03.07.2009

The bottom line of social media engagement

By Paul Grant

Picture the scene: An enthusiastic communications executive presents a report to the organisation’s leadership team, and in a particularly favourable light explains how successful this new initiative has been. A few eyebrows are raised around the table, and various questions put forward about the impact in the marketplace. One by one, all eyes flicker towards the ex-MD, now Chairman of the Board, who finally asks the inevitable question; “Well, that’s all good news… so how does this affect our bottom line?”.

Every effective leader is concerned with the financial implications of new products, new systems, new staff, new partner arrangements, new technology, and any other new innovation as it is introduced to an organisation. Has this activity produced an improvement in efficiency, an increase in revenue, an increase in profitability? Conversely, has it only created a new cost centre? Has it created positive brand experience? Has it changed public perception?

The times they are a changing

The 21st Century has already ushered many new developments to the fundamental operation of organisations in healthcare and government. The Internet, broadband connection speeds, software services, and trends such as social media, have provided a new foundation for communication models that have seemingly emerged overnight, forever changing the expectations of ordinary citizens.

Whilst creative agencies, marketing departments, public relations companies and media buyers, are all touting the benefits of platforms such as Facebook, Twitter, Blogging, and community building, very few are actually able to demonstrate the kind of measurability that actually represents  something tangible to those in the boardroom. That is to say, real return on investment. Not an arbitrary number of ‘hits’, or ‘visitors’, or ‘bounce rate’, or ‘followers’, or ‘OTS’ value, or any other ‘marketing speak’ for that matter.

No, at the purest level, most leaders want to know about the resulting pounds and pence, dollars and cents. What did it cost and how did it achieve business objectives? Is the strategy behind the initiative working profitably? Does it need refinement? Is this a loss-leader? And so on.

Avoiding the question

Most digital agencies and marketing departments have a gamut of statistics and web metrics they can use to present the apparent ‘impact’ of an initiative. Very few seem willing to answer the fundamental boardroom question in hard currency. They would perhaps rather present their arbitrary numbers and hope that through abstraction, the consensus will be general nods of approval.

Bear in mind that their goal is to show that the work they have done for you has produced positive results, was worth the money, and you should therefore hire them for the next assignment. Do they necessarily care about the truth as much as you do?

Generally a creative agency’s greatest strength lies in their ability to be creative and not necessarily in displaying the kind of rigour and attention to detail that may be required by economists, statisticians, accountants and CFO’s.

It is consequently not uncommon for: a web-design agency to be reporting on how successful the website is; a search-engine optimisation company reporting on how successful the SEO activity is; a media-buyer reporting on how successful online advertising is; a PR company reporting on how successful the PR has been; and a social media company reporting on how successful the social media has been.
This is a fundamentally flawed approach, and may explain why so many executives are simply in the dark about what is really going on.

The truth is that the tools exist to tell the story accurately, but the effort required to check and double-check and to verify with more than one measurement means, can lead to some providers simply avoiding reporting in terms of tangible ROI. Additionally, agencies and marketing departments are often not really paid to produce an accurate assessment – this is a ‘value-add’ that they provide to justify their involvement. Not to mention that it is in the best interests of any external agency to present any results in a favourable light. In which case, how much ‘value’ has been added?

This situation makes it very difficult for executives to make an informed strategic decision about how to move forward.

Appointing an independent auditing team

Consider your internal accounting department. You may well trust their work, and be proud of their accuracy in reporting and meeting deadlines, yet you will always insist on appointing independent auditors to look over the accounts to ensure that you have the complete picture. It is the audited accounts that you will sign and submit for the record.

It is therefore imperative that executives and senior management insist on knowing the granular impact of their organisation’s digital media initiatives in financial numbers, and ideally through independent auditing. Bear in mind that this may require a certain level of transparency around cost centres, revenue streams, sales pipelines, and other traditional accounting mechanisms. Perhaps this kind of information is not suitable for external agencies, in which case you will need to establish effective cooperation internally to produce meaningful insight, or assign an independent contractor with appropriate non-disclosure agreements in place.

Until the important work of reconciling digital engagement initiatives with financial indicators is complete (one way or the other), it is impossible to accurately ascertain true return on investment, or indeed the ultimate impact on the bottom line.

The bottom line – quick tips

Here are some quick tips for executives looking at the bottom line impact of social media or digital engagement initiatives:

  1. Set clear strategic and financial objectives that agencies and marketers will be held accountable for
  2. Measure everything, and appoint independent audits of internally and externally produced reports
  3. Insist on a financially based return on investment analysis – if it isn’t tied to your accounts, it may just be hype.

If you would like to increase your insight about social media engagement and the bottom line return on investment, contact us and speak to one of our consultants.

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Meet the Author

Paul Grant