Why should businesses engage in Social Media? In the end, the goal of all marketing is to increase sales/conversions. But only in rare examples can a company point to their social media marketing efforts and indicate a direct correlation with sales (one exception is Dell Outlet on Twitter). Companies should engage in social media to increase:

• Reach – create buzz, get new customers, create awareness
• Reputation and influence – become an authority/thought leader, improve sentiment
• Engagement – improve customer and brand loyalty

But how do you determine if your campaign is successful? First you need to determine your objective. If you have a new product launch, you probably want to build some buzz and create awareness (Reach). If you have added new features to your product, you will want to measure it’s effect on user engagement/loyalty. If your goal is to increase your influence and reputation, you can start aggregating content or create your own (via a corporate blog for instance).

This is a rapidly evolving field and the tools and metrics used to determine success are changing quickly. Don’t be afraid to throw away metrics, the most important thing is that you start tracking. Below I list some methods for objectively measuring your success.

Measuring Reach

• Visitors – The number of people visiting your site and the source of that traffic. This can be measured using standard web analytics tools like Google Analytics. If you want to benchmark against peers/competitors use tools like Compete/Alexa.
• Number of Friends/Followers/Fans (applies to Facebook, SlideShare, etc…) – I don’t believe Twitter followers is a good metric to measure since there is a lot of spam. Much more important is quality of visitors (i.e. one Oprah or Michael Arrington is much more valuable then 1000 followers). Measuring 2nd degree relationships (number of friends of friends), is much more valuable (albeit more difficult to measure).
• RSS Subscriptions – Feedburner
• Links – When sharing links, you can use tools like bit.ly to determine how many people have clicked on it. Just add a + to the end of any bit.ly link (check out my self-referential example: http://bit.ly/16GZ6x+).

Measuring Reputation and Influence

• Number of public mentions (Blogs, Twitter, Facebook) – To measure public mentions on blogs you can subscribe to an RSS feed for your company/product/brand/name on Google Blog Search. For public mentions on Twitter subscribe to an RSS feed from Twitter Search. For Facebook, use Lexicon (this is more interesting as a tool to compare against your competitors, though they are undoubtedly improving this tool and I’m sure will add a y-axis soon).
• Incoming links (SEO) – This is the primary way Google measures the authority of pages when ranking search results. Use tools like Google Webmaster Tools, Xinu Returns and Technorati to track these.
• Comments about you on other sites – Since Google doesn’t index comments on blogs (most often), you can find out using tools like BackType.
• Retweets – Twitter Search
• Unsolicited positive mentions – I love this metric, there’s not much you can do to actively improve this, but if you are tracking it and are open, transparent and engaging your users properly, people will speak positively about you.

Measuring Engagement
You can use standard web analytics tools (Google Analytics) to measure:

• Visitor Loyalty – The number of return visitors over 1 month
• Recency – The number of return visitors over 1 week
• Duration – The length of time spent on the site
• Actions – The number of actions taken on the site: downloading, posting, commenting, playing, etc…

The absolute numbers are not important. Track these numbers month over month and look for an upwards trends.

Off-site engagement metrics include:

• Facebook – You can use FB insights to measure the number of actions on your fan page: comments, likes, wall posts, etc…
• YouTube – Youtube has it’s own analytics for measuring video plays.
• Trendrr – Trendrr is an awesome tool which let’s you measure public mentions and music/video plays across a variety of sites.

In short there is no easy way to measure your success across social media. Sure there are short cuts like Twitalyzer, which is nice for at a glance metrics, but if you have the time coming up with your own set of metrics is far more valuable. This all assumes that your brand is small enough that you don’t get thousands of public mentions a day. If you do, you’ll have to call in one of the big boys like Visible Technologies or Sentiment Metrics.

Anything I missed? Anything else you track? Let me know on Twitter or in the comments…