Social Media Return On Investment

I’ve been fairly obsessed as of late with quantifying Social Media Return on Investment, or sROI for short.

At the root of the issue is a clash of belief systems.

Marketing thought is dominated by two rather large models of thinking. You have the Direct Paradigm and you have the Brand Paradigm. By Paradigm, I mean simply a way of looking at the world. Let me take one step back, and then one step forward.

People, in general, can only hold so many variables in their heads at the same time. So, we abstract. We’re supposed to derive some forms of causality that are important, throw that into some overarching architecture, and then use that framework to make decisions in a quick manner. When two people first approach a problem, and come at it from different paradigms, sometimes it can get nasty because there’s some questioning root assumptions.

The language you find in the Direct Paradigm is that the last action somebody took towards a sale is the most important. They point out, quite rightly, that repeated human behavior matters the most. A human in motion will tend to remain in motion. I wouldn’t make the accusation that all Direct people can only hold the short term in their minds at any given time. In fact, some of the best contributions and strongest predictors of campaign success are based on a very sophisticated understanding of time.

The language you find in the Brand Paradigm is that how somebody feels is the most important. They point out, quite rightly, that if somebody hates a brand, they won’t buy that brand. There’s a set of key performance indicators, invented in the early 1930’s to handle radio measurement, that attempt to quantify that. Likeability and message recall are the two big ones.

The Direct Paradigm tends to value deductive reasoning, and this is form and function as a result of having all the data. It’s inherently about data mining.

The Brand Paradigm though relies on inductive reasoning, because they’re forced to use sample statistics to perceive the world.

If you were to review what adherents of the Direct Paradigm are saying about sROI, they’re wagging their fingers and their tongues. They point out that Dell only made a fraction of their direct sales from Twitter. They point to the lack of conversion from the sales is proof positive that social media ROI is too low to justify intense spend.

If you were to review what adherents of the Brand Paradigm are saying about sROI, they’re clapping. They point out to successes like Best Buy and argue, quite rightly, that it impacts how people feel about a brand. They point to a fragmenting attention economy as being the main reason for intensifying social media spend.

So, which belief system – which paradigm – is right?

I’d argue that they’re both right.

I’ve read about an era in marketing when both the direct response and word of mouth dynamics were scientifically optimized. In my minds eye it was quite an exciting time.

I think we have to understand, fundamentally, that the Direct People have it right. They’re quite right that if you don’t have the right message to the right customer at the right time – you won’t get a sale. It’s about having the opportunity to convert being there at the right time.

I think the Brand people also have it right. How people feel about a brand is important. I’ll go so far as to say that how the friends of certain people feel about a brand, and how they consume that brand, is also a factor. Sure, you might put the right message to the right customer at the right time – but if I hate that company because they pulled their sponsorship for the Reading Rainbow…I’m not buying.

I’m optimistic that within social media measurement, through this quest for social media return on investment – that we’re going to find a satisfactory model that will be easy enough for 95% of the population to understand. That it’s going to incorporate just enough from the Direct Paradigm and just enough from the Branding Paradigm to work. In fact, what I’m seeing is a real opportunity for a Third Paradigm.

What if, under this Paradigm, we selected the most predictive elements, instead of what would be the easiest elements? What if, built into the model, we had a larger number of variables to chose from in constructing our general causal model? What if we acknowledged the dual nature social media?

I’ll add one factor that I think is especially salient: the nature of the product or service itself. There are certain products that are completely social in nature. It’s for this reason that I believe sROI is actually going to vary quite a bit depending on the sector and the competitive set.

The ultimate calculation will depend, quite heavily, on how much is borrowed from both Branding and Direct.