Rethink ROI for Social Media with The Engagement Curve
The one cloud that has consistently hung over Social Media through its formative years has been the question about measuring return on investment (ROI), with many leading social media authors and consultants taking the “DUH” approach when challenged.
Brand: Why should I invest in social media?
Social Media Consultant: DUH….everyone else is doing it, so you have to do it too,
Needless to say, this is one of many factors that have inhibited the growth of the industry and the use of social media technologies for market engagement and business transformation. While there are as many approaches to measurement as there are things that can be measured, many consultants understand and appreciate the need to produce measurable results. They have identified important metrics such as share of conversation, sentiment, reach and countless other strategy specific measures, but many are still seeking the magic bullet.
I had thought I might have found that magic bullet some time ago when I started to advance the concept of the Net Trust Score. The thinking was that the one fundamental return a company could get for engaging with customers and the general public through social media could be increasing the market’s trust in the organization, which would likely lead to better financial results through a decreased cost of goods sold and greater loyalty. In a connected, transparent and nearly real time market, trust is often an accelerator for business. But the lack of trust is often a bigger inhibitor, making it more expensive to bring products or services to market and build market share. From a process standpoint the idea is simple, the Net Trust Score can be determined just as we now determine Net Promoter Score, but with a different set of questions.
While I still believe this approach is worthy of consideration and investment, my colleagues and I at Deloitte Consulting have begun to explore another insight over the past several months. The reason the ROI question has been such a challenge is because most companies have been laser focused purely on the financial aspects of investment and return. As a result of being focused on the world we knew and the traditional bottom line financial assessment, many have failed to recognize that the very nature of the market has changed, requiring us to take a more holistic approach. To understand the new market conditions, we should expand our concept of the nature of the returns we might garner and the significance they bring.
Many of the leading thinkers in social media have held that metrics like page views, engagement and positive sentiment were easily correlated with top line growth, but explicitly connecting the dots has proved difficult. More difficult is enunciating this value in a way that would rationalize the investment of resources required to not just be present in social media channels, but to shift the approach across the organization to be effective by being deeply engaged. From the early days of Social Media Club, the community organization I founded, I have promoted the idea that this era could benefit greatly by building upon the similar challenges faced during the rise of Branding as a business discipline. While the value of a brand was tough to measure and remains controversial with some arguing that it is immeasurable, many modern marketers believe in its value and the need to make massive investments to influence the market that increases awareness and improves reputation.
This situation has more than a few parallels to the way social media’s growth produced evangelists. The similarities are too deep to ignore, but ignore them is exactly what many leaders have done over the past several years, despite a belief that one of the most important returns from engaging customers through social media is increased brand affinity. Indeed, connectivity is at the core of every great engagement strategy and improved connections between customer and company are direct contributors to brand strength.
After being pressed from my financially minded colleagues at Deloitte to express the measure of value a client could get from an investment in social media, we recently had a breakthrough which allowed us to clearly see the new economic reality of our connected world.
Social Media isn't just contributing to brand value; it can be viewed as an active expression of brand value in the newly visible flows of non-monetary economic value that traverse our social networks—particularly flows of attention, data, stories and labor. These flows are not only between the company and its customers, but amongst the participants in the more broadly defined view of the market that may include families of employees, the general public, competitors and even former customers.
Perhaps most importantly, these flows can now be identified, measured and converted into financial equivalents, thus enabling us to aggregate the disparate forms of returns captured into a more traditional financial view. The rationale for investing in social media as a channel and as a means for developing high value relationships is supported further by the fact that engagement through social media is at once personal, public and persistent. Connecting the dots, it seems apparent that the increased economic value of such an investment is the equivalent of the previously intangible constituent components of what many call brand value. If it is true that social media’s power lies in making things visible as I have been saying for the past 6 years, it would seem that the fundamentals of business are in the process of being forever altered through our newfound ability to see and account for the constituent components of brand value as they flow across the social graph.
Diving deeper with my Deloitte colleagues Dan Elbert and Dan Nieves, we also realized that many organizations were overly focused on the impacts of single transactions and fighting the fires created by disgruntled customers armed with social media accounts. A few of the more holistically minded brands are focusing on customer life time value, thinking beyond the here and now to understand long term investments in their customer relationships. But even that may not be enough. In the connected society we now inhabit, it's no longer about a single customer, it's about the customer and their network and the influence their experiences and stories have on the future purchase decisions of that network. More than that, it’s that these experiences are not only shared with the network, but also with the public at large creating a cascading effect of positive and negative sentiments that affects countless other purchase decisions for an untold amount of time into the future. This requires us to look beyond customer life time value to develop an understanding of customer + network life time value and the impact each customer experience has on the market at large.
This means that no single customer interaction should be taken lightly and the potential for both positive and negative flows of value across the customer's network in the public sphere of social media requires that companies not only get it right, but that they do right by every customer (and every employee, since these flows can just as easily come from inside your four walls). More importantly, with this realization comes an appreciation for the critical importance of developing genuine relationships as a competitive differentiator that engenders deeper loyalty and greater trust, The strategic importance of managing customer relationships is not new, but thinking about how these relationships can be leveraged to generate non-monetary economic gains in this manner is potentially revolutionary.
Those critical of Customer Relationship Management (CRM) technologies and methodologies often pose the question “have you ever tried to manage your relationship with your spouse?” to point out a tragic flaw in the typical approach. They rightfully point out that it takes two parties to create a relationship, which requires the participation of both for their mutual benefit. In a relationship, our intentions and the perceptions others have of them drastically alters both the feelings and decisions of the other party. We can no longer look at marketing as an investment and support as an expense to be minimized. As “Get Lucky” co-author Thor Muller has been saying for many years, “Customer Service is The New Marketing.”
If customers know with certainty through the consistency of word and deed that the interest of the company lies in enhancing/increasing the creation of shared value for the customer, the company and the market, customers are likely to do more to help the company achieve its desired results. This is why it is essential for companies to focus on growing the number of TRUE relationships they have in the market instead of being solely focused on increasing the profitability of each transaction. In this case, TRUE not only means real/genuine, but is also an acronym for Trusted, Reciprocal, Unique and Empathetic, the characteristics that help us better understand the important qualities from both sides of the relationship. When the relationship is based on these intrinsic values and supported by systems of engagement that provide efficient and consistent communication and collaboration, a company may have the greatest chance for enhancing/increasing profitability. In short, a company interested in developing TRUE Relationships can more easily win the hearts, hands, minds and wallets of their market.
In bringing these insights together to develop a holistic view of the modern market, it is helpful to fundamentally reframe the question of ROI while advancing the industry’s understanding of the economic value provided by investments in branding and social media. It is through this lens that we want to introduce you to The Engagement Curve, which illustrates the economic imperative for investing in relationships and systems of engagement.
The Engagement Curve draws more than alliteration and inspiration from The Experience Curve; it shares a common bit of DNA with regards to the effect of scale, competitive differentiation and economic yield. Many industry leaders believe these insights have the potential to create a similar impact on strategic planning, with the first rewards going to the courageous few – those who choose to invest in demonstrating its potential to realize greater operational efficiencies, cultivate deeper customer loyalty and seize the greatest possible market share.
This is a much bigger topic than any single blog post or article or research paper. So big in fact that Deloitte is offering Engagement Strategy as a service to complement our Social Business practice. In support of this new service, we have already developed numerous tools and methodologies to enable our clients to more easily view their TRUE Relationships and manage engagement at scale to realize the benefits these insights can create. We are also, beginning to work on a book to fully illuminate the implications and applications of this management strategy.
Given the nature of this work, we look forward to your comments and your criticisms, just as we are happy to answer your questions, whether here or in direct meetings where we can discuss how The Engagement Curve can impact your specific situation. If you are already a client, please reach out to your Deloitte contacts to schedule a conversation today. If you are not yet a client, we look forward to having the chance to work with you.
Want to learn more? Listen to our Debriefs webcast: Social Business Innovation Hub: What Enterprises Are Really Thinking – And Doing or read about insights on Social Business.
Deloitte Consulting LLP