The anti-social organisation
In this guest post, Jonathan Barouch argues that marketers need to stop asking the ROI on social media and start using it to do business.
“What’s the return on investment of Social?”
CEO’s are demanding an answer to this question. They know it’s important, but they are feeling exposed. They want to see the metrics before committing time and money to embedding social channels into the broader corporate mix.
It is a difficult question to answer. You might just as well ask the CEO what the company’s ROI is for email, or its telephone connections (although probably not wise for the sake of your career!)
The fact that CEOs are setting the bar for upfront metrics so much higher for one communications channel over another demonstrates a serious lack of understanding of social media at the senior executive and board level.
The University of Massachusetts Dartmouth reports that 77 per cent of Fortune 500 companies already have a social media team and an established social presence. But from my experience, I would suggest that most of these companies’ social strategy currently consists of little more than a 21-year-old PR intern tasked with the job of “managing Social”.
This is a great shame, not only because valuable customer conversations get missed, but because when it is properly engaged, social media can be the richest data source on customer preferences and customer trends that has ever existed.
The companies that build a capability to harness and understand the constant stream of social data will be rewarded with valuable real-time insight.
This requires a company-wide integration of social channels across the business. It is well beyond the brand monitoring of the 21-year-old PR intern.
So how do we turn anti-social organisations into customer-led responsive companies?
The cynic in me says that it usually takes a crisis to jolt a large organisation into action (and in the context of social, the viral downside of even a small crisis can be spectacular.) However, more corporates are waking up to the upside opportunities, and investing in deeper social strategies that go beyond an intern re-tweeting cute pictures of cats on the company Facebook page.
There are countless blogs from social media ‘gurus’ talking about the best first steps for a corporate to dip their toes into social media, but I tend to disagree with many of their recommendations.
Rather than getting expensive consultants to set up a social media command centre to report on brand sentiment as a starting point, I suggest doing things the completely opposite way.
The key to creating a social organisation is to help people within the organisation to understand how their actions and engagements in the real world impact the conversations that customers have about them.
The only way this can be achieved is by allowing social media capabilities to sit across the various silos of a corporate, with information filtering down to the front line. It needs to be integrated into business processes as a standard business tool.
While you clearly don’t want all your employees tethered to Facebook, there is a happy balance where relevant and timely social media posts from customers arrive in the hands of the employee. This then gives them the power to use the insights to influence the actual customer experience, right then and there.
As is always the case, the trick is to get the right customer information into the hands of the right employee, at the right time.
I came across an interesting example recently with a large corporate client who felt they had an operational problem with managing social media. The customer told me how their organisation manages social media through the corporate communications department at head office.
But this corporate communications team was so flat out that they barely have time to eat lunch as more and more customer service and operational issues flooded their social media handles.
In an effort to share the learnings across the business the team sent out fortnightly social media reports to the whole company. While this initially seemed like a good idea, ultimately the social media reports only served to highlight how much the organisation needed to improve their customer experience.
Recurring customer issues mentioned in the reports reached front line staff up to 14 days after the complaints or issues were first flagged through social channels – often highlighting things that operational employees were already well aware of (and which could have been easily remedied had they been flagged and routed to the relevant teams in a timely manner).
It is not only operational teams that can leverage real-time social data to respond to service issues and pick up on trends, but also other divisions throughout the organisation.
Data-driven marketing teams should be looking for influential customers, customer trends and product marketing opportunities using the wealth of preference data that can be extracted from social media.
Most organisations do a pretty poor job of recording customers’ explicit signals about what they like and dislike – even when they are told directly – so it is understandable that marketers feels overwhelmed by the sheer volume of customer signals that come through social media.
Successfully harnessing and acting on those signals is at the core of a successful social strategy. And it needs to be integrated across all business functions, from sales to marketing, operations and customer care.
Social media of the future will be cross-functional, integrated into existing systems and will help to enrich the customer experience. Hopefully before too long a CEO asking the questions “What’s the ROI of social?” will be like them asking “What’s the ROI of us answering our customers’ phone calls?”
The question simply won’t need to be asked.
- Jonathan Barouch is the CEO of location-based analytics application Local Measure
Tim Burrowes founded Mumbrella in 2008. He worked on Mumbrella until 2021. At various points he was editor, content director and editor-at-large.
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Good article. Couldn’t agree more that the social interface needs to come from within silos. Biggest barrier is finding the relevant people within those silos, second biggest barrier is convincing the executive that some of their ‘real’ employees need to be at the social coal face, and hence need to have a certain amount of head hours per week set aside for this. Then these siloed staff should be connected with the data-driven team in real time to qualify and quantify the individual reaching out to the business.
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Good social media is the antithesis of advertising.
As soon as marketing gets its hands on the latest platform, its decline is virtually assured.
And the cycle repeats.
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I’m not convinced that I am much more than a straw man. My existential doubt might diminish if people talking about me and my peers produced empirical rather than anecdote. Nevertheless, in spite of my putative youth and inexperience, I agree that [social] media’s value cannot be simplistically established.
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Short version.
Teach customer service people how to use the internet as well as the phone.
Social media are another source of data that may or may not be useful.
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“The fact that CEOs are setting the bar for upfront metrics so much higher for one communications channel over another demonstrates a serious lack of understanding of social media at the senior executive and board level”
er, no. It demonstrates a serious concern for the massive reputational damage caused by the mere fact of social channels, which are just a big stick for disgruntled keyboard warriors to hit you with – as your own example proved, Jonathan
“when it is properly engaged, social media can be the richest data source on customer preferences and customer trends that has ever existed”
er, no. It may surprise you to learn that for many years,established methodologies have been employed by marketing depts to glean this information. The whinging and nattering served up through social channels is no substitute for proper market research
Surprising in mid 2014 to read this kind of breathless, juvenile “social changes everything” hype. It’s so 2010.
the social emperor has no clothes and has been outed as just another complaints channel. People don’t want to engage, or have dialogue. They just want to whinge, by and large.
Tell me which companies suffer by having little to no social presence.
NONE
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@Neville; in 1987 one of the biggest earning bands in the world was ‘The Grateful Dead’; a bunch of acid-drenched musos from the sixties. Why were they so successful twenty years after their ‘peak’ despite no albums or singles on the charts? Because they inadvertently developed a database of fans willing to see them again and again. That model still holds. You’re using pretty limited preconceptions of the social interface.
You want a modern model? Kogan.
You want a company that’s suffered in the face of this? Harvey Norman.
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I think it’s totally fair for CEO’s to ask “What’s the ROI on Social?” and if Marketers had first asked themselves this question, they’d be well prepared to answer it.
(Sidebar: Marketers have for too long asked for budgets without substantiating what the return on investment might be and how the value (from this investment) would be recognised.)
The idea that ROI for e-mail and telephone isn’t calculated is farcical (somewhere, they have done this calculation), likely why you’re currently sitting in the seat you are in and being paid to answer the calls and action customer requests and enquiries via e-mail.
I agree that many CEO’s are setting a higher bar for metrics as the general business pressure to justify any expenses is now more stringent from front line staff to CEO.
I think a key point omitted from many ROI conversations is the customer experience, retention and business process improvement that forms a part of the return (the other major challenge is having someone to monitor and implement the feedback, changes and process suggestions), often uncovered when customers are engaged directly.
I understand Jonathon has flagged this as a benefit. What Marketers need is to deliver a road-map to CEO’s of how the feedback will be disseminated, allocated and resolved in a responsive and effective manner.
The business case for Social (or any sort of customer interaction/feedback) is tied up in the question “What are you going to do with the data?”
If you’re not going to use it – Don’t bother collecting it.
As for ROI, prepare for the question, it’s only going to become more important.
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@me you’ve done nothing but demonstrate your very limited understanding of business. Harvey Norman isn’t “suffering” because Kogan uses social media better. Harvey Norman is “suffering: because Kogan is a pure e-retailer with no minimal fixed overheads (stores or ATL marketing). Kogan uses PR and social because it’s cheap and fits with his brand (the disruptive upstart sticking it to the establishment-who’ve-been-ripping-you-off), his products and his target customer.(in fact, Kogan’s PR efforts have a lot more to do with his success than social)
If Gerry Harvey suddenly “does social” better, it won’t make a shred of difference to his bottom line. But we don’t need to cry for him – he’s worth 10x Ruslan Kogan.
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@Neville. A product sold is a product sold. Gerry Harvey’s legacy wealth has nothing to do with it. Kogan still needs contract manufacturing and assembly, warehousing, a distribution system and admin office space; all real-world business requirements. He has demonstrated that ATL is not as necessary if you have the correct social engagement. His example is admittedly extreme, but it still prevails. That Gerry tried and failed the online game is proof of what Jonathan writes; treat this facet with lip-service and keep falling behind. Every parenthetical aside in your statement just affirms this. The future is now, homeboy.
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I was once in a role where we noticed that the younger demo was switching off the brand. We pretty much went to straight to the social channels and directly asked remaining young customers why. The response was instant and honest, and earned plaudits for even thinking to ask. Recommendations were implemented and the bottom line improved. Those couple of hours on Twitter and Facebook would have had a better ROI than any focus group research. Pity it’s so hard to measure.
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The problem isn’t ROI, it’s the speed of response to social cues.
Taking in to account economic costs of production and opportunity costs of failure to adopt, as well as standard metrics on actual sales/conversions/actions, ROI is actually very simple to measure. I acknowledge that most marketers have absolutely no idea about econometrics, but that is easily fixed with a little training.
The biggest issue though is that ROI is a moving feast; timeliness of response impacts on conversion behaviours. The slower the company is in engaging audiences and responding to queries, the more it negatively impacts consumer trust. So Barouch is correct to note that there are serious issues with a corporate communications department having control of customer engagement without having the time to execute the task. ROI is dwindling for every moment that customers are not being served.
Telling senior management and CEOs that they need to stop asking about ROI is unnecessary and actually rather naive (although I am not sure if this is something Barouch wrote, or a sub-editor’s flourish). But demonstrating how ROI can be weakened by a poor social strategy, and how it can be boosted by organisation-wide implementation, is unarguable.
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Damn this discussion is good. Really nice stuff Joanne and Chris. I think the point of Jonathan’s statement re: phone and email is that social is now (or will be very, very soon) another ‘point of entry’ element for any business. The ROI may not be measured by gains so much as measured by mitigation or prevention of loss. The same sort of loss your business might have experienced without phones fifty years ago, or without emails fifteen years ago.
If your business can’t harvest data and capitalise on real-time understanding of and response to exactly what the customer is ‘asking for/might not even know what they need’, and your opposition is doing exactly that, then you’re going to lose. I think I just said what the two of you (and Jonathan) are saying.
This goes way beyond marketing or corp comms. Extrapolating this in the absence of genuine case-studies (apologies for the Kogan sidebar), it seems to me that the interface will become the function of the majority of employees as those that enter the workforce bring mature (not nascent) social skills along with their silo competencies. And that little understood, but increasingly massive, haystack called data will be harvested with the right magnets to find the needles.
I think the ROI will be the sustenance of that old-fashioned thing called a business’ goodwill.
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@me. Stop trying to confuse the discussion just because i’ve highlighted the flaw in your ‘argument’. You assert that Kogan’s success is due to his social media marketing. That is patently absurd. Kogan doesn’t carry the overhead of 300 stores, irrespective of how much admin office space he needs. This is the ‘real world’. He has demonstrated that if your target customer is utilitarian, brand agnostic or low budget, it makes sense to digitally market to them because you won’t have the enormous wastage of say, FTA TV. That Gerry Harvey ‘failed’ equally reflects the difficulty in making the move from traditional physical to online businesses – the same problem that has plagued Fairfax, Barnes and Noble etc etc. The major difference with Kogan is that he can be competed into extinction by a similar business. Why don’t you ask Wotif about the defensibility of online business models? They are all only a couple of months away from being replaced by the next hot start up. AltaVista, anyone?
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Hi Joanne and me,
Lifetime value of the customer is a tough measure and one I think we’ve all inferred in different ways through our comments.
The challenge for executives, managers and staff with lifetime value is how they manage this alongside year on year profitability.
Personally I think it’s values driven to a large extent, it is possible to make more money now at the cost of longer term revenue retention – not doing this and making even more over the long term is also a choice. We have all heard stats about the cost of acquisition being 2,3,4,5 times compared with retention but how do we actually implement strategies for it?
Lifetime Value of Customers is anecdotal to some extent because unless you have the underpinning values that seek to continually address your customers needs, develop your product/service offering and retain them, you can’t demonstrate the difference, there is no graph for ‘what would have been’.
Social and Responsiveness are like a nice wine and cheese (they work best together), leave them alone for too long and they tend to sour. The social interaction is useful, in addition to Social media it is also important to engage socially (invite your top customers to dinner, learn about them, genuinely care, don’t always sell them) and they will assist in retaining themselves (wouldn’t you prefer they call you when there’s an issue rather than your competitor?).
ROI is a important business measure from stationary to social.
Lifetime Value of the Customer takes tenacity, passion and discipline.
Decide how the data will help you,
What you will do with it,
and if it’s worthwhile.
Be responsive, take steps to measure the ROI and use Social (if and where it adds value).
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@sven or Neville. Kogan sells TVs and Gerry sells TVs. Look at the TV market at the moment. They can’t get any bigger, and the resolution is more than enough. 3D is a dud as will be curved screens. Margins have been slashed.
As TVs move from discretionary item to commodity item, retailers like Kogan have capitalised on this by putting out own-brand TVs. The cost-to-benefit ratio for ‘famous name’ brands doesn’t really make sense, so people are increasingly willing to buy a bit cheaper because (a) the product isn’t crap and (b) the social interface – including updates, service, delivery, etc – makes the whole experience worth it.
Gerry didn’t fail online because his e-commerce model was wrong, he failed because he didn’t know how to treat the online aspect holistically. Kogan does. It’s not just about a Paypal-friendly portal. It’s as much about his personality and how he projects it. And how he services it.
Yes, I agree Kogan will be subject to better competition as time moves on, nothing exists in stasis and the flux is getting ever more fluxy. But if he heeds what Jonathan, Joanne, Boogie and Chris are saying (and he probably already knows this), then maybe he will be able to keep ahead of the curve by using increasingly sophisticated real-time econo- and behavio-metrics, satisfying a widening customer base as he expands his brand into other categories.
As I have already admitted, this comparison is an extreme one. But if a siloed bricks and mortar business has a siloed bricks and mortar competitor, the principles put forward by Jonathan will still apply.
Your first response was to dismiss a very credible piece of work with your own disgruntled keyboard warriorship. At last count there were 13 comments to this article, with only three pieces of disgruntledness. You are your own self-fulflling prophecy.
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@me, your rapid descent into total bullshit started at ‘holistically’ and ended at “you are your own self-fulfilling prophecy’
this kind of fluffy, fuzzy nonsense is why most marketing types can never make it into real business disciplines
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