Expert Voices: Kathy Herrmann on Determining SCRM ROI - Story From: CRM Outsiders

By Chris Bucholtz

Back when people were pooh-poohing social media and social CRM on the grounds that it was too difficult to determine return on investment (ROI), Kathy Herrmann was one of the few coherent voices in the crowd shouting back, “Yes! Yes, you can!” SCRM ROI has become slightly less mysterious and slightly better understood in the last couple of years, but Kathy’s still on the forefront of helping businesses realize that there are techniques to measure the effectiveness of SCRM and to put it into terms even your accountant could understand.

Working with Dr. Natalie Petouhoff – another early advocate for SCRM backed by business metrics – Kathy’s consulting practice includes a center of excellence in the business of social business. Already a co-author of the Simplifying Social Business series of ebooks (available on Kindle and Nook), she has volumes in ROI for social customer service and social marketing and PR in the works.

I chatted with Kathy about what it took to develop an ROI strategy for your social CRM efforts. Since every company’s social CRM initiative is different, it’s not possible to crib it from a business book or swipe it from a competitor – but there are some elements that are constants.

CB: In order to establish an ROI measurement that makes sense for any business, is there a starting place? Is it based around the goals of the SCRM effort, or is there another initial consideration?

KH: Like any other corporate initiative, social CRM is no silver bullet. Like any other corporate initiative, you should expect to demonstrate the business case for your social programs which means defining/determining (in this order):

1.      Objectives,

2.      Strategy,

3.      Key Performance Indicators (KPIs), and

4.      Expected business results (cost savings or revenue generation), including demonstrating an ROI.

What this really means is the rules of business remain in effect when your undertake an SCRM initiative. Additionally, the reality is there is no one way to implement social programs, so any path your company takes should be thoughtfully undertaken – and should also be an outgrowth of your overall corporate strategy.

The ROI is your narrative or underlying story that supports your strategy – and it’s nothing more than a numerical view of your strategy. It reflects monetary gains versus costs. And to determine either monetary amount requires you to have an understanding of your initiative’s potential cost structure and expected outcomes. You can only know the potentiality after you define your strategy.

CB: Does the ROI model vary in complexity with the number of social channels an SCRM effort employs?

KH: Absolutely. Calculating the ROI of social media requires that you can hold three different concepts in your mind at once:

1) Traditional operational activities and metrics (for example, marketing or call center metrics).

2)  Social metrics.

3)  Business results when social media is applied.

By understanding their interrelatedness and dependencies, you can connect the dots and gain insight into the activities, reach, relevance and behaviors of customers.

My collaborative partner Dr. Natalie Petouhoff and I develop ROI models for companies. We always start with our base methodology but then each company requires customization to their respective smROI model. And the reason is because each social program has its own characteristics that impact the ROI.

For example, a customer service versus a marketing initiative will have different operational metrics impacting the model. ROI will also be impacted by the social channel. For example, determining the ROI of an initiative that is centered on a community versus Twitter activities requires different social metrics.

Our model is always evolving because corporate social programs are as well. In our base ROI model, though, Natalie and I focus on the following areas of potential gains:

1.      Increased revenues (from marketing and PR activities).

2.      Increased savings from:

a.      Call center operations.

b.      Customer insights.

c.       Brand protection.

d.      Lead generation.

e.       Product development

f.        Internal collaboration.

How many of the above gains a company accrues will depend on the nature of its SCRM strategy.

CB: How difficult is it to “tune” an ROI model to fit SCRM campaigns?

KH: Determining a social media ROI can have challenges, because it requires you to ...