Measuring the Effectiveness of Social Media: An Elusive Necessity

There is a growing demand for accountability in many sectors of 

modern American society.  Public school students in many states are required to demonstrate adequate performance on standardized testing in order to receive high school diplomas.  Health and beauty product advertisements often include clinical study statistics that are used to gain consumer confidence.  Many workplaces use employee data to monitor sales, efficiency, and other components of productivity.  With such buzz about “big data,” there are certain metrics that marketers should pay attention to in order to gauge whether their efforts and initiatives in social media are improving the perception of their brands. 

When measuring the effectiveness of social media marketing, it is important to note that many American businesses are in denial about the need to embrace social media.  Some marketing researchers believe that the skepticism of businesses comes directly from the fact that they have not observed data showing the return on investment from social media.  The distrust for social media could be alleviated if there was objective data that shows how investment in social media can produce a business return.  It is imperative for businesses to use strategies that successfully incorporate social media metrics when building a demand for marketing dollars.

A 2011 survey of U.S. marketing professionals showed that most difficult to measure campaign channels included public relations, search engine optimization, social media and trade shows.  The difficulties associated with tracking ROI in social media sites may be due to the limited use of available marketing tools. The survey found that the most-used tools include web analytics (48 percent), email marketing software analytics (47 percent), lead counts from online contact forms (38 percent), social media monitoring (30 percent) and call tracking (27 percent).  Though a majority of the respondents have these tools available, measurement continues to be a significant challenge for marketers.

Google Analytics attempts to show a causal relationship between social media activity and sales. 

We do, however, need to be a little forgiving of these seemingly “math-challenged” marketing professionals.  Social media ROI is far more complex than a simple cost vs. brand lift equation. Social media just doesn't fit in the current marketing-analysis paradigm, so we need to stop trying to force it. It's the classic “square peg/round hole” scenario. While social media certainly affects the consumer process, it proves to be very difficult to measure. There are many exchanges of information in many different places, and too many variables to effectively determine the relationship between social media and customer decision-making.

Participation in social media activity seems to transcend typical marketing techniques, and businesses need to see the ROI as long-term and difficult to quantify.  Social media sites should be used primarily as an outreach tool for listening and engaging customers.  The benefits can be optimized when businesses set clear goals and policies to maximize the impact that social media can have within an organization.

Social Phenomena and the Transformation of Business Processes

In Groundswell, Charlene Li and Josh Bernoff show us how companies can use customer communities as a method to generate revenue and deliver better services.  Customers contribute to online ratings and reviews, support forums, and also provide feedback for product development; these are important elements that allow companies to gain insight and energize their customers.

Purchase decisions are influenced by reviews.

The authors discuss the significance of energizing the groundswell through product reviews.  Oftentimes online transactions can be an unsettling process for some consumers who are insecure about not being able to touch the product before they buy it.  When customers are prompted to write reviews for products, this demonstrates how people can depend on other people and how reviews can influence sales.  Companies can target specific audiences by energizing the consumer “critic activities” and thus in turn influence the content viewed by the “spectators.” Forrester surveys show that 96 percent of customers use online reviews to help them make purchases (page 138).  It is interesting to note, however, that it is difficult to identify a direct relationship between reviews and sales; those who read reviews are generally more interested, which contributes to their willingness to purchase.  

The use of support forums to answer questions is another interesting method that is used to increase customer satisfaction.  When properly managed, support forums allow for customers to help each other; consumers who are passionate and well versed with a particular product or brand can provide very valuable answers and advice.  The dedicated forum responders help companies save hundreds of thousands of dollars in customer service calls (page 162).  Also interesting is the forum responders’ receipt of what the authors refer to as “psychic income.”  While I (and most other practical people) prefer the more traditional “money” income, these altruistic forum participants answer questions for the gratitude, validation, and the feeling of influence.  

So nice of you to help! Can I pay you in Monopoly money?

Another method used to energize the groundswell is when companies provide the opportunity for consumers to be involved with product development.  The authors describe an interesting case study where the Canadian grocery chain Loblaw listens and responds to customer feedback (page 192).  Making improvements based on customer suggestions is baked into the process at Loblaw, and failed products are seen as an opportunity to try again.  The company takes feedback and delivers it directly to the product developers; many products are improved after the developers analyze, reformulate and rerelease.  This is a novel way of producing products that are directly aligned with customer demand, and it also improves the corporate-consumer dynamic by empowering the buyers.

If your dog could eat ANYTHING for breakfast, what would it be?

Li and Bernoff have shown us how social media have tipped the balance of consumer relations.  Customers are more empowered and they can wield control by writing reviews, giving and receiving support, and affecting product development.  It is the dawn of a new era of existence in a capitalistic society; the consumers who were once powerless recipients of goods are now active participants in the buying, servicing, and development of products.

Dear Netflix: The difference between moving “quickly” and moving “too fast”

What are we supposed to think when something is “too good to be true?”  Should we stay positive and be thankful?  Or is it best to be prepared for a possible disappointment?  Whatever your preference, a few years ago I found myself thinking, “Netflix, you are too good.”

When streaming online media was added inclusively in 2008 as a feature to the monthly DVD-by-mail subscriptions, subscribers were entitled to watch unlimited hours of streaming media at no additional cost.  I was ecstatic: no commercials, no scheduling restrictions, and no extra cost.  Customers could easily use the Internet to stream television shows, movies, and documentaries at no additional cost and they could do it whenever they desired.  So where’s the catch? 

It came in 2011.  During the summer Netflix announced that it would separate the current subscription plans into two separate plans: one covering the instant streaming and the other DVD rentals.  The announcement led to a flurry of negative reception among Netflix's Facebook followers, who posted negative comments on the company's wall. Twitter comments also created a "Dear Netflix" trend with generally negative comments as well.  Social media platforms allowed for Netflix to have a repository of feedback from this big decision.  The company realized very quickly that this situation needed to be fixed.  One twitter account posted the following:

Netflix customers were not pleased; tens of thousands spoke out against the plan on Netflix’s Web site, and Netflix stock slid sharply. 

Reed Hastings, Netflix co-founder and CEO, said, “companies rarely die from moving too fast, and they frequently die from moving too slowly".  This “pacing,” so to speak, is an interesting component to the marketing techniques that are used so frequently by many companies.  Though these actions seem risky, there must be calculated and thoughtful approaches involved.  Netflix expected some of its 25 million subscribers to cancel in the wake of the price change, but the cancellation rate exceeded expectations.  Hastings and his investors now realized, it’s time to listen, slow things down, and be more considerate to our customers.

Risk-taking is a big part of making money, and I understand that.  The Internet and social media should serve as tools to help companies in their big decisions.  Just recently I completed a questionnaire for the Telegram & Gazette.  Some of the questions were very specific and regarded the costs that I would be willing to pay for online newspaper subscriptions.  This must be very valuable information when businesses and companies determine price points for new commodities.  A commodity's worth is indeed dependent on consumer demand.

Netflix should have done some market research prior to making such a hasty decision.  I think the company should have implemented a surveying system or they should have formed a collaboration with Communispace in order to have data regarding customer preferences.  If Netflix was aware that some customers would be disappointed and unhappy, it should have treaded more carefully in the financial waters of DVDs and media streaming.  Netflix learned its lesson, and hopefully others will too.  Financial details will inevitably make people sensitive, so please listen first and THEN decide!!