Does Social Sell?

For all the excitement about social media, there’s a specter hanging over its use by companies. Is all this tweeting, blogging and Facebooking paying off? For some proponents, the question is irrelevant. They agree with the view encapsulated in the social media bible The Cluetrain Manifesto — markets are conversations. Companies have to participate in the conversations where they’re happening, ROI be damned. Their dismissal of metrics is summed up in an oft-repeated question, “What’s the ROI of putting on your pants on in the morning?”

Those kind of pithy ripostes are music to the ears of the social-media faithful at conferences and on blogs, but they’re unlikely to impress budget-strapped CMOs who, while eager to find new ways to reach consumers, are under more pressure to prove their efforts are pushing the business forward. Measurement remains the single greatest challenge to social-media adoption by companies.

While digital channels and online interactions offer a plethora of data points, they don’t come with a set playbook for assigning value. Marketers have grown comfortable with formulas like gross ratings points and frequency, time-tested formulas for building brands in traditional media. Yet with social media, what’s a Facebook friend worth?

“The value of social media is it’s the richest data set that’s ever existed,” says Dan Neely, CEO of Networked Insights, a Wisconsin-based analytics company that uses social media to help clients make marketing decisions. “You can use this data for many things.”

The two sides of the social-media measurement debate are at the forefront as many marketers plan to ramp up their social-media budgets in 2010. According to an ExactTarget survey of 1,000 marketers, 70 percent said they plan to increase spending in social media, but less than 20 percent said they could effectively measure ROI. The seeming schizophrenia is because marketers using social media tend to blend “art and science” in their measurements, according to Morgan Stewart, ExactTarget’s director of strategy and research.

“ROI isn’t the thing that’s pushing people to social media,” says Stewart. “Companies using reputation as a measure of success are more likely to be shifting budget there. That tells you something about the mind-set.”

Here’s what three marketers well versed in social media are doing to measure their participation and justify new investments.

Pepsi: The Speed of Digital Culture

At a time when many brands are stuck in experimentation mode in social media, Pepsi is placing a staggeringly large bet on it. Pepsi was absent from the Super Bowl for the first time in 23 years, redirecting money to an ambitious social marketing-centered program called Refresh Everything that will direct $20 million to charities. According to Pepsi execs, the program is appealing because it rested on four big trends: crowdsourcing, doing good, sharing and transparency.

Refresh Everything is the culmination of years of social-media work done by Pepsi, the perpetual No. 2 behind Coca-Cola in the soft drink market. Pepsi’s still a big spender in traditional media — it spent $89 million in U.S. advertising on the brand in 2009 — but Coke outguns it by a 33 percent margin. Social media, offering a more level playing field, is where Pepsi is making its stand with one of the largest commitments to the space yet seen.

Yet Pepsi execs are at pains to point out that Refresh Everything is not a social-media campaign per se. Rather, it uses social media as glue to hold together a wider push that includes traditional elements like TV spots, says Bonin Bough, PepsiCo’s director of social media. It even includes a dash of Pepsi’s usual celebrity tie-ins with the inclusion of Hollywood stars Demi Moore and Kevin Bacon, and New Orleans Saints quarterback and Super Bowl hero Drew Brees.