Enterprise 2.0 ROI: A Sticky Discussion

10 Sep

Enterprise 2.0 returns are hard to evaluate

Implementing an Enterprise 2.0 strategy has many benefits. Fostered collaboration, increased productivity, and improved brand image are examples of positive returns Enterprise 2.0 tools provide to businesses that deploy them.

However because these assets are highly intangible it is hard to actually measure their impact on financial outcomes. It is even harder to know which one is truly responsible for the increase in revenues or profits. Is it the organizational improvement? The smoother exchange of information? Or a combination of both of them?

The long cause-and-effects chains that comes with IT implementation tends to blur this relationship even more. Let’s say that a new Web 2.0 tool enables employees to better share knowledge within the company, this knowledge could help employees better address their customers requests which may lead to an increase in customers loyalty and therefore an increase in sales. With another fixed asset, such as a new machine tool, the cause-and-effect chain is much shorter. A new machine tool leads to an increase in production capacity and to an increase in sales, which is easier to measure.

How do we measure ROI of an Enterprise 2.0 strategy then?

Increasing expenditure on technological resources is risky if you don’t know the financial benefits you can derive from it. Being able to measure a return on investment is therefore critical to make decision about wether or not to implement a new IT tool.

First of all you need to define your different variables, i.e. your expected returns (R) and your initial investment (I).

Investments: Using social media or any other Web 2.0 tools is not free. It requires people, technology and time. These resources can be defined in terms of monetary costs (e.g. cost of a new software, cost of  maintenance of the software), and in terms of time value (e.g. IT implementation, staff training and staff learning how to use the technology).

Returns: To measure your returns, you must first express your goals as a numeric value. They can be expressed as a reduction in internal email exchange (%), an increase in customers communication (number of comments, number of likes…), a decrease in search times for information (minutes)…

However the achievement of these goals only express a non-financial impact. Non-financial impacts such as word-of-mouth, comments, fans and followers, clicks-through or retweets are critical but doesn’t translate in ROI yet. A proof must be established that these impacts are actually translating into increased sales and profits.

The data collected must therefore be interpreted and  correlated with your financial performance. Questions such as “Does my increase in likes correlates with my increase in sales of the product advertised?” must be answered. This can be done through the use of tools for measuring web traffic such as Hootsuite or Mycommetrics that help you keep track of your customers’ clicks and see if they go to the ecommerce section of your website.

One thing to remember: the key in measuring ROI is to find trends (e.g. increase in sales of product X) and discover where they come from (e.g. we distributed coupons in conjunction with a twitter campaign. We can calculate how many coupons were used to determine the effectiveness of the campaign).

Socialnomics’ following video showcases companies that have thrown themselves into social media and gives examples of social media ROI on campaigns:

This video also shows that the Whopper sacrifice campaign (if you remember one of my previous post) generated $400,000 of media value against $50,000 investment. This clearly shows the limitation of ROI measurement since it doesn’t take into account the damage on the brand image. What do you think of this paradox? I’d like to hear your thoughts about it.
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8 Responses to “Enterprise 2.0 ROI: A Sticky Discussion”

  1. dannymoralesqut September 11, 2012 at 11:05 AM #

    Hi Aurelie, Good post. I agree with you about ways of measure ROI and I also think that is not enough to have likes or comments on your company Enterprise 2.0 tools, you have to relate this facts with the trend of sells in your company. A good way to do that could be delivering some promotional tickets or some special bar codes so the people can print them and get some free stuff or discounts. If you do that you will know how many people who “likes” your company is actually buying items because you will have the exactly number of people using that tickets or codes. Maybe could be useful also gift cards. This are also some strategies to engage customers through Enterprise 2.0.

    Finally I recommend you this link that I’ve also posted in my blog: http://www.youtube.com/watch?v=plM7G223wOE&feature=player_embedded

    Nice post

    Danny

    • aureliequt September 11, 2012 at 1:26 PM #

      Hi Danny,

      Thank you for sharing this really interesting video. And coupons are indeed a clever way to track back the origin of your increase in sales.
      Thanks again for adding value to my post!

  2. PrapatW September 11, 2012 at 1:33 PM #

    I think it is a good idea to distribute coupons in your social medias channel and see how many people actually use those coupons. It is a good way to estimate the number of people that actually buy your products from all your audiences. For example, if we invest 1,000 total social medias(time loss, coupons, etc.) and we have 100,000 follower in Twitters. 30% use coupons we give them and we get 10$ profit from their purchase. That’ll be 300,000$ more profit which is our ROI from social medias.

    Cheers,

    Prapat W.

    • aureliequt September 13, 2012 at 11:05 AM #

      Hi! Great numerical example. And it is exactly what I mean by trying to convert non financial benefits (here awareness of a product) into financial value (here sales generated by the social media campaign)

  3. shaungoossens September 12, 2012 at 5:01 PM #

    Hi Aurelie,
    The coupons are a very good idea, making it easy to track the influence of your social media campaign and at the same time saving money on printing actual coupons and mailing them out. It also doesn’t annoy people like it would if you Spam them for example.
    – Shaun

    • aureliequt September 13, 2012 at 11:09 AM #

      Hi Shaun,

      Giving coupons through a social media campaign has the added advantage that through word-of-mouth, you might win followers or fans that want to benefit from the good deal as well. Your pool of prospects customers is therefore enlarged and you can reach a wider audience when the next campaign comes.

      Thanks for your comment.

  4. librarianollie September 12, 2012 at 7:26 PM #

    Hey all, I like the idea of distributed coupons as a means of measuring ROI. One way this could be done would be through QR Codes. Attaching a link which re-routes to a website tracking hits and sales.

    Aurelie, I like the statement; “you must first express your goals as a numeric value” as a means of measuring the ROI. Especially if you consider your goals not to be in terms of economic success. The example I use is the Kony 2012 campaign by invisible children inc (http://www.youtube.com/watch?v=Y4MnpzG5Sqc). Their goal was to reach 50,000 people in 6 months; they reached 85,000,000 in 25 days. As far as ROI goes, this is the goose laying the golden egg. However, the resulting aftermath of such global success caused Invisible Inc to lose face and reputation. I guess ROI in social media can backfire if get more than you bargained for. What are your thoughts?

    http://talktimesydney.com/ollie

    • aureliequt September 14, 2012 at 8:16 PM #

      Hi Oliver,

      Trying to achieve a positive ROI through the use of social media can actually backfire.

      KFC experienced the power of social media buzz. Here is their unfortunate story:
      In an attempt to draw more customers in its restaurants KFC offered coupons for a free two-piece meal and promoted this offer on Twitter. A lot of hungry consumers flooded the KFC website, but only a few were actually able to print coupons.
      For the lucky ones who got the coupons and visited the fast-food chain, restaurants were unable to keep up with the demand or just refused to honor these coupons, and KFC was forced to call off the promotion.
      This resulted in irritated customers that claimed that they would never eat at KFC again.

      To be remembered: Social media are a powerful tool. You can derive benefits from their use, but it can also bring you down.

      http://www.prospectmx.com/15-marketing-campaign-failures/

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