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The Right Metrics

(updated 2020)

Nearly 75% of companies invest in some form of social media; but, almost 60% of them struggle to measure the impact of their efforts. Social media isn't exactly new anymore, but part of the struggle can be attributed to the organization's inability to define social media's role. Is this just a new communication channel by which people socialize? Is it a new marketing channel? Or is it both? If something needs to be measured - which stats are relevant?

Even in 2020, there's debate around the placement of social media, due to the convergence of the roles of public relations (PR), communications, and social media. Each area can be thought of as a subset of the marketing discipline. But, until recently, there was never really a push to quantify the value of PR or communications. Now, business activities must be measurable and value additive to make it to the budget - shareholders don't leave room for fluff.

Concept to Implementation
We often over-complicate matters by over-thinking the problem. For any business problem, the goal is to identify key drivers and to provide meaningful management insights that aid in the resolution:

This is the first step: the total number of followers you have on any social media platform individually, or in aggregate, is irrelevant, in and of itself. The relevance is in the ability to convert those followers into loyal customers. There are several metrics that help in this measurement.

1. Clickthrough Rate - this rate is measured by dividing the number visitors who click on a specific link by the total number of visitors that were presented the link.  This metric is exclusive to links and web advertisements. Averages for click though rates vary by industry, and for ads it will vary even further depending on whether it is a static ad you've placed on your site, or an ad generated by a search request.  Click through rates for search generated ads is much higher than static ads.  The average across 21 industries is 65% for static ads vs. 4.70% for search ads.

2. Engagement Rate - measures how many interactions one specific person has with your site, such as shares, likes, comments.  It also relates to the number of engagements a singular post receives.  This is similar to click through rate; however, they're tracked separately, as there are different industry standards, established for each one, e.g. average rates. The calculation of this rate will vary; however, it's always a simple calculation of the number of engagements divided by total reach, total posts, total posts, total followers, total views, etc.

Torture the data, and it will confess to anything. ~ Ronald Coase

3. Conversion Rate - measure the percentage of site visitors that convert into loyal customers.  The average rate is 2.87% across business of different sizes, product/service offers, and geography.  However, granular information is available by product type, platform, electronic device, and country.  You can also add a factor for active promotion vs. casual browsing. Again, the calculation is fairly simple - the number of conversions divided by the total number of interactions.

The second step: social media efforts should be considered an investment, and treated as such by measuring its Return on Investment (ROI):

Because of its explicit nature, ROI also serves to readily relate the value of the organization’s activities to employees and shareholders.

This metric is familiar to internal and external stakeholders; the denominator "net income" or "net investment" is literally understood by everyone. No need to reinvent the wheel. If we have high engagement rates, leading to high conversion rates, and increased profitability, capture the total increase directly attributable to the conversions, to track and to compare to the total initial investment. Once profits exceed the initial total investment, positive ROI is achieved. Flat or declining profits warrant investigation of the root cause, and perhaps a reduction of future investments - as with any business activity.

Industry Benchmarks
There are no clear industry benchmark or methodology for the measurement or monitoring of social media efforts.  In fact, less than half of marketers take the time to translate their efforts into ROI or insights for competitive advantage. But, this shouldn't stop you. If the implementation of a social media strategy is conceptualized as a part of the overall marketing strategy, it's relevance is the incremental increase it provides to the bottom line, which is measurable. Social media is not the basis of competition, it is simply a tool to help organizations to remain competitive by way of brand awareness. You will not find discussion of social media ROI in financial statements or on an annual report - not yet. However, as an internal metric, it's just as important to monitor as any other metric.