Does social media make sense for our company? How can we use it to reach potential customers? What are the downsides?  Where should we start? These are just a few of the questions surrounding the topic and marketing potential of social media.  In the end, one question should ultimately drive the social media marketing decision. What's the ROI?  

The Go To Market Show visited with Tracy Panko, CEO of Spiral16, a social media monitoring and insight company, to discuss the value dynamic of social media. From Panko's experience working with companies to monitor social media, the ROI question starts (as does the strategy itself) with identifying objectives.  If the goal is to increase sales, the strategy and measurement is different than it would be if the objective is to improve customer service expense ratios. To truly measure, objectives need to be tangible.  So targeting an increase in sales of 15%, for example, is better for measurement than just saying you want to increase sales.   

Once goals are established, the role of social media can be outlined as part of an overall integrated strategy.  For companies in the retail space, social media can more directly drive business online or in-store through deals, product announcements, etc.  For others, social media is typically utilized as part of a content marketing strategy designed to build reputation and drive conversation about products or services. Regardless of the role social media plays, it makes sense to integrate tactics with other channels to connect with your target audience, such as email or direct mail, traditional PR, media, etc.  Understanding the audience and the best way to reach them provides the background to assess the potential of social media and the investment required to leverage the channel effectively.

Once an initiative is launched, regular monitoring and reporting will provide the data  to calculate ROI. Integrating social media with sales data and other insights can provide a more complete picture.  Adding touch points or interactions outside of digital channels increases the complexity of tracking, making the best analysis a mixture of direct and inferred actions. Call it science and art in its purest form.

According to Panko, some uncertainty is inherent in assessing social media ROI. "The ROI metric was built as a decision making tool for more finite decisions, like the costs and benefits of purchasing a tangible piece of equipment," Panko says. "Social media requires a little more work to get at the real value."  Examples of returns that can be measured are share of voice and sentiment.  Positive mentions can be measured, as can the language being used to talk about your company.  Trends in all of these can be tied into measurement to see the full impact of social media efforts.

Looking deeper into sentiment provides insight into a company's brand reputation.  With studies showing up to one-third of the value of the S&P 500 being derived by brand equity, understanding how people are talking about your company in social media circles can provide valuable insight into the reputation you have (positive or negative) in the marketplace.  In an increasingly transparent world, a positive reputation creates a great foundation for brand relationships which translates to revenue and solid return on investment.  A negative reputation signals the need to look deeper into the cause.

Spiral16 is a great monitoring tool that has solid expertise behind it to help clients focus on relevant data.  This helps narrow the field of information to avoid 'data paralysis' and incorporates nuance that goes further than the raw data itself to gain a full understanding of brand interaction.

Visit Spiral16 online to learn more.

Key Facts:  
- 88% of U.S. companies expect their social media budget to grow during 2011. (Source: Useful Social Media)
- 29% of companies expect their social media budget to double in 2011. (Source: Useful Social Media)
- 54% of companies do not measure social media ROI. (Source: Useful Social Media)
- Time spent on social networking sites in the U.S. increased 277% during 2009 (Source: Nielsen)