I came across an article today: “CEOs say marketers are disconnected from financial reality.”

Not only was it timely, coming as it did on the day I was sitting down to write about ROI, but it’s also true. I’ve talked before about how marketers tend to gravitate toward soft measurements, particularly in the area of social media marketing. This CEO article goes into detail about the level of mistrust the C-suite has for marketing’s worth and has some revealing statistics to back it up — such as the fact that 74 percent of CEOs want marketers to become 100 percent ROI-focused.

Unrealistic? Not completely. The strong message here is that marketers need to do a better job connecting the dots between their organization’s budget and resource investment, and substantive results: Cost-per-lead, cost-per-conversion. They need to apply social media marketing to the sales funnel, along with any other marketing activities. And they need to demonstrate how social marketing contributes to retention and the lifetime value of customers.

So, how to get started calculating ROI?

• Make your website the hub of all your online marketing activity. Website analytics provide the most robust measurements and reporting. Make your website a high-conversion environment and create an online strategy to ensure that all roads lead to it.
• Set specific goals and key performance indicators (KPI) for your social program. How will performance be measured? Social media marketing has a soft lead generation position in the sales funnel, so how do you assign it value? By deciding how performance will be measured: Purchases, opt-ins, downloads, website visits, demo requests, etc. Then assign each a value.
• Implement a comprehensive activity tracking system. Use your internal activity tracking of all campaigns, posts, interactions, etc. and integrate that information with Google Analytics Social Reports. These analytics put social data into context, assuming your website is indeed the center of your online universe.
• Measure value. How many qualified leads and customer conversions came from online marketing, particularly social media? How did your goals and KPI perform? Using those website analytics, you should be able to accurately track how your social program contributed to your organization’s bottom line and turn that into a revenue metric.
• Calculate hard and soft costs. Tools, ongoing maintenance, employee time, setup costs, content production, and more — these all need to be accounted for in your cost analysis.
• Calculate the resulting ROI. Now that you have your value numbers and cost number, you can settle on a real-number return on investment.
• Report marketing ROI holistically. There is no need to call social media marketing out as a special activity in your marketing program. It is part of your overall program and should be a line item in your reporting.
• But: Be aware that “hard” ROI cost/benefit analysis isn’t the whole story when it comes to social media marketing. Remember that statistic I cited above: That three-quarters of CEOs want marketers to become 100 percent ROI-focused? Now that you’ve done the hard work actually calculating the ROI they require to make basic decisions about your marketing budget, it’s time to educate them about all the more intangible benefits of marketing the social media way. Measuring the impact of relationships over time is elusive, as immediate conversions aren’t always won. Social media used correctly is a trust builder — and it results in higher returns due to brand loyalty. Now is the time to bring to the forefront some of those soft measurements, like the fact that social media programs convert the consumer’s social time into a brand premium, reaching a ROI of up to four times as high as the ROI of a TV commercial. Additionally, social marketing allows you to learn more about your customers by gathering their data, listening to their concerns, and tracking their online behaviors to your advantage — information valuable to your entire company, not just your marketing department. ROI for social media is a solid number, but there is room to tell the story of your program too, using softer metrics.
• Use your ROI results to make informed decisions. Now you have been able to identify the social networks that drive the most traffic, the kinds of posts, content and interactions that deliver high-quality visits, and which paths visitors take once they arrive at your website. You’ve also seen where your program’s weaknesses lie. Use this information to refine your program going forward.
• Embrace accountability. Realize that your CEO has done you a favor by requiring you to demonstrate responsibility for a budget. Why? Your marketing program is no longer being guided entirely by assumptions, soft measurements and gut instinct. You have a better understanding of the value your program brings to your organization. And you now have the information you need to improve it.

Read the first three parts of our series on ROI:

• Myths and Metrics: How do you measure social media success?
• The opposite of ROI: Are you putting your business in jeopardy by being a social media late adopter?
• Making the business case for a social media marketing program

Lynn Christiansen Esquer is a principal at SocialProse Media. Email her at lesquer@socialprosemedia.com