Measuring Social Business Success

Not a day goes by when we don't see another headline about Facebook, Twitter, LinkedIn, or another consumer social networking site. In the software industry, vendors have taken notice of this trend and now offer their own social software for business purposes. Enterprise social software has all the makings of long-term viability, but questions remain about the impact that social software can have on a business. In many ways, social software can help with organizational productivity as well as strengthen relationships with internal and external stakeholders such as employees, partners, suppliers, and customers. On the other hand, tying intangible benefits such as productivity and innovation to hard dollars can be somewhat of a challenge for companies wanting to measure the return on investment, or ROI, from implementing a social business strategy. This leads to a very important question: how do you measure for success when it comes to devising a social business strategy?

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presented on this topic at IDC's annual Directions conference in March 2011 and was reminded again at its importance while listening to social-savvy Dell present at Radian6's event in Boston, MA on April 7, 2011. (Unfortunately Dell's presentation is not posted, but you can find other keynotes from the Social 2011 conference here.) There are a lot of great takeaways from Dell's presentation at the event, but two things that Dell said really struck a chord with me. One, you need demonstrable ROI since every time budget is requested for a social media project that money is ultimately taken away from someone else. Two, www.dell.com is no longer the company's home page; instead, Dell's homepage is Google, YouTube, Facebook, LinkedIn, etc. To me, this means that there a lot of things that companies need to monitor and measure in order to know where they are having the most impact from a social business initiative.

According to IDC's Social Business Survey, nearly 50% of respondents indicated that they were using the number of total visitors to a website or blog as a key metric to measure the impact of their social initiatives. This was followed by the number of page views, customer satisfaction, number of registered users/members and number of responses generated from a blog post. However, only 15% of respondents indicated that they were using direct/indirect revenue to measure the financial side of things which was the second to last metric before "none".

One reason for the low ranking could be the uncertainty of measuring ROI. ROI is another industry buzzword that can mean many different things. In fact, terms such as "return on influence", "return on innovation" and even "return on ignoring" have been used in association with measuring social business projects. From a marketing perspective, those terms may make sense in terms of creating buzz, but business executives are more likely to understand the actual dollars related to an investment instead of mindshare.

Why is return on investment so illusive? Why is direct/indirect revenue so hard to capture? As Albert Einstein once said, "Not everything that can be counted counts and not everything that counts can be counted." This quote illustrates the sometimes confusing nature of trying to determine what is best to measure and it applies to many companies today that are looking to tie the number of Web site visitors or comments on a blog post to actual money. It also brings up an important point about calculating true ROI – a metric is not ROI. A metric is part of an ROI calculation, but it is not enough. It's confusing because we can often track the change in a metric, but don't necessarily know how to measure the impact on the business.

To calculate ROI, in its simplest terms, means we need to determine the gains versus costs of a social business. The slide below presents a framework developed by IDC and industry pundits Kathy Hermann and Dr. Natalie Petouhoff (formerly from Forrester Research) as the first step towards measuring social business ROI. It provides the key areas that companies can start to identify social business gains (which appear in green) as well as costs (which appear in red). A free copy of the study can be downloaded here.

Social Business Gains

Social business gains come from a variety of areas including the following:

-- Gains recognized from Sales Revenues can be in the form of accelerated customer acquisition rates and decreased customer churn as a result of monitoring customer sentiment and engagement.

-- The Insights learned from customers, partners, and employees through social media monitoring or community involvement can translate into faster organizational decision making capabilities, product development, and messaging.

-- It may not be as evident, but Brand Protection has a serious implication for companies today. Just as quickly as a company can establish a positive brand image, it can be taken away with one negative comment from a customer or reply from a business. To protect revenues, proactively monitoring the social Web for negative sentiment can help mitigate risk and avoid crisis communication costs.

-- Social media and social networking sites can be used as alternatives to more expensive Lead Generation tools like traditional or online advertising, trade shows and events, conferences, or list purchases. Companies can therefore save money by lowering the acquisition costs of leads as well as shorten sales cycles.

-- Call Center Operations are one of the key areas that can benefit from utilizing a social business approach by deflecting support calls and being able to respond to incidents faster.

Social Business Costs

In terms of social business costs, these areas are largely around investments in people and technology:

-- People costs are related to those that are involved with the social business project. These can be:

-- Project managers, executives, and program owners

-- IT personnel and administrators that design, maintain and resolve any product related issues

-- Consultants or agencies that provide IT support, content, or moderation services. This could also include trainers to help with the implementation and roll-out of a social project.

-- Technology costs relate to the social platforms, applications, and tools needed to accomplish the social business objective. They have a variety of use cases, features, infrastructure and integration capabilities to consider. A company's technology choice will vary on the nature of the social project, components, and how much or little it will be incorporated into the broader organization.

Again, these are the first steps in measuring ROI and they are designed to help companies get a better picture of what to measure when determining social business ROI. No matter where you are in your social business transformation, remember these key takeaways:

-- Measuring social business success varies, but should always tie back to objectives and tracking progress. Continuously educate the organization and demonstrate business value. Many companies are not only using quantitative information, but qualitative success stores and anecdotes to help demonstrate value and keep momentum alive.

-- Success can come in many different forms, but program owners will eventually have to "show me the money." Metrics can be used to measure changes, but it is not true ROI when used alone. Use the social business ROI framework as a guide to start calculating gains versus costs.

-- Find an evangelist to help promote transformation from a technology, process and cultural perspective. All employees can benefit from social business transformation even if only focused on externally-facing initiatives for now.

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