The CMO Survey Blog

Measuring the Impact of Social Media on Your Business

This post was co-authored with Becky Ross and Shannon Gorman, both MBA students at the Fuqua School of Business, Duke University.

Spending on social media continues to soar, but measuring its impact remains a challenge for most companies. When The CMO Survey asked marketers how they show the impact of social media on their business, only 15% cited they have been able to prove the impact quantitatively. This low percentage is not completely surprising given that social media is a recent innovation that companies are quickly trying to understand and direct to the most profitable ends.

Additionally, The CMO Survey asked marketing leaders to report on the metrics they are using to track and analyze their social media activities (see Table). The most common metric is “hits/visits/page views” which represents the beginning of the funnel—awareness—but is not very diagnostic of purchase. The metrics that show the largest increases over time, are “engagement metrics,” such as number of friends/followers (+88%), net promoter score (+71%), buzz indicators (+54%), product/service ratings (+71%), and other types of text analysis such as sentiment analysis or keyword analysis on Twitter or anywhere customers post text about companies (+77%). Although abandoned shopping carts also increased, in general, we observe fewer companies using actual purchase activities or financial outcomes, such as profits or revenues, as metrics to evaluate their social media programs which was discussed in a prior post.

Table. Frequency of Social Media Metrics Used by Companies

Given these findings from The CMO Survey, we interviewed social media experts to better understand the challenges of demonstrating the impact of social media and the types of metrics used to do so. Here are eleven insights gained from these interviews.

  1. Use goal-driven metrics. Set specific goals for each social media campaign and then develop metrics based on those goals. If a social media campaign is designed to generate brand awareness, then engagement is an appropriate metric. However, if a social media campaign is intended to drive purchase, then the conversion rate from visitor to buyer might be a more suitable metric. This insight may seem obvious but there is often a disconnect between goals and metrics.
  2. Demonstrate metric validity. Metrics must be vetted to ensure they are valid—meaning they measure what they are designed to measure. For example, at what point should marketers classify a consumer’s interaction with a company on social media as “engagement”? Is it when a consumer likes or shares a post? Proving metrics requires linkages to key outcomes, customer interviews, and managerial judgment.
  3. Uncover and verify leading indicators. Social media engagement, measured by the number of page views, click-throughs, comments, shares, and likes, is often used as a leading indicator of downstream sales outcomes. Identifying and tracking such leading indicators is valuable as companies can gain an early sense of how well their strategies will pay off.
  4. Create dashboards. Most companies with a social media presence track metrics from multiple sources. As a result, it is helpful to create a social media dashboard that aggregates these different sources and shows a comprehensive view of the company’s or brand’s performance. A dashboard saves monitoring time and ensures that marketers have real-time access to how important metrics are trending.
  5. Develop meaningful benchmarks. Comparing results to meaningful benchmarks provides important context when assessing the impact of social media campaigns. Building a database of social media campaigns and their corresponding outcomes enables your company to develop these benchmarks. Your agency may also be able to provide a broader view of these benchmarks if they have access to a range of campaigns from various companies.
  6. Conduct experiments. To truly understand the impact of social media, companies must be willing to conduct experiments. Small experiments such as pre- and post-tests that measure consumer activity before and after a social media campaign are a useful way of assessing performance. Even better, include a control group that is matched on observable characteristics for comparison to the treatment group. For example, use geo-targeted social media in one city and compare results to a control-group city in which the campaign did not run.
  7. Allocate funds to measurement. According to The CMO Survey, companies spend only 2.3% of their marketing budgets on measuring ROI. Measuring the impact of social media requires investing in metrics. This investment might include dedicated staff, agency partnerships, tools and technology, models, or customer databases.
  8. Consider the cost of ignoring social media. One social media expert we interviewed offered the insight that the inability to perfectly measure social media’s return on investment (ROI) should not limit investments in it. Instead, he encourages his organization to also consider the Cost of Ignoring (COI) social media – “What is the cost to our business of ignoring this new business platform?”
  9. Build predictive models. Metrics are often used to analyze what has happened, but they also can be used to predict what is likely to happen depending on the tactics employed, such as spending levels and media placement. To gain the most out of your metrics, leverage them to build predictive models and then plug in different inputs to simulate possible outcomes.
  10. Guide future actions. Measures should ideally be designed to offer developmental feedback. Ask yourself, if your social media campaign is not working, what information do you need to know in order to improve? Build your metrics or add additional metrics to capture this information so you know how to course correct and do better in the future.
  11. Stick with your metrics. Vendors are constantly developing new tools to measure the impact of social media. Nevertheless, marketers should focus on utilizing a handful of tracking tools that fit their goals and have passed important validity hurdles. Be careful not to flit between different metrics as doing so will hinder learning and waste valuable resources.

Although metrics are out there, debates about what these metrics mean and how they should be used can become both statistically and philosophically complex. At a recent conference, Tony Fagan, Google’s Director of Quantitative Research, noted that his staff was implementing propensity score matching in order to improve their ability to make causal inferences from observational data. His comment made it clear that marketers are not in Kansas anymore when it comes to social media measurement. We hope these insights offer a few signposts to marketers on this path.

Sponsored by the American Marketing Association, Duke University’s Fuqua School of Business, and McKinsey, Inc., The CMO Survey collects and disseminates the opinions of top marketers in order to predict the future of markets, track marketing excellence, and improve the value of marketing in firms and in society. For report downloads, visit cmosurvey.org/results.  

12 Tips for Integrating Social Media into Your Marketing Strategy

This post was co-authored with Becky Ross and Shannon Gorman, both MBA students at the Fuqua School of Business, Duke University.

Social media is an increasingly important tactic in companies’ marketing strategy and yet results from The CMO Survey continue to indicate that many companies manage social media as a separate activity. Asked how effectively social media is linked to their company’s marketing strategy on a 1-7 scale where 1 is “not integrated” and 7 is “very integrated,” the average level of integration was only 3.9. Although we see companies planning to increase social media spending as a percent of marketing budget from 9.4% to 13.2% over the next year and 21.4% over the next five years, the level of integration has not changed in the past four years (see Figure).

Figure. How effectively is social media linked to your firm’s marketing strategy? (1=Not integrated, 7=Very integrated)

12_14_14

We interviewed marketers across industry sectors for insight into what actions they are taking to improve social media integration. Here is what we learned.

  1. Choose strategy over tools. Social media is still in its infancy, so change is constant and new tools are being introduced at lightning speed. Using the latest and greatest technology may benefit the company, especially when its target audience includes younger and more media-savvy customers. However, it is always important to judge the value and impact of a social media tool against the company’s marketing strategy rather than its innovativeness. Will the tool help the company design or develop a more effective marketing strategy? If not, leave the shiny object on the shelf for another day.
  1. Drive social media actions against marketing goals. If social media actions are undertaken without a clear customer objective, integration is likely to be elusive. This means that marketers should always identify a specific customer objective when employing social media tactics. One common approach we observed was marketers using social medial to help move the customer into and through the purchase funnel.
  1. Be forward looking. Like traditional media campaigns, social media is often used to generate brand, product, or company awareness. If awareness is the goal, marketers must have a clear understanding of what happens next in the company’s marketing strategy to convert awareness into purchase intent. Likewise, if building brand advocacy is the goal, marketers should be clear about how to use these evangelists to amplify the company’s message and increase customer loyalty.
  1. Align social media channel to marketing strategy. While practically every brand is on Facebook and Twitter, there are many other social media platforms, such as Instagram and Snapchat. Brands typically do not have the resources to be on every social media platform, so how do marketers prioritize? They should choose the social media platforms that fit the company’s target audience and brand positioning. For instance, Facebook and Twitter tend to reach a broad demographic, while Instagram and Snapchat have a younger user base.
  2. Create social media toolkits. Brand toolkits have become standard procedure for many companies and are effectively used to guide local markets on how to portray global brands by providing templates and guidelines for tailoring content. In a similar way, some companies are starting to create social media toolkits which include templates for Facebook and Twitter posts. These kits can ensure strategic alignment and create a more cohesive brand image across geographies and platforms while reducing the time and resources required to develop social media content.
  1. Put social media experts on brand and customer teams. When social media operates from a separate group or from a separate location, there is a greater probability of poor integration. Instead, social media experts should be closely linked to the brand and customer teams so they are involved as soon as communication objectives have been established. This involvement pays off because social media experts are tuned in to the latest platforms and know what approaches generate interest from current and potential customers, fans, and enthusiasts. As a result, these experts can guide brand teams to the most effective results.
  1. Balance in-house and agency expertise. With so much to learn and social media moving at such a fast pace, many companies outsource social media activities to multiple agencies. This structure threatens the integration of social media because agencies rarely understand the totality of a company’s marketing strategy. This concern leads some companies to move more social media activities in house or utilize deep partnership models with their agencies.
  1. Convert to purchase. Social media is one of the very few places where companies can engage with their customers in an ongoing, personal, and real-time manner. As such, it can serve as a key touch point that brings the company’s marketing strategy to its raison d’être— If, for example, a follower posts she is going shopping for a particular item, companies can respond with a tweet containing helpful information or personalized discounts, and/or promotions.
  2. Be willing to say no. Given the buzz surrounding social media, every brand or customer-facing function likely wants its own Facebook page and Twitter account. Marketing leaders need to hold the line and decide which social media platforms are ideal for a given brand from a strategic and customer point of view. Controlling social media access through a social media group ensures that someone is accountable and knowledgeable about the best ways to use it as part of a company’s or brand’s marketing strategy.
  3. Champion integration. For integration to be valued and sought, leaders need to share success stories throughout the organization. Success stories can become part of the company’s ethos and organically influence the integration of social media in marketing activities.
  4. Sort out attribution. If social media is part of a company’s marketing strategy, questions will be raised about its contribution to sales revenue and how it works alone and in conjunction with other tactics. These are worthy questions and steps must be taken to understand and measure the effects of social media in order to integrate it with the company’s marketing strategy in the most efficient and effective manner. Marketers shouldn’t let these attribution questions keep them from pursuing social media, but instead consider them an opportunity to demonstrate its value.
  5. Learn from failures. Because it is much easier to experiment with social media than traditional media, companies can test and learn quickly. Also, social media execution costs tend to be much smaller than traditional media, so the losses from failures are less severe. By experimenting with social media, companies can more accurately determine which social media posts and campaigns have the greatest impact on their marketing strategies—helping to further integration efforts.

When social media is integrated with the company’s marketing strategy, the company’s management of its customer and brand assets is seamless. Strategic elements such as segmentation, targeting, positioning, and all go-to-market activities reflect a clear and consistent understanding of the value the company offers to its customers and how the company seeks to capture value from attracting and retaining these customers over time. The result of social media integrated into marketing strategy is improved efficiency and effectiveness in all aspects of the marketing plan.

Tweet this: Social media important to company performance but difficult to prove

New results from The CMO Survey point to this disconnect. Social media spending is currently 9.4% of marketing budgets and is expected to increase 128% to 21.4% in the next five years (see Figure 1). However, the 351 marketing leaders responding to August 2014 survey overwhelmingly report that proof lags spending and only 15% of marketers report their companies can show the impact of social media using quantitative approaches.

What’s the buzz? Companies experienced a 25% percent increase in sales through the Internet in the last year—from 8.9% to 11.3% of sales. There does appear to be a sizable opportunity in reaching customers through the Internet that underlies this spending push. Consistent with this view, digital marketing, more broadly, is expected to increase 10.8% in the next year, while traditional advertising budgets are predicted to decrease 3.6%. In other words, there is a signal in all this buzz.

Figure 1. Social media spending as a percent of marketing budget

social_media_line_600notitle

Pinning it down: Demonstrating the effect of these spending increases on businesses remains a challenge. Forty-five percent of marketers have not been able to demonstrate this impact at all while 40% have qualitative proof only. Getting that all-important quantitative proof, which only 15% have, is essential to justifying this spending (see Figure 2).

Figure 2. How companies demonstrate the impact of social media spending

social_media_pie3

Doing so will likely require more spending on measuring marketing ROI. Survey results indicate that companies spend only 2.3% of marketing budgets on measuring marketing ROI. It will also require companies to rethink the way they approach such measurement. Survey results also indicate that only 11.9% of companies surveyed use experiments—a method that allows marketers to know with certainty what, whether, and to what degree social media spending impacts performance.

Why Companies Should Compete on Privacy (and What Customers Can Do to Help)

The CMO Survey reports that 40 percent of companies use customer information collected online for targeting purposes and 88.5 percent of chief marketing officers expect this practice to increase over time. At the same time, CMOs have very low levels of concern about how the use of online customer data infringes upon privacy. Specifically, when asked, “How worried are you that this use of online customer data could raise questions about privacy?” on a scale where 1=not at all worried and 7 is very worried, the average response was 3.5. The Figure shows the full distribution.

Figure. CMO concerns about use of online customer data and privacy questions
slide-46_436-wide

At the same time, a recent by the Pew Internet & American Life Project found that 86 percent of Internet users have taken steps to remove or mask their digital footprints — ranging from clearing cookies to encrypting their email. Fifty-five percent have gone even further to avoid being observed by specific people, organizations or the government.
(more…)

Chief Marketing Officer Optimism at Four-Year High; Proving the Value of Marketing Remains Elusive

New results from The CMO Survey offer encouraging predictions about the future of markets and document ongoing challenges to marketing excellence and leadership. The 410 top marketers surveyed in August report their highest levels of optimism for the overall U.S. economy in four years. On a scale of 0-100, with 0 being the least optimistic, CMO scores came in at 65.7. This is nearly a 20-point increase over the same measure taken in August 2009 near the low point of the recession. Almost 50% of top marketers answered they are “more optimistic” about the overall U.S. economy compared to last quarter. Back in 2009, the optimists came in at just 14.9%. “Pessimists” went in the opposite direction with those reporting to be “less optimistic” dropping from 59.3% in 2009 to 13.2%.

Now for the rough news. Demonstrating the impact of marketing spending remains a challenge for marketing leaders. Only one-third of top marketers surveyed report their companies are able to demonstrate quantitatively the impact of their marketing spending. This percentage worsens when considering social media investments. Only 15% of CMOs surveyed report proven quantitative impacts from their social media marketing expenditures. Another 36% respond they have a good sense of the qualitative impact, but not the quantitative impact. Almost half of the CMOs surveyed (49%) have not been able to show that their company’s social media activities have an impact on their business (Figure 1). Despite this, marketers are expected to increase expenditures in social media from 6.6% to 15.8% over the next five years (Figure 2). (more…)

Measuring Social Media ROI: Companies Emphasize Voice Metrics

The influential economist Albert O. Hirschman argues that customers can have a disciplining effect on companies and markets through their exit and voice behaviors. Instead of simply “quitting” a product, Hirschman urged customers to voice their complaints so companies could improve and learn. Hirschman would be a happy camper these days because social media puts a megaphone on the voice of the customer. Results from The CMO Survey® show that companies, in turn, are also starting to see the value of emphasizing voice-based metrics.

The CMO Survey investigated which metrics companies are using to measure the impact of social media investments. In August 2010 and then again in February 2013, top marketers were asked to share which metrics they use to evaluate social media. Looking across the results, we can see which metrics companies most often use. The survey did not, however, ask respondents to rank or rate each metric in terms of importance. (more…)

Do Marketers Know What They Want From Social Media?

Social media spending as a percentage of marketing budgets will more than double over the next five years according to new results from The CMO Survey. Responses from 468 top marketers in February indicate that companies are spending 8.4 percent of their budgets on social media. Over the next year, that number is expected to increase to 11.5 percent, and in the next five years it will reach 21.6 percent.

Looking back to the first time I asked these questions in August 2009, the levels were 3.5 percent of current budgets and expected to increase to 6.1 percent over the next year and 13.7 percent over the next five years. The increase in current spending from 3.5 percent to 8.4 percent alone represents a 140 percent increase in the last 3 years. No other part of the marketing budget has grown so much in such a short amount of time. In fact, during the same time period, traditional advertising has continued to plummet. It was decreasing by 7.9 percent per year three years ago and continues to drop 2.7 percent in the current year.

The dramatic increases in social media spending were universal across different business sectors: B2B-product, B2B-services, B2C-products, and B2C-services. The B2C-product sector, which includes companies such as Procter & Gamble and The Coca-Cola Company, expects the most dramatic increase, from 9.6 percent to 24.6 percent (see Table 1). (more…)

New Results from The CMO Survey


Watch the video above to see and hear Chris Moorman discuss the results.

Full results, including the “Highlights and Insights” report, are available on the results page.

Chris Moorman’s post about these results can be found at:  blogs.forbes.com/christinemoorman/

Six Reasons Marketing Budgets are on the Rise

Marketing budgets as a percent of overall firm budgets and as a percent of firm revenues are both on the rise as noted in my prior post. Why are firms spending more on marketing? Here are six reasons I see in The CMO Survey™ data and in my research.

  1. New jobs: Marketing appears to be taking a leadership role in managing social media activities in companies. Given social media spending as a percent of marketing budgets is expected to rise from 7.6% to 18.8% over the next 5 years, this means new funds are flowing toward marketing.
  2. New skills: Companies plan to increase marketing training by 3.7% in February 2012 to 7.2% in August 2012. In particular, I see many companies in investing in programs to build marketing capabilities. A good example is GE’s Experienced Commercial Leadership Program, which develops cohorts of young marketers for the company. Another example is Becton Dickinson’s Marketing Excellence Initiative, which provides non-marketers with a big dose of training in key marketing tools and processes.
  3. New knowledge: Big Data has captured the imaginations of leaders in companies big and small. The ability to leverage information about customers in order to deliver and demonstrate value opens the door for marketers to fill the role as analysts and “data whisperers” as McKinsey calls them. As noted by McKinsey in its Chief Marketing and Sales Officer forum, “Data whisperers are those analysts who can coax meaning and insights from the increasingly sophisticated and massive data sets available today.” (more…)

The Social Media Integration Gap

Last week I reported on the expected increase in social media spend from an already high 7.4% of marketing budgets to 10.4% within a year and 19.5% within five years. It is therefore both interesting and somewhat disturbing that we continue to see a sizable fissure between what companies are doing with social media and what they are doing with the rest of their strategies. I asked CMOs to rate “How effectively is social media integrated with your firm’s marketing strategy” on a seven point scale where 7 is “very integrated” and 1 is “not at all integrated.” Results from The CMO Survey indicate an average score of 3.8 with a standard deviation of 2.0. Sadly, only 7 percent of respondents believe that social media is “very integrated” to the firm”s strategy while 18.4% rated social media as “not at all integrated.” The full distribution of responses is shown in Figure 1.
(more…)