Imagine that you went to a doctor who gave you bad advice, and as a result, you either became more ill, or didn’t get better. You’d sue for malpractice, wouldn’t you?
I want to know how to sue social media gurus for the lousy advice they give.
This latest example of social media malpractice is so egregious, it makes me wonder not just how the purveyors of this bad advice survive in the market, but who the hell reads this stuff, and finds it valuable. The example I’m referring to is an article titled 5 Simple Steps to Measure Social Media ROI on Social Media Today.
Let’s dissect the stupidity:
1. Determine Your Social Media Spend (SMS). Social Media Today: This includes hard and soft costs, including your time. Yes, time! Despite what social media zealots say, social media is not free. Count it all.
My take: Right off the bat, we have an issue: What exactly are we measuring the ROI of? When you calculate the ROI of a direct marketing campaign, do you allocate every little cost that the organization incurs? I mean, if the cleaning crew didn’t clean the office, then maybe marketing couldn’t execute a campaign. Ideally, you would allocate all costs (hopefully, based on an activity-based costing model) to individual campaigns. But we don’t, because what we’re really trying to capture is the ROI of the incremental investment made. The fixed costs are sunk, given.
The same principles apply to social media. What we really need to measure is the ROI of social media campaigns. Ideally, we would allocate the cost of social media infrastructure, but what’s more important is to understand the ROI of individual social media campaigns — not just social media as a lump sum investment.
But there’s another issue here: Sometimes social media isn’t a standalone campaign, but a contributor to an existing effort or initiative. So to calculate SM ROI we’d need to know the ROI of the initiative or investment without a social media component. Good luck with that.
2. Determine your Customer Lifetime Value (CLV). Social Media Today: This is a terribly important metric, yet most companies don’t know it. Know it. Marinate on this: If I buy your $200 shoes and go away forever. I’m worth $200 to you. If I buy your $200 shoes and you keep in touch with me, inspiring me to share my experience in social media, and 30 people buy your shoes as a result of my endorsement, my CLV just shot up to $6,100. Ask your current customers how much they roughly spend on your product each year, then, multiply by 20 to arrive at their CLV.
My take: HUH? Ask your customers how much they spend then multiply by 20 to calculate CLV? Are you serious? CLV is a near-impossible metric to calculate. Marketers generally have little insight into how long a customer will stay for, how their spending patterns will change over their tenure as a customer, what the cost to serve that customer is and will be, or figure out how much business a customer influences through referrals.
But let’s assume for a moment that you could get a handle on this variables. What exactly is SMT asking us to do when it says “Ask your current customers how much they roughly spend on your product each year, then, multiply by 20 to arrive at their CLV”? Different customers will have different CLV. Are they asking us to aggregate this amount? Average this amount? Calculate CLV by different customer segments? What exactly is SMT asking marketers to do?
3. Determine New Customer Value Via Social Media (SMV). Social Media Today: Track conversions using Google Analytics or any other website tracking software. Google Analytics allows you to slice by social. This takes time, but it’s necessary if you want to understand your ROI from social media. Track sales, conversions, etc. and place a value on those items. For some, it might be hard-dollar sales; for others (typically B2B): the value of a contact form submission.
My take: HUH? What’s the value of a “contact form submission”? Is this average revenue or sale amount per new customer? Someone is going to have to explain this to me, because this makes no sense at all, as written.
4. Determine Impression Value (IV). Social Media Today: There is value in impressions; it’s what traditional media sell. To determine IV, add up your impressions from Twitter and Facebook, cumulative YouTube views, website traffic and any other online source. Divide that total by 100 and then multiply by an industry-appropriate CPM (cost per thousand impressions).
My take: Gag me. Using this logic, the ROI of direct mail campaigns should include a value for anyone who read the DM piece, even if they didn’t respond or buy. Impressions may be a metric worth calculating — but it isn’t a metric that can be used to calculate ROI.
5. Calculate Customer Service Value (CSV). Social Media Today: Twitter and Facebook are arguably the most efficient, cost-effective, forward-facing customer service platforms ever created. Social media can reduce customer service costs – in the form of inbound call deflections – which is a tangible value. This is a subjective one, but you need to take a crack at valuing it. For example, if you feel like Twitter provides $1,000 of customer service value a month to your business, write that in. It matters.
My take: You’ve got to be kidding me. “Social media can reduce customer service costs – in the form of inbound call deflections – which is a tangible value.” Hey Social Media Moron: A customer service-related tweet or Facebook post IS AN INBOUND customer service interaction. The problems don’t fix themselves. There may be a reduction in telco costs, but, today, in large firms, that cost savings is negligible
Social Media Today goes on to say:
Now, let’s add up that Investment Return (IR), shall we? (Customer Value/10 (years) x Number of New Customers) + Impression Value (IV) + Customer Value Via Social (SMV) + Customer Service Value (CSV).
Social Media ROI = Investment Return (IR) – Social Media Spend (SMS) / Social Media Spend (SMS).
Bottom line: This is an example of nothing more, nothing less than Social Media Malpractice. Or better yet — management consulting malpractice. Anybody who buys into this crap deserves what they get.