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6/2/2011
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Enterprises Struggle To Measure Social Media ROI

Only 40% of companies take on the challenge of trying to measure social media performance, according to a Hypatia Research report.

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Even as more businesses invest in social media outreach, most have not figured out how to calculate a return on that investment.

According to a Hypatia Research report, "Benchmarking Social Community Platform Investments & ROI," only 40% of companies measure social media performance on a quarterly or annual basis, while almost 13% or the organizations surveyed do not measure ROI from social media at all, and another 18% said they do so only on an ad hoc basis. (Hypatia didn't specify what response the other 29% gave.)

Of the performance measures in use, annual customer satisfaction was mentioned by 15.4% of the participants in the study, followed by customer retention (14.3%), brand reach and frequency metrics (9.4%), number or quality of leads generated (9.2%), Net Promoter Score (8.4%), and customer service center cost reductions (8.4%). The authors noted there is room for debate on whether the Net Promoter score belongs on this list, since it is a survey-based metric of how likely customers are to recommend a company or its products, measuring probabilities rather than actual performance.

"While it's virtually impossible to calculate the ROI of a large corporate social media program with either precision or accuracy, given that social media is by its nature a multi-channel environment, it is possible to get ROI estimates on specific points of the initiative. For example, if the public is asked to register to use the site or to receive coupons, one could keep track of how many of those leads became customers," the authors wrote.

As an example of one company that has done a good job of quantifying the value of social media, Hypatia cites iRobot, which in its consumer arm makes robotic vacuum cleaners and other automated appliances. The company actively tracks mentions such as customer-generated YouTube videos, and it calculates the value of a customer compliment (or the cost of a complaint) at a fraction of the $200 average purchase price of an iRobot product. The calculation is based on the number of people who viewed the comment, about 25% of whom iRobot estimates are actively considering a purchase.

The report quotes Maryellen Abreu, director of global customer care at iRobot, as noting that the company has an educated customer base that researches its purchases "so, really, a thousand hits on a negative posting could all be potential customers."

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