Chapter OneThe ROI of Social Media
THE "I" STANDS FOR INSIGHT AND IMPACT
Social media is transforming how nonprofits do their work and their relationships with constituents. The early adopters that have embraced social media with an approach of listen, fail informatively, and evolve are seeing results. Strategic use of social media is actually helping measurably to reach new people and is bringing added value to mission-driven work. Social media is propelling nonprofit goals to build a movement around a core advocacy issue, improve customer service or programs, reach new donors, and spread awareness of a nonprofit brand around the world.
Nonprofits can no longer afford to take the stance that social media is "just a bunch of hype" and continue with business as usual. The risk is playing a harsh game of catch-up or even worse. Nonprofit leaders need to ask, what can our organization do to make our Internet communications strategies and fundraising more effective in these rapidly changing times?
The return on investment (ROI) of social media requires a different approach. It is about replacing the word "investment" with new "i" words, "insight" and "impact." This chapter will help demystify social media listening, measurement, experimentation, and it will illustrate how nonprofits can effectively use these techniques to help improve their social media strategies to see measurable results.
Social Media ROI-A New Approach
Although social media tools have been available to nonprofit marketing and fundraising professionals for several years, there is still debate about whether these new tools are worth the time investment. With economic and financial pressures always present, many nonprofit executive directors are highly skeptical as to whether social media helps nonprofits reach their objectives. When staff members suggest incorporating social media tools and techniques into the media mix, executive directors ask the following: What are the tangible benefits? How much will it cost in staff time to implement? How do we measure success? And, of course, is it worth it?
Over the coming decade, social networking sites like Facebook and other social media outlets and channels will become as ubiquitous to nonprofit development, communications, and program departments as the phone, direct mail, and e-mail. This transition will happen gradually, as younger nonprofit staff members, who are fluent in the use of these tools, assume leadership roles. And as members of generation Y comes into their own as donors and new technical developments transform the web into a social space, the use of social media will become as commonplace as "air," says Charlene Li, a social media expert.
Adding social media into the nonprofit marketing and fundraising toolbox does not mean abandoning proven marketing and fundraising methods such as e-mail marketing and direct mail. It does require some experimentation and a different expectation about short-term results. Finally, it means that organizations need to rethink and change their approaches, and that is easier said than done.
The Traditional Return on Investment Analysis for Nonprofit Technology
Many nonprofit organizations turn to a traditional return-on-investment process as a prelude to justifying a large investment in a mission-critical technology system or equipment. This might include new desktop computers, a video-conferencing system, a web site redesign that includes a new content management system, a customer relationship management (CRM) database, and the list goes on. Simply stated, the traditional ROI process is an analysis that looks at the benefits, costs, and value of a technology project over time. The analysis also includes financial projections that clearly show how the technology purchase will improve the bottom line. In other words, the analysis clearly connects the cost of investing in the technology to increased income or budget savings because the technology has made staff members more efficient in their work or has enabled them to better serve clients or stakeholders. Further, a traditional ROI analysis might also point out how staff time might be better spent, such as by illustrating how much more effective staff members are in their work because they can devote their attention to customers, clients, or program development rather than spend time on clerical tasks.
An ROI analysis is more than a simple mathematical equation that looks something like this:
Income from new technology - cost of new technology = ROI.
A traditional ROI analysis goes much deeper and involves a number of analysis steps, as shown in Table 1.1.
For a more robust and detailed understanding of the traditional nonprofit technology ROI process, please refer to chapter 3, "Measuring the Return on Investment," by Beth Kanter, in Managing Technology to Meet Your Mission: A Strategic Guide for Nonprofit Leaders.
ROI and the Development and Marketing Departments
Development and marketing professionals have used ROI calculations to analyze the results of their Internet-based fundraising, membership, advocacy, and communications campaigns. Most e-mail and CRM software will capture standardized and universally accepted metrics such as open rates, conversion rates, and others. This can help nonprofit development and marketing professionals not only easily answer the question, did our campaign work? but also have confidence based on past experience of a certain level of results. In other words, there is less risk.
Over the past five years, the nonprofit field has begun to establish industry benchmark metrics for measuring the success of online e-mail advocacy and fundraising campaigns. Nonprofit fundraising and marketing professionals use these metrics to compare their results to industry norms.
Nonprofit online fundraising and marketing professionals collect and analyze standard web site metrics from analytics software programs like Google Analytics. The software can crunch the data to clearly demonstrate an ROI (or not). In fact, Google Analytics has a feature that tracks revenue goals and can automatically calculate the dollar return of specific strategies. In addition, because web metrics have been in use for more than a decade, they are generally accepted and understood by executive directors. What nonprofit executive doesn't know the definition of a page view?
From Counting Eyeballs to Measuring Engagement
What is most difficult for many nonprofits to understand in their quest to measure and improve social media strategies or to justify getting started, is that social media not only requires defining success differently but also uses different metrics. Social media metrics are not all about page views. In fact, some social media experts go as far as saying that the page is view is dead or life support. To measure social media success in the early stages, organizations need to measure intangibles such conversations and relationships. This can be a hard sell, especially when an executive director is screaming, "Show me the money!"
Social media requires not only a different approach to strategy but also a different mind-set from that of implementing e-mail, direct-mail, and other traditional communications and fundraising campaigns.
The social media measurement maven K. D. Paine, in an interview with the blogger Jason Falls put it this way: "Ultimately, the key question to ask when measuring engagement is, 'Are we getting what we want out of the conversation?' And, as stubborn as it sounds Mr. CEO, you don't get money out of a conversation." At least in the initial stages of social media exploration, and as early adopters are discovering, engagement is leading to donations.
Reframing ROI from Investment to Insight and Impact
Should nonprofits be using an industrial measurement model in a digital age to measure the success of their social media efforts? It simply doesn't work. In the 1920s, ROI was created as a financial measure, developed by DuPont and used by Alfred Sloan to make General Motors manageable. It is an analysis that calculates business performance, taking into account not only whether the business made money but also whether that profit was good enough relative to the assets it took to generate it. Over past century, the ROI process has been refined and so deeply etched in business thinking that many view it as the only legitimate means of measuring business performance.
It is also important to remember that ROI was a measure of return on the total investment in the entire business. It was never intended to look at the ROI of a specific marketing strategy, program, tool, or any other isolated aspect of an organization.
Many social media gurus have challenged the notion of using a straight financial calculation to determine whether an organization should invest in social media before taking the plunge or evaluating the first forays. These experts are not saying to not use metrics or that social media isn't measurable. What the experts are saying is that organizations need to measure value, and that value isn't necessarily synonymous with dollars, especially in the early stages of social media strategy experimentation.
Perhaps the best recent illustration of why traditional ROI formulas should not be used for social media fundraising is the discussion that followed an article published by the Washington Post titled "To Nonprofits Seeking Cash, Facebook App Isn't So Green: Though Popular, 'Causes' Ineffective for Fundraising."
The article, which proclaimed fundraising through Facebook's Causes application a failure, based its analysis of fundraising performance on a dollars-per-donor metric. The article created an uproar on nonprofit blogs, with many fundraising and social media professionals making the point that it is still too early to measure success in aggregate dollars per donor. Allison Fine, author of Momentum and who blogs about nonprofits and philanthropy, pointed out that awareness, not dollars, is the right metric for success in fundraising on social networking sites at this point in time. In addition, she argues that social fundraising applications such as Causes facilitate the spread of a nonprofit organization's message in a way that the nonprofit does not need to do the heavy lifting. Steve MacLaughlin from Blackbaud, a leading technology provider to the nonprofit sector, said, "If the reason why you want to use social networks is just to raise money, then stop now. It doesn't work that way. Causes is a friend raising tool, not a fundraising tool."
The fundraising consultant Betsy Harman, principal of Harman Interactive, concurred and pointed out why fundraising on social networks requires time. "Any nonprofit who thinks they can simply create a Causes page on Facebook and wait for the money to roll in, doesn't understand networked fundraising. It's still all about building relationships, telling your story, and taking potential donors through the process of cultivation, stewardship and solicitation." Brian Reich, a marketing consultant and coauthor of Media Rules! Mastering Today's Technology to Connect with and Keep Your Audience, suggests that too many nonprofits have taken the "build it and they will donate" approach and that "simply by using the tools they'll raise a lot of money. They've forgotten that it's the relationship building and that takes time."
The consultant Ivan Boothe said that Causes applications have been effective for organizing activists and keeping them engaged with a campaign. "Asking for and receiving donations has only ever been pursued on social networks as a way to reinforce this identity, not as a way to raise large amounts of money. It's about cultivating relationships with your most passionate supporters, giving them ways to speak in their own voice and connecting them with other people. Most young folks who are on social networks get this, since it is how they're relating socially on these networks already."
It is important to understand that looking at the ROI of social media and social networking tools requires two new "i" words: "insight" and "impact." The concept of return on insight is something that the social media thought leader David Armano points out in his white paper "The Collective Is the Focus Group." In the early stages, organizations need to approach social media implementation with more agility, which requires listening to and reiterating what works. He names this process "listen, learn, and adapt." The expectation of immediate dollar results is unrealistic, as many early adopters of nonprofit social media well know. It takes time to build relationships and more time to see results of social media efforts. As social media is largely experimental, it is imperative to measure quickly and make real-time course corrections and to figure out what is working. In this stage, learning and engagement are the value that social media offers to nonprofits.
The idea of impact on mission, which comes at a later stage, is to connect your social media objectives to specific organizational outcomes. As K. D. Paine, a thought leader in social media measurement commented, "We should reserve the term 'ROI' for impact on mission. For the Red Cross it's not about fans and followers or even money raised. It is about lives saved." Paine goes on to say that if the social media strategists at the Red Cross can show that they helped more people in a crisis through Twitter, then that trumps all other metrics.
Listen, Learn, and Adapt Defined
The best practice of listen, learn, and adapt has fueled the success of many nonprofit social media strategies. Of course, organizations need to first set an overall objective for a social media strategy and then identify the audience and tactical approaches (see Table 1.3 at the end of the chapter).
But before the organization establishes a presence or gets started using any tools, listening must be the first step. Listening means knowing what is being said online about an organization, its field, or its issue area. Listening involves the use of monitoring and tracking tools to identify conversations that are taking place on the social web. It is an important first step before engaging with audiences. At its most basic, listening is simply naturalistic research, although it is more like a focus group or observation technique than a survey.
Listening is not simply scanning or data collection or a river of noise. The process involves sifting through online conversations from social networks to blogs-many voices talking in many places. The value of listening comes from making sense of the data and using it to inform your engagement strategy with stakeholders.
Learning means discovering what works once the strategy has been launched. It takes place in real time as the social media strategy unfolds and as an evaluative process at the conclusion. It's an aha moment that leads to moving in the right direction. Most important, learning is a reflective process that is done either alone or as a team to harvest insights. Wendy Harman, the social media strategist for the American Red Cross who has been using this approach for three years, says, "At first, I would do the reflection myself, using a journal to document the experiment and at the end of the project review everything I've collected. I'd think about successes and failures. I also kept an eye on what other nonprofits were doing in the social media space. This would inevitably lead to the design of the next experiment. Now that our organization has embraced social media, we do this as a team."
Adapting means using insights to make corrections to improve social media results in the next reiteration. It is much easier to adapt a social media project at a tactical level than to change or improve other areas in an organization that social media might shine a light on: customer service, programs, and services. And making changes in those areas may require rethinking staffing and work flow and, of course, involving leadership and others in the organization.