Tag: return on influence

Social Media

Klout Is a Tool — not an Imperfect Holy Grail

Posted on by Eric Peterson

Last week, I found my dander elevated as I read Harnessing the Power of Social Media with Mark Schaefer. Schaefer knows his stuff when it comes to “influence,” and he recognizes that it is a messy, nuanced, multi-faceted topic — so much to the point that he wrote a book on the subject. Unfortunately, Schaefer didn’t write this article that referenced him. Rather, it’s a summary by someone who, as best I can tell, simply attended an Awareness webinar where Schaefer was the presenter …and then clumsily tried to recap it. The article uses circular examples — offering proof that social media superstars are influencers simply based on the fact that brands have targeted them. That’s like saying that Rebecca Black has mad vocal chops because millions of people have viewed her music video.

Nate Riggs interviewed Schaefer directly a few months ago, and, during that discussion, Schaefer made the point that Klout is not truly a “measure of influence.” Rather, it is nothing more and nothing less than:

“How content moves through a system and how people react to it.”

That’s a brilliant and succinct statement. The hard work comes when trying to figure out what to do with that information. Marketers (as a broad generalization) hunger for simple answers where simple answers don’t exist: 1-to-1 marketing, “viral videos,” SEO shortcuts, and now “influencer identification and activation.” Marketing is squishy, imperfect, inexact, and messy — it always has been, and it always will be. Services like Klout and PeerIndex are useful, but they’re not The Marketing Holy Grail.

For more on my thoughts on Klout, PeerIndex, and the like, hop over to the post I wrote on the Resource Interactive blog last month: In Search of Influence, Authority, and Clout (or…Klout?).

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Reporting, Social Media

Social Media ROI: Stop the Insanity!

Posted on by Eric Peterson

I’ve taken a run at this before…but my assertion that the emperor has no clothes didn’t stick. Either that, or the dozens of people who read this blog simply agree with me in principle, but don’t really think it’s worth the effort to raise a stink.

Regardless, I’m not quite ready to let it go. And I do think this is important. Connie Bensen’s recent post (cross-posted on the Marketing 2.0 blog) on the subject had me cheering…and crying…at the same time!

Maybe it’s because I’ve had the good fortune to know and work with some incredibly sharp CFO-types in my day. Most notably, for my entire eight years at National Instruments, the CFO (not necessarily his official title the whole time, but that was his role) was Alex Davern — a diminutively statured, prematurely white-haired Irishman who arguably knows the company’s business and market as well or better than anyone else in the company. He is a numbers guy by training…who gets that numbers are a tool, a darn important tool, but not the be-all end-all.

I had to sit down with — or stand up in front of — Alex on several occasions and pushinitiatives that had a hefty price tag for which I was a champion or at least a key stakeholder — a web content management system, a web analytics tool, and a customer data integration initiative. I never had to pitch a social media initiative to Alex, and I don’t know exactly how I would have done it. But, I seriously doubt that I would have pitched that “ROI is Return on Influence when it comes to social media.” I can feel the pain in my legs as I write this, just imagining myself being taken down at the knees by his Irish brogue.

Here’s the deal. Let’s back up to ROI as return on investment. Return. On. Investment. It’s a formula:

Both numbers have the same unit of measure — let’s go with US dollars — so that the end result is a straight-up ratio. Measured as a percentage. This is a bit of an oversimplification, and there are scads of ways to actually calculate ROI. A pretty common one is to use “net income” as the Return, and “book value of assets” as the Investment. With me so far? You acquired the assets along the way, and they have some worth (let’s not go down the path of that you might have spent more…or less…to acquire them than their “book value”). The return is how much money they made for you.

Now, let’s look at ROI as “Return on Influence” (I’ll skip “Return on Interaction” here — I can get plenty verbose without a repetitive example):

Hmmm… The construct starts to break down on several fronts. First off, you’re going to have a hard time measuring both of these in like units. That’s sorta’ the point of all of the debate on ROI — “influence” is hard to quantify. But, that’s not actually the main beef I have on this front. At the end of the day, your return is still “what value did we garner from our social media efforts?” Maybe that isn’t measured in direct monetary terms. But, really, is this whole discussion about mapping the level of Influence to some Return, or, rather, is it about assessing the Influence that you garner from some Investment? A more appropriate (conceptual) formula would be:

But, IOI, as pleasantly symmetrical as it is, really doesn’t get us very far, does it? So, let’s go back to Alex as a proxy for the Finance-oriented decision-makers in your company. You have two options when making your case for social media investment:

  • The Cutesy Option — waltz in with an opening that, frankly, is a bit patronizing: “What you have to understand about ROI when it comes to social media is that ROI is really Return on Influence rather than Return on Investment”
  • The Value Option — know your business (chances are the Finance person does); know your company’s strategy; know the challenges your company is facing; frame your pitch in those terms

Obviously, I’m a proponent of the second. I don’t really have a problem with starting the discussion with, “Trying to do an ROI calculation on a social media investment is, at best, extremely difficult and, at worst, not possible. But, there is real value to the business, and that’s what I’m going to talk about with you. And, I’ll talk about how we can quantify that value and the results we think we can achieve.”

Connie’s post has a great list to work from for that case. But…more on that in my next post.

Oh, yeah. the picture at the beginning of this post. And the title. Susan Powter, people! Stop the insanity!!!

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Reporting, Social Media

Death to "Marketing ROI is Return on Influence"…Please!!!

Posted on by Eric Peterson

I realized that my Data Posts from Non-Data Blogs Yahoo! pipe wasn’t working correctly, and when I fixed it, a recent post from Debbie Weil at BlogWrite for CEOs popped up: More on the ROI of Social Media: Return on Influence. Ordinarily, I’m a big fan of Weil’s thoughts, but this one had me wondering if I ought to try to track down some blood pressure medication. Weil by no means invented the phrase (and does not claim to have), “When it comes to social media, ROI really means ‘return on influence,'” but, sadly, she has jumped right on that misguided bandwagon.

Maybe it’s that I was raised in a house where one parent was an engineer and the other was an English major. Maybe it’s because I’ve got a contrarian bent — a slight one (I like “alternative” music but not “experimental” music). For whatever reason, “ROI is return on influence” has stuck in my craw from the first time I heard it. And it still makes me twitch whenever I stumble across a post where someone waxes eloquently about the genius of the phrase.

Weil has a couple of “short answers” for why return on influence makes sense. Her first is that it makse sense “because the return is soft. The benefits of incorporating social media strategies into your marketing are real (and can no longer be ignored) but they’re not normally measured in dollars.” I have no argument with any part of that assertion after the word “because.” Weil points out that the return is soft. So, why isn’t the “return” being replaced in this platitude? “Influence from (social media) investment” I get. And that is something that you should try to measure.

Are you still with me? No one who has picked up this phrase has stopped to think that it doesn’t make sense! If you develop influence in your market, then you will get a return, which may or may not be soft. But, are you trying to measure the return on that influence, or are you trying to measure the influence that you garnered by engaging in social media?

Marketers really are freaked out by the increasing focus on Marketing ROI. That focus is driven by CEOs and CFOs. In my experience, CFOs are pretty sharp people. They get that Marketing is important. What they want is accountability, efficiency, and effectiveness from Marketing. They want to know that the chunk of the company’s budget that is being invested in Marketing is being well-used. Unfortunately, they communicate that imperative in financial terms: “What’s the ROI?” They’re Finance people, folks! What would you expect?

Marketers, rather than getting to the heart of delivering business value — driving improvements in efficiency and effectiveness, and demonstrating results — have instead gone nutso with, “I have to show ROI!” Return on Influence is a headless-chicken response to this belief. And, almost comically, it has resulted in a classic marketing response: “Let’s spin and message it! Let’s talk about how, for Marketing in the social media world, ROI really stands for ‘Return On Influence.'”

Oh, man oh man, what I would pay to sit in the room when a Fortune 1000 CMO proudly rolls out that explanation to the CFO. It completely, utterly, totally, and ridiculously misses the point.

Accountability and continuous improvement, people: the executives in your company are not stupid (if you think they are, then they either are, or they aren’t but you think they are: in either case, find a new company). Understand what you are trying to accomplish with your social media strategy. Is it to build your brand? Is it to engage with your most avid customers? Is it to position your company as being full of cutting-edge thought leaders? Articulate that. Measure whether you are making headway with your efforts.

Am I right?

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