Social media consists of online conversations. The reason for measuring these conversations in some way (and the reason for all web analytics) is to collect data that can be used to make informed and therefore better business decisions.

Now if the data is not used or is not useful, there is no point in doing the measurement. This is not to say that the only use for measuring social media is to calculate an ROI in terms of sales (or equivalent conversions for non-transactional websites). But I firmly believe there is value in collecting whatever data you can collect, acknowledging it is incomplete and will always be incomplete but then using it as a guide in the decisions you are making.

As with any spend within an organisation, the first step should be to define objectives, what you would like to get in return for your spend. Simply tying social media to immediate sales, while easiest, is likely to underestimate the contribution it is making to your company. But not recognising that there is a need to justify the resource allocation (spend, time, etc) on social media in terms of how it is helping a company to meet its overall business objectives, will put at risk the existence of those resources.

The compromise may be a Balanced Scorecard that contains a mix of metrics with associated targets based on what you are trying to achieve with your complete marketing campaign, of which social media is one element. These metrics could include revenue, cost of providing customer support (targeting a decline), brand awareness across the internet, visitor participation on corporate blog, website engagement, ideas generated through customer feedback, etc.

This Balanced Scorecard would show the value and impact of social media to a company beyond the basic ‘how much money did it make us’. The metrics used would be tied to business objectives so they are relevant and meaningful to management. Each metric would have a goal so that performance can be clearly evaluated. If goals are not being met, then that is a trigger to say that action needs to be taken in order to bridge the gap. And any decisions made would of course be a more informed decision using the data that has been collected through the measurement of your social media efforts.

I guess the point of all this is to say that people need to be thinking about how to evaluate the performance of their social media strategy from the initial stages, this is not an afterthought that can be tacked on at the last second.

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This was an article I wrote for one of the Amplified 08 newsletters, a network of network event that is occurring on the 27th Nov in London.  For more discussions around calculating the ROI of social media, I recommend having a read of a post by Jason Falls (along with all 93 comments) or the post by Clare Munn (which contains links to other relevant blog posts).  A lot of my thinking around this was influenced by the comments on Jason’s post.  From that, I agree that social media must be more than a straight forward ROI calculation but I still feel that it needs to be measured and tracked over time in some way, hence my suggestion of a Balanced Scorecard approach.