Social Media Return On Investment

What kind of Return can you expect from Social Media?

The legitimacy of the answer has a lot to do with your mental model of the world.

When I talked first in this space about it in January, I made the distinction between how Direct people and Brand people would answer the question. It turns out that the difference predates the invention of Radio and TV as mass mediums.

There was a difference between Claude C. Hopkins approached it, and how Earnest Calkins approached it, as far back as 1890.

Hopkins argued for the hard sell and scientific advertising. Hopkins view of time was narrow, short-term, and of instant reaction.

Calkins argued for the soft sell and branding. Calkins view of time was broad, long-term, and of building a lasting relationship with customers.

Both men had a huge influence in the creation of the modern advertising industry, and this cleavage between the Brandsters and Analyticals persists to this day.

Assume both types agree on what is meant by the term ‘investment’. A cost is a cost and it’s relatively straightforward to derive that figure.

The term ‘return’ is far more contested.

When is a return a return?

At the root is the amount of time that must elapse before a judgement about return can be made.

An analytical, Hopkins type of arguement would define Return as the amount of money the firm earned as a direct result of a given campaign, during a given campaign or very shortly thereafter.

A brandster, Caulkin type of argument would define Return as the amount of money the firm earned, over the long run, of all the customer relationships.

That question of time is incredibly important when it comes to which variables are used in the final attribution calculation. For instance, in a Hopkins mental model, there would be no attempt to even calculate ‘brand equity’ or ‘goodwill’. These are deferred, potential, monetary value, and as such, cannot be considered a ‘return’ at all. In a Hopkins mental model, return is the immediate dollar return and/or cost offset as a result. Time is an enemy because it dilutes the accuracy of a controlled test and exacerbates cost.

On the other hand, a Caulkin argument would follow that relationships in social media marketing are incredibly important, and that there is a potential to lengthen the loyalty curve. As such, how the social media marketing is executed has a massive impact on the value of the entire customer base, amortized. There’s real brand equity and goodwill there, and it should be valuated as a return. It may be months or years before anybody would know for sure if a given campaign had a lasting effect. In a Caulkin mental model, that view is perfectly acceptable, because to question this bit or that bit of a marketing mix is like asking what the ROI of the wing on a jet is. It’s a nonsensical question to them.

“What kind of return can one expect from social media?”

It’s a social question. So I answer it with a question: ‘what is that you’re trying to do?’

If the goal of a social media campaign is to drive immediate sales through to the website – then there is a very well known Hopkins attribution model in place there.

If the goal of a social media campaign is to drive delight and build relationships – then there are very well known attribution models in place there.

Each types of thinking lend themselves to a social Return on Investment figure that will have validity, depending on where you come from.

A single, unified, model of social media ROI is certainly possible. It would have to be heavily abstracted for anybody to use it. This, in turn, goes to an argument about which pieces must be abstracted, to which degree of accuracy, for which audience, for what reason.

A fact-filled, evidence based approach would be required to answer that question with a high degree of certainty. And as such, measurement and marketing scientists alike can craft a proper predictive model. It is from that basis that you can calculate the Return on Investment expected. Until that time, there are excellent proxies from both points of view.