Earlier this year Engagementdb released a social media brand ranking tool and an accompanying report. They rate the level of social media engagement and the number of channels of the top 100 brands. They then correlate this against financial performance. This tends to show that those brands with a high social engagement saw their revenues increase by 18% while those with low engagement saw a reduction of 6%. This does not take into account many other factors so it is a simple approach but it is one of the few instances where actual ROI has been applied to engagement.
They concede that social techno-graphics must also come into play and may be factor in determining the level of engagement adopted by a brand. For example, Toyota (the report is based on US data) is highly engaged over many channels especially around the Prius, while luxury auto brands such as Mercedes and Porsche have a low level of engagement.
This report is one approach to answering the question posed by many a Sales and Marketing Director:
“If I take up this social media strategy how will it effect my bottom line?”
So how can we measure the comparative effectiveness or value of social media engagement over other more traditional forms of consumer engagement? Some argue that is it a lost cause. The aim should be just to be part of the conversation, to be seen to be engaged. This raises the perceived value of a brand in the minds of consumers. It is about being connected and the benefits may occur way downstream of the initial engagement. This is a valid and is arguably the right approach, but at the end of the day the ROI question will always come up. We can look at applying different metrics and ways of assessing ROI, and we can say the the rules have changes, social media is not like traditional media. This argument is also valid, but the bean counters will never be satisfied and will always seek a monetary answer.
However there may be another way forward. I discussed this problem with some people at Glasgow University. Professor Muffy Calder is interested in mathematical modelling and automated reasoning for concurrent, communicating systems. She can see a potential relationship between the approaches and tools she uses in molecular modeling and the problem of social media ROI. There is a form of mathematical modeling called Markov chains. Markov chains have been used in chemistry to model the likelihood of a chemical reactions taking place, and to model the spread of epidemics. The Google page ranking algorithm is a form of Markov chain. They allow you to model the probability of a change from one state to another. Markov chains are a random process in which the future is independent of the past, and can be determined from information about the present state.
The prime problem of applying this to human behavioral modeling is the need for accurate data, but given accurate data on the types and percentages of individuals in different states of engagement, then one may be able to predict the percentage of a given population that may ultimately change from a stage of low awareness to high awareness, or from impassive to active engagement with the brand, or to an eventual state of making a purchase. If one combines this with a measure of cost, or rather comparative cost – i.e. the cost of one form of marketing activity against another – then you can equate the value of one form of engagement over another.
Such a model would be very useful as it would not only be applied after the event to measure effectiveness but could be a predictive modeling tool. The tool would be parametrized so that one could see the potential effect of changing elements of the engagement and the types of social engagement, the numbers of people interacted with etc.
