Andrew Walmsley on Digital: Return path's far from clear

Only self-deluding marketers will claim to understand ROI on their brands' social-media activity.

Social media had it easy last year. The channel was in an early-adopter phase - lots of dipping of toes and little requirement that it paid its way. However, by the end of 2009, with the economy coming out of recession, marketers were starting to look forward and ask for demonstrable returns in 2010.

According to a CMO Club survey, 72% of chief marketing officers who did not attach revenue assumptions to social media in 2009 planned to do so in 2010. Yet few seemed confident that they'd be able to do it - 53% did not know their ROI on Twitter, while 50% did not know it on LinkedIn or blogs.

For me this raises two questions. First, I'm amazed (and deeply sceptical) that 47% of marketers felt they could measure their ROI on Twitter. Second, how are they getting on in 2010? The 'I' in ROI is pretty easy to figure out. It's the 'R' that's a bugger, and nowhere more so than in social media.

The problem lies in the multiplicity of ways activity can create value for an organisation. Sales, price elasticity, referrals, links, sign-ups, reduced purchase cycle, conversion are all potentially influenced by what consumers think of a brand, and what they think is all over social media.

In the US, research company Forrester reports that pet-supplies chain Petco found 'products with reviews have return rates that are 20% lower than those without reviews - and the return rate is 45% lower for products with more than 25 reviews - saving on shipping, restocking, and customer service costs'.

In the UK, one retailer tracked more than £250,000 of sales directly coming from its Facebook page, even though this page was not intended to generate direct sales, and had no call to action.

It is relatively easy to measure value creation, but hard to capture it all. More difficult is measuring brand-value destruction as a consequence of social media. One brand was referred to on a forum about refrigerators in a comment along the lines of: 'Brand X is so crummy that John Lewis won't stock it.'

This statement went unchallenged, and was visible to anyone searching for that brand of fridge on Google as one of the top results. The trouble was, it was untrue - the John Lewis website carried several of the company's products. This comment was damaging the brand, and potentially costing sales. It could have engaged offline with the critic to find out what the real problem was, or posted a link to John Lewis; but the problem here isn't the action it could have taken, but the difficulty in measuring its impact.

In experimental terms, there is no control; if the brand had acted, it would not have been able to measure any differences in outcome. Yet, equally, it would not have been able to tell whether this was costing it sales anyway; all of its metrics look at activity, not a lack of it. If a consumer chooses another brand because of an inaccurate review, it will never show up on any dashboard.

However, there is another problem. In a profession accustomed to push media, it is hard to appreciate the importance of demand media. Perhaps the notion of 1000 people being exposed to this message does not sound like very many, but remember that 1000 people were so interested in your product that they searched specifically for it online.

There has been real progress this year in understanding some of the ways social media creates value for marketers, and in the direct attribution of returns to activity. Nonetheless, it is in reality impossible (or at least uneconomic) to capture every nuance of return, and in many cases, a strong dash of common sense is called for.

If 50% of chief marketing officers think they understand ROI in these media, they need to lay off the Kool-Aid.

Andrew Walmsley is a digital pluralist

30 SECONDS ON ... THE CMO CLUB

- The CMO Club is a global peer-to-peer social network with a membership of more than 700 chief marketing officers.

- It was founded by Pete Krainik, whose marketing career spans almost 30 years in a range of sectors including consumer goods and technology. Prior to running the CMO Club, he was global vice-president of marketing for IP telecommunications company AVAYA. He has also previously worked for Mars and Deloitte & Touche.

- The mission of the network is to create an environment in which its members can exchange ideas, share their experiences and explore new innovations. It also aims to promote the status of the marketing discipline within business.

- Members can meet at events organised by the CMO Club and interact via webinars and other platforms. The organisation runs local networks based in US and European cities which hold regular dinners. It is also holding a 'Thought Leadership Summit' in San Francisco in November.

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