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The Daily Sabbatical/Ivey Business School | Jan 4, 2013 | 8815 views

Social Networking: The Corporate Value Proposition

This article takes a look at social media’s value to C-Suite decision makers

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arketers habitually find it hard to quantify the value of what they do, and their use of social networks is the latest manifestation of this difficulty. Why is it so hard to determine the business value of social networks? This article explores the slippery slope of coming up with a useful ‘social media ROI’ and offers new ways to understand social networking’s value proposition.

Almost two years ago, in an article in the July-August issue of the Ivey Business Journal, “Social Networking: The View from the C-Suite,” we wrote that, “Many managers today are uncertain about what social networking really means, how it fits their business strategy, and most importantly how they can define its practical value to the business.” How little the world changes! Despite two years of increasing corporate social media activity, our research is telling us that the C-Suite is still finding it extremely hard to define their organization’s value proposition for social media.

eMarketer, a U.S.-based firm that provides research and analysis of digital media, recently reported that 175 chief marketing officers were asked to identify social media activities with the highest Return on Investment. Most did not know the return (“Dramatic Difference in Approach to Social Media Metrics”, Feb 8, 2011). Even ‘Facebook’ and ‘ratings and reviews’, the two features rated as having the greatest ROI, were only so rated by about 15 percent of respondents. Other researchers have recently told similar stories. We agree with eMarketer, that, “The ROI question is still not answered”.

This article takes a further look at social media’s value to C-Suite decision makers. How can executives quantify the benefits of fostering customer engagement and brand? How can they impute value to transforming influence? How should real-time, collaborative dialogue between the company and customers and vice versa best be expressed as a value proposition?

1. Rethinking how marketing views social media
Given marketing’s prominence as an expense category, the C-Suite has long wrestled with the question, “What is our return on marketing?”.

To test the question, we asked a number of practitioners how they measure the value of social media and what sort of results they were seeing from its use. We found the answer can all too easily default to marketing goals rather than specific metrics and results. Certainly, goals are a valid conceptual starting point, especially for social-media measurement beginners. Indeed, failure to identify goals before selecting metrics frequently leads to underperformance.

However, goals can only take us so far in defining and assessing the value of social media, and they will likely be insufficient when we have to make operational marketing decisions. If executives are to deliver on brand promises, they need a deep understanding of customers, one that can be gained from evaluating customer behavioural data at a granular level.

Finding actionable metrics
Analysis of customer data and other metrics has been evolving through a hierarchy of increasing sophistication (see the accompanying table):

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LEVEL 1 – Volume oriented
Traditionally, marketers wanting to address operational matters have taken a more quantifiable approach, using metrics that have tended to be volume-oriented. Typical examples are: number of followers, traffic driven to the website, community traffic hit rates, page openings, click-throughs, time spent on-line, responds vs. non-responds, postings and comments, conversions, and units sold. Volume-oriented metrics are undoubtedly useful, but relied on by themselves they can foster a ‘more is better’ mindset. They also tend to provide only a partial answer – flagging increases or decreases in customer activity without actually telling us what to do. Our view is that volume-oriented practices limit value for decision makers in the C-suite.

LEVEL 2 – Customer attitudes and needs
Limitations of volume metrics have led behavioural marketers to examine customer attitudes and needs more closely. Metrics include: customer satisfaction, cost-of-acquisition, brand awareness, brand competitiveness, and brand likeability. The ‘net promoter score’ is an indicator of customers’ attitudes derived from measuring the customer’s likelihood to recommend the firm or product to others. These metrics bring a more qualitative view of customers but they still can reinforce volume oriented thinking and thus inadequate as proxies for quantitative insights. Naturally, the more longitudinal the data become over time, the more relevant they will be to those who really want to know ‘what happened’. Our view is that a more holistic view of the customer, one provided by a social media microscope, offers considerable promise. But a lack of consistent data, historical bases, sharing standards, and transparency will keep it off many C-suite dashboards.

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