Measuring Your Return on Investment (ROI) from Social Media

Here is a true story…last week, I was reading the business section of a national publication. One of their reporters had written a story about how social media was being used by companies within a particular industry as a strategy to increase sales. The reporter interviewed the directors of marketing from several companies to get a broad base of opinions for the story.

One of the marketing directors explained how he typically invests several hours a day toward Facebook, i.e. writing status updates, posting photos, replying to comments, and various other activities on behalf of his company. This level of activity typically represents 25 percent of his weekly schedule. The reporter also asked about Facebook’s contribution toward company sales. The marketing director said it was difficult to quantify, and in actuality, his company’s objective was not to necessarily increase sales via Facebook, but to build brand awareness.

I was stunned and even thought that perhaps the reporter had misinterpreted what was said during the interview. I had to hear it for myself so I called the director of marketing. I asked him the same question. “How do you measure your return on investment”?  And he essentially gave me the same answer as he did during the interview. I dug a little deeper and asked him (and I realize this may seem like grassroots marketing 101 stuff here) if his company had paper-based receipts or other form or documentation for each sale during a given month. And of course, the answer was, yes.

I then asked if it would be possible for someone to take the time to export the list of his company’s Facebook “Likes” and put them into a spreadsheet. And again the answer was, yes. And then I said, “This could be tedious work but has anyone considered sitting down at the end of each month and simply searching the spreadsheet of Facebook “Likes” for the names of each customer who placed an order during that month”?

His answer back to me was, “Well sure, but there just is not anyone here at the company with that kind of time. I would have to do it. And I know I don’t have time”. I nearly fell out of my chair. No one at the company has about an hour a month to measure the return on investment (ROI) of spending 25 percent of an employee’s time toward Facebook activity?

There is nothing more fundamental or necessary than being able to measure ROI from our social media activity, search engine optimization, or other forms of promotion. The good news is that measuring ROI is something that lodging executives, owners, managers, or other tourism professionals can do with relative ease. And doing so will eliminate the intuitive feelings of “our property needs to be on Facebook ‘just because’” and transform that into, “Our Facebook activity was responsible for 15% of last month’s guest revenue resulting in $XXXX in revenue”. Much different equation.

Here are some simple steps that you can implement in order to measure social media ROI for your property. I will outline the process for Facebook but you can just as easily apply the same steps to LinkedIn, Twitter, etc.

And I should probably offer a disclaimer here. These ROI steps will likely seem straightforward and not challenging to implement from a technical perspective. And they will require several hours per month of someone’s time. However, it has been my experience that very few companies are investing two hours each month toward measuring ROI in order to determine if the 40 hours per month invested by their marketing director is delivering outcomes. Therein is the competitive advantage for you and your property. Be strategic in your social media participation, collect and evaluate data, implement the following steps, and you will have added a level of sophistication to your marketing strategy that your competitors will not know how to duplicate.

Step 1: Collect Facebook Data

Download your “Like” or “Friends” information from Facebook and copy the data into a spreadsheet for easy searching later. To access this data from Facebook, 1) click on the “Account” dropdown menu at the top right corner of your browser, and then select “Account Setting”, 2) click on “Download a Copy” of your Facebook data, 3) click the green “Start My Archive” button. Facebook will then e-mail you a link to the archived folder and be sure to keep it secure. You will repeat this downloading process once a month, or whenever you wish to measure ROI.

Step 2: Organize Your Monthly Revenues

Use your property’s CRM tool to export a list of all guests who made room reservations, point-of-sale purchase, spa visits, golf, etc. during the particular time period you are measuring. At some point in the future, you may want to give consideration to making the data collection process more comprehensive to where you are segmenting guest loyalty and other variables. However, at this point, just keep it simple. Produce a report that simplistically itemizes the names of the guests who spent money at your property, and the amount that each guest spent, during X time period and then move on.

Step 3: Cross the Data

I recommend that you hire a student intern and then ask him or her to search your Facebook spreadsheet for each of the guests on your revenue report. Then highlight the name of each revenue-producing guest found within the Facebook spreadsheet. Then enter the dollar amount spent in a separate column next to the guest name in the spreadsheet. Sum the revenue column in your Facebook spreadsheet to complete the process. The total dollar amount in the revenue column represents Facebook’s ROI for your property.

I realize that steps 1, 2, and 3 are basic and simplistic. There is likely a specialized (and expensive CRM tool) you could license for your property that may generate efficient reports. But if you are like most businesspeople, a cost effective solution that does not involve a long and protracted enterprise-level software integration to get at the numbers tends to be a pretty good solution.

Steps 1, 2, and 3 will answer the fundamental question of “How much guest revenue did Facebook generate for us last month”? That is a very powerful marketing insight that most of your competitors probably wished they knew how to quantify as well.

This article was written by Stephen