Thursday, January 14, 2010

Social Media Marketing Stands at the Chasm

(Or, "How to Stop Worrying and Learn to Accept the Need for ROI)

Recently I attended a seminar at the Ha
rvard Business School that featured David Meerman Scott, the consultant, speaker and author of the book “The New Rules of Marketing & PR.” Scott spoke about Social Media and business marketing. His was by far the best talk I have been to in quite some time. Scott is a marketing careerist who is an early adopter and proponent of the use of Social Media (YouTube, Twitter, Facebook, LinkedIn, etc.) in marketing. He is experienced, knowledgeable, engaging, and entertaining.

Scott had my attention very early in his ta
lk. He asked the participants, many of whom are the “old guard” of Harvard Business School’s theories of marketing, these four questions:

In the past two months, either privately or professionally, in order to find an answer to a problem, or to research or buy a product, have you:
  1. Responded to a direct-mail advertisement?
  2. Used magazines, newspapers, TV or radio?
  3. Used Google or similar search technology?
  4. E-mailed/texted/chatted with a friend, colleague, or family member and received as a response a URL which you then clicked to visit the web site?

As it happens audiences around the
world, in many different forms and contexts, answer pretty much the same way. Few of us buy or do research via direct-mail or the traditional media of magazines, newspapers, TV or radio. Everyone uses search technology and web-based interactions to find out what’s available, what’s hot, what works, what’s the best deal, and what to do. Everyone.

Scott’s talk made tangible my already existing instinct that Social Media was the thing to do.

But, many people have not experienced
such a revelation and remain unsure of Social Media. Some are quite hostile. A large portion of the populace thinks it’s for geeks and or charlatans…

One way this is expressed is in a question that has gotten under Scott’s skin, “what is the ROI of Social Media?” His reaction to this seemingly innocuous question was the one off-note key of the presentat
ion. He really hates it when someone says “show me the ROI.” Just the day before he had gone on what he calls “a rant” (listen here) about his frustrations with constantly being asked to provide, demonstrate, or describe the path to the ROI for Social Media in business.

The visionaries, like David Meerman Scott are often frustrated by the requests of business to provide a financial justification for two main reasons. The first is “can’t they just see it? Can’t they see the time we’re wasting? We have to go NOW!” The second is centered on the reality that when management isn’t ready to deal with a subject, doesn’t want to invest, they often ask for an analysis such as an ROI, claim that the underlying assumptions are questionable, and effectively say “no.” It’s a deliberate waste of the visionary’s time. Nobody likes to push on a rope, certainly not a visionary.

But this is not new. At each brand-new age in IT the proponents are asked for an ROI and they tell those who hold the purse strings, “you just don’t get it.” They get on their “you’re such a Luddite” horse and dismiss as irrelevant those who would challenge the vision. The question and the frustration with it are as old as time. It happened with distributed processing vs. mainframes, PC’s vs. central IT, the Web versus proprietary networks and is apparently happening, right now, with Social Media for business (and plastic corks for wine...).

Working on Step 2

Eventually proponents of each new technology or process or approach understand that prior to gaining significant investment those who are responsible to shareholders and management need to be shown why the proposal is a good idea and why and how it will produce a beneficial financial return. Eventually the proponents who said “you don’t get it” realize that it is they who don’t get it and we all get down to business.

The song
they’re singing is called by Geoffrey Moore, another marketing maven, “Crossing the Chasm”. In his work he argues there is a disconnect between the early adopters of the product (the technology enthusiasts and visionaries) and the early majority (the pragmatists). Moore believes visionaries and pragmatists have very different expectations creating a gap between the market as viewed by what visionaries offer and what pragmatists are willing to buy.

In Crossing the Chasm (and the closely related to the Technology adoption lifecycle) five main segments are recognized; Innovators, Early Adopters, Early Majority, Late Majority and Laggards. Moore’s recommended strategy is to focus on one group at a time: Innovators then Early
Adopters and so on, using each group as a base for marketing to the next group. The hardest transition, and the location of the chasm that Social Media faces, is making the transition between visionaries (early adopters) and pragmatists (early majority). If you make it through to the end you have yourself a world-class success.

- Technology Adoption Lifecycle -

Crossing the Chasm is, for want of a better term, about a cultural conflict. Early Adopters are the visionaries who have the insight to match an emerging technology to a strategic business opportunity driven by a dream. As a buying group, visionaries are easy to sell but very hard to please. "You can succeed with the visionaries, and you can thereby get a reputation for being a high flyer with a hot product, but that is not ultimately where the dollars are. Instead, those funds are in the hands of more prudent souls who do not want to be pioneers"

The Early Majority are pragmatists. "They care about the company they are buying from, the quality of the product they are buying, the infrastructure of supporting products and system interfaces, and the reliability of the service they are going to get. Pragamatists tend to be 'vertically' oriented, meaning that they communicate more with others like themselves within their own industry than do technology.

There are four fundamental characteristics of visionaries that alienate pragmatists:

  1. Lack of respect for colleagues' experiences.
  2. Taking greater interest in technology than in their industry.
  3. Failing to recognize the importance of existing product infrastructure.
  4. Overall disruptiveness.

It is very difficult to break into a new industry selling to pragmatists, and that’s essentially what Social Media is attempting to do in overall corporate marketing. References and relationships are very important. Pragmatists won't buy from you until you are established, yet you can't get established until they buy from you.

Moore says "Overall, to market to pragmatists, you must be patient. You need to be conversant with the issues that dominate their particular business. You need to show up at the industry-specific conferences and trade shows they attend. You need to be mentioned in articles that run in magazines they read. You need to be installed in other companies in their industry. You nee
d to have developed applications that are specific to their industry (italics mine). You need to have partnerships and alliances with the other vendors who serve their industry. You need to have earned a reputation for quality and service.”

For actual chasm crossing tangible, “relevant to my situation” applications have a huge advantage. They are most likely to be championed by end users. Applications are what an end user sees. If the application fixes a strategic challenge they can be used to generate a business case. Certainly Social Media, with its very low costs of technology, should be able to do this. To accelerate the adoption of Social Media techniques and tactics we must tie them directly to an application, to
a business case, in order to gain the end-user sponsorship necessary to succeed.

To cross the chasm, Moore advocates that a company focus on a single market, a beachhead, win domination over a small specific market and use it as a springboard to adjacent extended markets to win. So, if you haven’t dipped your toes in at all, don’t try and apply Social Media everywhere at once. Choose a market or a channel. If you have been working Social Media pay attention to those activities that succeed in Social Media marketing and find the tangible ways they generate business value.

Back to Meerman Scott, don’t make the content about your product. Make it about your customers’ interests. This is
not coercive marketing/advertising. For this portion of your content at least expect it to be customer-participatory and contributory and by definition you have to relinquish message control. Get involved in the on-line communities your target market participates in. Create triggers in content that encourage people to share and point them to your virtual doorstep (where you can sell to them ‘cause they’ve opted in).

To convince internal or external investors, those with the purse strings, show a planned deployment of resources
and an expectation of the Awareness and Interest you will generate, how you’ll know if you succeed, and what you’ll do if results are good, bad or indifferent. Make them confident you know what you’re doing. They’ll get that and you won’t seem so “reality challenged.”


  1. Hey Doug - Thanks so much for using some of my ideas in this thoughtful blog post. The "ROI thing" is a huge debate these days. I think many of the people who insist on ROI are really just fearful of the unknown.

    I wonder how many companies calculate the ROI of giving each salesperson a BlackBerry? $2,000 per person is spent because "it makes the salespeople more efficient" but I know zero companies that calculate the return on that investment.

  2. David -

    If we ride the Crossing the Chasm argument, some ROI requests are legitimate. They're from Early Adopters and Early Majority types, people who are already active or serious considering efforts to market through Social Media. They're looking for the portion of the argument that shows how they'll make money.

    I don't think the ROI formulation, even for these oppty's, needs be as rigorous or extensive as that for an industrial investment, a power plant for instance, as we have 2-4 years of Social Media experience. Power plants have over a century. That said, each of the people I spoke to, in an "open-ended question" kinda' way, want to know how money invested is planned to generate money returned.

    All that said, there is a wide-spread use of "get me an ROI" by management as a way to forcefully but politely kill a discussion. A friend described this as standard procedure for Fannie Mae's COO during the 1990's. I've seen it often. Hearing it from Larry Small is one thing, he's reputed to be a very smart and very capable person. You learn to read the signals and adjust.

    What's harder is the use of the question in at least two different ways. One is the nay-saying ankle biters who are only using the question to obstruct. For them I would just point them back to your Four Questions and, paraphrasing Braveheart, "What are you going to do without your [Social Media]!" The nay-sayers need to get into a sensible boat. I don't know where else The Four Questions lead them but to use of Social Media in marketing.

    The second group that ask the question about Blackberries and the like have just gotten into the discussion and they're still disoriented. Your message is making their hair hurt. They too need to go back to The Four Questions but only so that their sub-concious understanding can catch up to the here and now.

    One further thought that I'll likely try and write up. I think the question itself is off in the following manner. Instead of calculating the ROI of Social Media or billboards or Super Bowl ads why not back it up and compare and evaluate the ROI of a mix of methods for generating Awareness and Interest?

    This approach puts the discussion on business, not a technology basis and takes me directly back to, dare I say it, The Four Questions.


  3. One reality associated with applying the traditional "crossing the chasm" paradigm to "promoting" social media/social networking/enterprise 2.0/web 2.0 adoption in support of an entrprise goal or innovation is that, in many markets, the markets and customers themselves -- as you point out -- have already adopted public social media techniques in advance of the enterprise. The enterprise marketer looking to employ web 2.0 techniques is already behind the curve since web- and media-based conversations are already going on that are relevant to the enterprise product or service. Trying to fold in web 2.0 techniques on a product specific basis may be shortsighted without knowing what else is going on out in the marketplace. Marketers make a mistake thinking web 2.0 techniques are just another tool they can use to communicate about a product or service if they are not already engaged authentically with the marketplace. That takes a strategic, not a product specific focus.

  4. Dennis -

    Well put, the market is already having the discussion. This goes back to David Scott's Four Questions.

    My thought is to change the ROI scope from "ROI of Social Media" to "ROI of Awareness and Interest" with the various vehicles for creating and participating playing their roles.

  5. Doug, one way I think about the challenge to the enterprise in adopting web 2.0 techniques to communicate externally is in terms of "infrastructure." Within the organization the IT department has traditionally defined infrastructure in hardware or software terms that can be related directly or indirectly with corporate functions and operations. Externally, however, the "infrastructure" the enterprise needs to be more concerned with is the "infrastructure of conversations" that are taking place, irrespective of the specific technology platform. Traditional measures of ROI associated with replacement metrics, cost savings, and sales support are difficult to translate to this different environment.

  6. Dennis -

    I think I take your point. I hesitate (though I will cogitate...) as getting buy-in to Web 2.0 is hard enough (just ask Meerman Scott). Adding the word "infrastructure" to it adds the concept of a shared resource and implicit taxes for its use and governance and ay-yiiiiiii!

    I think conceptually it has legs but my instinct is not to use the term.

  7. Good article Doug and really good discussion on ROI. Social media ROI is difficult to quantify specifically, and this makes management wary. Time and resources spent on an activity that doesn't generate immediate results is generally frowned upon. The value of social media is derived from the resultant community. To build a community, you need to understand your market and their influencers; have relevant content that engages a following; and nurture the relationships without a hard sell. It’s about building Trust (as so eloquently described by Chris Brogan and Julien Smith in Trust Agents). It takes time because it’s word of mouth. To some degree it’s unmeasureable because it’s halo-effect marketing. I was a CMO for a small company and was building word-of-mouth marketing programs similar to those used in social media. The CEO wanted instant leads. The sales team wanted to do trade shows. My methodology would take time to prove out. I couldn’t justify my activities with immediate ROI. I changed the programs to meet the CEO’s and the sales team’s needs. In the long term, the company would have seen better growth with the methods I was employing. In today's economic environment it is critical to relate marketing activities to leads and sales results. Hence the chasm for social media is wide and the demand for ROI is strong. I believe only a handful of CEOs will truly understand the value of building a social media platform. Those who get it early on will reap the benefits. The ROI may be difficult to quantify, but the results will be there in the long term.

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  9. was inspired to write this article after reading this article '5 Pitfalls of Measuring Social Media ROI'.

    The arguments cited in the aforementioned article are true when you are calculating return on investment (ROI) based on traditional investments like real estate, business startups and even the markets; however, it is not so cut and dry when calculating your social marketing ROI.

    Chris from social media optimization sydney

  10. The challenge being, return on investment is return on investment. The calculation doesn't change based on the type of investment. Social Media costs or returns may be harder to quantify than "traditional" investments, and there may well be non-tangible reasons to invest and do so with energy, but, the calculation remains immutable.