Why Social Media Makes Absolutely No Business Sense |

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Endorsed by the Chairman of KPMG, CEO of Whirlpool, CEO of Intuit, CEO of SAP, Gary Hamel & others!

Why Social Media Makes Absolutely No Business Sense


Posted by on August 26, 2009

no-sense

(don’t ask about the picture, just admit it’s awesome!)

I know what you’re thinking, “Hey doesn’t this idiot run a social media consultancy?”  Yes I do, I’m playing devil’s advocate here so play along!

Pretend you’re a social media consultant and I’m the CMO of a large company (or even a small one).  I’m interested in the social media space and have had you come in to chat with me about what can be done.  I’m interested but also very skeptical as to the value of social media from a business standpoint.  Why am I skeptical and why am I having so much trouble seeing the business value from social media?  Glad you asked!

  • Why would I want to invest my money into social media when you can’t even identify what the ROI is from my investment?   I have several marketing programs going on that I’m investing in.  Each one of those programs has a specific dollar amount that is put in and a specific dollar amount that is generated aka ROI.  In order to invest in social media I’m going to have to take money out of some of the programs that have already shown me a clear ROI and put it into something that you apparently can’t calculate the ROI from.  Why do I want to do this?
  • My company is already making money and has been profitable for the past 10 years without ever using social media, why should I start now?
  • The average lifespan of a CMO is 2 years, by the time we build and internal social media structure, benchmark/create metrics, research, and then execute; I won’t be here anymore.  Why do I want to approve a budget for something that I won’t be around for?
  • Social media is really just a guessing game.  Things are changing so quickly in the space that it’s impossible to know what’s going to work and what isn’t.  I can’t take the risk of investing in something that has the potential to blow up in my face.  It’s just not reliable.
  • We can’t measure any real bottom line value from conversations that are taking place online.  So what if the social media efforts are driving more eyeballs, clicks, or conversations.  I need to invest in something that can actually make me money.
  • The tools, metrics, and methods in the social media space are not consistent.  I hear consultants talking about all sorts of things like “risk of ignoring” or the “social influence index,” what the hell does that mean?  The industry can’t even agree with itself and I’m supposed to get involved?  Maybe I’ll wait another year or 2.
  • We’re a large international company and more of our audience probably exists offline then online, why should I be spending my money on online activities?

So Mr. social media consultant, convince me.  Why should I be investing in social media?  Can you answer any or all of the above questions?  Have any other questions you want to add?

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  • http://alternativepath.in/ Samraat Kakkar

    Hi

    You have really played the devil's advocate very well. And you are right about the concerns. But how I look at social media & why a CMO needs to consider it

    1. Don't look at social media from a 360 degree perspective.
    2. Look at the platforms which you think can deliver the value for your brand.
    3. You got to be present on platforms where you think your natural audience is , or create properties that are easier to push in the natural market. So you are just ensuring that you are present where your audience is spending time.

    But yes, CMO may question the ROI of each of the activities since not concrete data is not available to support investments.

    • http://www.thefutureorganization.com jacobmorgan

      Thanks!

      I tried to not be too evil :)

  • T_Reutersward

    So, what if there are no supporting tools to measure the ROI? All I know is that I have moved the discussion about my brand to a field where I can act and respond, and where I set the rules. Would I rather that my customers turned to other social networks to complain, praise or question my product?
    If I were a CMO I would sleep better at night just knowing this.

    /Therese, Stockholm.

    • http://www.thefutureorganization.com jacobmorgan

      Hi Therese,

      But what's the value of those discussions? You're investing time and money into something and you need to be able to show the value of it. It needs to be actionable somehow and it needs to affect the bottom line to justify the spend.

      Sleeping at night is another issue :)

  • http://www.rogernolanconsulting.com/ Roger Nolan

    The problem is that we can measure the expense of doing Social Media, but it can be difficult to trackto the “Return” part. The truth is that we can track customer engagement very well but have a very hard time tying back to the point of sale.

    Clearly, things like “promotion codes” will not work well for network routers and enterprise databases.

    Some reasons for your CMO to do social media:

    - Whether you can track back to the point of sale or not, you still have to fill you sales pipeline and build awareness. …or, your business will die.
    - Your sales pipeline as you know it is broken. You have to get out there in many forums and media types to meet your customer.
    - Your current sales process probably starts with you target customer clicking on Google, not with your sales rep making a sales call.
    - The discussion about your company and product is already happening in these forums, blogs, etc. You can be a part of this discussion or let it happen without you.
    - The most trusted source of information your target customers have is their peers.
    - And finally, your message may be off. Social media is a chance for you to listen and refine your message based on what your customers are telling you.

    There is safety in being in the “late majority” but there is also a huge opportunity cost, especially in a market where there are network effects.

    Roger
    http://rbnolan.wordpress.com/

    • http://www.thefutureorganization.com jacobmorgan

      Hi Roger,

      Good points there. I think all of the items you mentioned eventually tie back into $ for the company and that's where the disconnect is. I agree with all of the points you mentioned and I could probably add several more to that list, however I still think that the issue comes down to being able to show the value for the investment. I know many companies have an “experimental” marketing budget so that is most likely where SM funding is going to come from.

      thanks for the comment!

  • http://twitter.com/EmmanuelGonot Emmanuel Gonot

    This is an excellent devil's advocate's post on social media. While many industry insiders and students recognize that tremendous opportunities lie in the very fluid and evolving nature of social media, most companies are still unwilling to commit resources to improve branding or deepen customer relations through this channel. I'm sure computations for ROIs and other relevant numbers will solidify in the coming months or years, and that is important for evangelists. For many businesses, the decision to engage in social media may come sooner, as they see competitors actively participating improving their branding, customer loyalty, and bottom line.

    • http://www.thefutureorganization.com jacobmorgan

      Hi Emmanuel,

      I'm thinking that 2010 will be a big year in companies shifting towards social media. Let's home I'm right!

  • nagandrea

    I might say something like:

    While your company has been profitable in the past 10 years, the behaviour and real-world experience of consumers has changed drastically in a very short period of time. Innovation is essential to maintain your stake in the market. I'd compare cases of companies or industries that have lagged behind in technological development to rove the point. There are a number of obvious ones that spring to mind, but it depends on the market.

    While a CMO might not want to invest in a project that may only yield results as he leaves the company, taking the initiative and developing a solid strategy and putting it into place will vastly increase his/her reputation and value when looking for the next position or being head hunted for the next position.

    As for measuring success, there are constantly tools being developed in order to measure the performance or response rate to a company's online activities. Surely it's better to have a strategy in progress and then to find the best method of measuring success en route rather than standing on the sidelines while your competition takes full advantage of the opportunities available online?

    With most larger organisations it might just be a case of dipping their toes in the water to see what social media can really do for them, and then expanding when they realise how valuable and cost effective it can be.

    • http://www.thefutureorganization.com jacobmorgan

      thanks for putting that together. I think it's important to highlight the experimental budgets that a lot of companies have to work with, those budgets can be used more and more for social media until returns are realized and budgets are increased. Of course this also means working within reasonable expectations.

  • http://www.tripledogs.com/ Thomas Myer

    Congrats on being profitable for the past ten years–the buggy whip manufacturers were saying the same thing just as the Ford juggernaut came online a century ago. Just like in Poker, past performance has no bearing on future outcomes. I guarantee that some Monday morning in the not-too-distant future, you're going to wake up to a harsh reality and you're going to want some of that new-fangled Social Media stuff to get you out of the jam. Why not start now while you're still in good shape?

    The social media landscape might have different players in a few years, but one thing is for certain–conversations are what your customers want. Even if they're buying complex B2B software tools, they want to engage in a conversation with you, ask real questions, get real answers back. They don't want to sit through another 30 second ad, read another white paper, or try to parse out the “between the lines” stuff in your latest case study. They want to know if your product is right for them. Why not let some air and light in? How about reducing barriers to conversation? Maybe you could get down to selling faster if you didn't overcomplicate things.

    As for ROI and metrics, when was the last time you had any kind of accurate fix on that in *any* of your marketing? If you're buying TV time or magazine ads, you have to take your agency's word for it that people are actually tuning in. If you're doing email marketing, you have to be content with clickthroughs and open rates, never mind that most people don't read enough of your emails to respond to any offer (if you don't believe me, put a $100 giveaway to anyone who mentions the giveaway somewhere in your email, see who goes broke first). For that matter, how do you reliably track things like retail store placement, adwords ads, etc etc? Yes, you get a vague picture, but at some point, all those leads go into a big pot and at some point, it has more to do with your sales force than your marketing.

    As for the average gestation period of a CMO, why do you think you're on your way out in 2 years? Because you're not being effective, and by “being effective” I mean getting new customers and keeping your existing customers coming back for seconds and thirds. You don't do that by purchasing more ads, you do it by being genuine and human and authentic and approachable.

    • http://www.thefutureorganization.com jacobmorgan

      Hi Thomas,

      Very solid points you made there. Stating that past performance is not a good indicator of future performance is absolutely key, I may even have to write a separate blog post about that :) Also solid points on ROI and metrics. The challenge though is that execs know that current marketing spend is not justifiable in many cases, but that doesn't mean we should treat social media the same way. That just gives us another vehicle that we can't accurately track. Therefore instead of using other marketing channels and their lack of measurement to justify social media; I think we need to be a bit more creative and analytical in creating NEW ways to measure and track.

      Great points made Thomas, hope to hear more from you.

  • ronderven

    Social media needs to be evaluated carefully, perhaps website by website. Personally, I don't get Twitter. I look at it, I try it and I don't get it. Yet there are other sites where it is possible to gain valuable back links to your website and thus raise Google ranking. For some companies, that is invaluable and well worth the time spent.

    Ron D

    • http://www.thefutureorganization.com jacobmorgan

      Thanks for dropping by and adding your 2 cents Ron. Social media definitely needs to be evaluated a bit more carefully, it doesn't always make sense for everyone so we need to be careful.

  • http://alternativepath.in/ Samraat Kakkar

    The reality is that social media is driven on metrics rather than ROI & therefore 1 can argue that it doesn't make any business sense. The challenge therefore is to relate the metrics with ROI. This may even mean redefining the metrics altogether. Once that is done, social media will start to make business sense

  • http://alternativepath.in/ Samraat Kakkar

    The reality is that social media is driven on metrics rather than ROI & therefore 1 can argue that it doesn't make any business sense. The challenge therefore is to relate the metrics with ROI. This may even mean redefining the metrics altogether. Once that is done, social media will start to make business sense


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