfortable with specific quantitative metrics. It must be remembered that social media marketing is a fairly new field; thus, there are not sufficient metrics or benchmarks for analyzing and studying the impacts of social media marketing on revenue or sales of a company (Peters et al. 2013). While judging the role of social media in business, none of the business owners are looking at the bigger picture; their horizon is limited for they tend to focus only on the likes, engagement tactics and comments. Conversion rates, which ought to be top priority, go largely ignored by the marketers.
Earlier, it was comparatively easy to measure the performance of online advertising campaigns; marketers could use metrics like cost per click, page views, unique visitors and so on (Fisher 2009). However, with the advent of social media, measurement of ROI has become all the more complex; now, marketers would have to take into account not just the online advertising, but the frameworks that form the foundation for it. The Internet Advertising Bureau (IAB) had released a report stating its findings on the effectiveness of social media marketing (Tan, Kwek and Li 2013). According to the report, in order to efficiently measure the success of social media marketing, the marketer needs to categorize the various tenets of such a marketing strategy (namely, blogs, social media websites and applications) and employ specific metrics (like conversion rates, return visits, interaction time, conversation density, content freshness, relevance, influence and growth, installs and so on) to measure the same (Scott 2015). IBM, for example, has one of the most robust social media strategies globally and has observed that measurement of social ROI has led to increased productivity and streamlined communications; also, in companies that IBM caters to, there has been nearly 18 per cent increase in ROI (Treem and Leonardi 2013).
To measure the impact of social media on revenue, a social ROI pyramid was developed by marketers, which started with engagement data at the bottom and business metrics at the top. But studies show that only about fifteen per cent of companies around the world have been able to quantify the effect of social media; most of the companies are still stuck at the bottom of the pyramid. Three reasons have been established for this stagnancy as far as social media is concerned – namely fear, compromise and technology.
One, social media, unlike other channels of marketing, is multifaceted; it is practically impossible to trace the various channels or platforms within social media, let alone the revenue generated through them. Thus, marketers are simply satisfied with measuring what little they can instead of focusing on what they should measure (Chaffey 2016). In other words, marketers today are settling for a theoretical framework of the ROI, instead of the actual one. While large companies have the means to establish business goals, measure them and optimize the business and marketing strategy, small scale firms lack resources and technology required for such evaluation. Two, the field of social media is like a giant black hole to the marketer, the intricacies of which are completely unknown. Thus, a marketer who is unaware of the revenue per social post, would have an ambiguous idea of the traffic generated by social media where the conversions originate from. As a matter of fact, they might not even know if customer engagement has an impact on the revenue obtained by the company. It might so happen that high levels of engagement yield absolutely no revenue generation; in that case, knowledge of the harsh truth could be daunting. Instead, marketers prefer to stay in the dark; they fail to realize that identification of the problem would lead to consequent implementation of improved strategies that would enhance revenue generation. Three, the lack of state of the art technology which would present a wholesome view of social media analytics poses a severe challenge to measurement of social ROI. Technology pertaining to web analytics, social network API, social listening and financial data would be required to successfully measure the impact of social media marketing in numbers (Moe, Netzer and Schweidel 2017).
To conclude, it must be reinstated that the purpose of any investment whatsoever is to get a return on it in terms of profits generated. The sole purpose of using social media as a marketing tool is to ensure that the message is delivered loud and clear to the target audience and also to reel in profits. However, due to lack of advanced technology and resources, most organizations are unable to measure the revenue generated through social media marketing; without accurate measurement of ROI through social media, it is impossible to understand how far a particular social media marketing strategy works or if it needs improvement. Therefore, it can be said that the inability to measure social ROI is one of the major obstacles in the successful implementation of social media marketing.
References:
Chaffey, D., 2016. Global social media research summary 2016. Smart Insights: Social Media Marketing.
Clark, M. and Melancon, J., 2013. The influence of social media investment on relational outcomes: A relationship marketing perspective. International Journal of Marketing Studies, 5(4), p.132.
Fisher, T. (2009). ROI in social media: A look at the arguments. Journal of Database Marketing & Customer Strategy Management, 16(3), 189-195.
Kumar, A., Bezawada, R., Rishika, R., Janakiraman, R. and Kannan, P.K., 2016. From social to sale: The effects of firm-generated content in social media on customer behavior. Journal of Marketing, 80(1), pp.7-25.
McCann, M. and Barlow, A., 2015. Use and measurement of social media for SMEs. Journal of Small Business and Enterprise Development, 22(2), pp.273-287.
Moe, W.W., Netzer, O. and Schweidel, D.A., 2017. Social Media Analytics. In Handbook of Marketing Decision Models(pp. 483-504). Springer, Cham.
Peters, K., Chen, Y., Kaplan, A.M., Ognibeni, B. and Pauwels, K., 2013. Social media metrics—A framework and guidelines for managing social media. Journal of interactive marketing, 27(4), pp.281-298.
Scott, D.M., 2015. The new rules of marketing and PR: How to use social media, online video, mobile applications, blogs, news releases, and viral marketing to reach buyers directly. John Wiley & Sons.
Tan, W.J., Kwek, C.L. and Li, Z., 2013. The antecedents of effectiveness interactive advertising in the social media. International Business Research, 6(3), p.88.
Treem, J.W. and Leonardi, P.M., 2013. Social media use in organizations: Exploring the affordances of visibility, editability, persistence, and association. Annals of the International Communication Association, 36(1), pp.143-189.
Tuten, T.L. and Solomon, M.R., 2017. Social media marketing. Sage.
Westcott, R., 2016. Return on Investment. Quality Progress, 49(1), p.47.
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