1) To measure "top of funnel"; be sure "bottom of funnel" is tight. If you're Coke or Pepsi, it's easy to shift some lower-impact advertising dollars to experiment with social media. You may not likely link Facebook activity to sales, but you know intuitively that your brand is more meaningful to customers and thus less forgettable. If you're in a company that can measure online purchases, then you probably already have robust tracking on your website. Social media, like any media, can be calculated at a "cost of a qualified website visitor," but a word of caution: You may get curiosity clicks from consumers who were never likely to purchase, and only a small percent of people will stop their social media activity to purchase immediately.
2) Stick with the highway, not the rest stops. It's tempting for agencies and public relations firms to build microsites where they can measure behavior. However, those often financially bloat a campaign and prohibit ROI. You don't need a Bud Light entertainment network to sell beer. The programs that have the best ROI are those that have a small "I," avoiding the need for $200K destination sites, expensive video production, and millions in ad spending. The cost of creating an identity on social media sites is low, and the cost of engaging brand evangelists can be lower. "Fish where the fish are," since it's hard to move someone from their favorite social media site. Even the best YouTube videos have 2-5 percent of people visiting a brand site after watching a video, so spending $250,000 on a viral commercial is antiquated.
3) Let your decision maker set key assumptions. Unless you're the budget holder, you likely need to convince someone else to fund a social media pilot. I like identifying the primary assumption drivers of a campaign and basing an ROI model on whatever known facts exist (industry norms, conversion rates, lifetime value of customer, etc.). Sometimes the required cost-per-new-customer is too small to justify a social media pilot, but often (especially for travel, pharmaceuticals, financial services, or electronics) the revenue-per-transaction can substantiate a $10-$100 acquisition cost. Then low click-through rates matter less.
I build a pro forma based on key assumptions that someone else makes. In one recent example, I calculated that a client would reach break-even if just .0035 percent of the audience who watched an entertaining video promotion for its electronic device actually bought one. So I asked the client to estimate the likely conversion rate. He guessed 2 percent, and I explained that it would be unlikely based on my experience. But the client would not have likely guessed .0035 percent, and now we had somewhere to start.
4) Find analogs. Every professional discipline has a way it is accustomed to framing ROI. For television buyers, reach and awareness levels (gross rating points) are measured against media expense, and they usually don't count agency fees or production costs. A digital media buyer typically pursues cost-per-impression or cost-per-click. A public relations executive might compare agency billings to "estimated advertising value" of a story's pickup. Direct response professionals like conversion rates, such as lead-generation costs, or incremental revenue based on re-contact.
Social media is only meaningful if the decision maker sees impact in their terms. Television still represents an estimated 97 percent of our video viewing, so I wouldn't dare suggest to a traditional marketer that YouTube videos drive awareness like TV. But our target audiences are increasingly adept at ignoring ads -- they are influenced significantly by peers and spend exponentially more time online (via phone, web, or a connected device). So social media holds up well to the scrutiny of "cost-per-engagement" as long as we capture the value of that engagement in the terms we care about.
I worked on a recent Hitviews campaign to promote two Fox television shows via online video stars. The client was happy with the investment because they recognized that a video star's entertaining video is more influential to his or her audience than a single ad. Fox would have needed to spend exponentially more on advertising to approach the impact of the near five million online video views of branded entertainment (or call it host endorsement or digital storytelling) that made viewers excited about the new television shows.
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