How to Understand Social Media ROI

Can participation in social media be justified by ROI (Return On Investment) analysis? Should you be able to show revenue gain or time savings with social media engagement? What goals are attainable via social networking?

This is a controversial and inflammatory topic. Here are just some preliminary remarks on Social Media ROI.

Business managers often want to know "how much bang for the buck" they get from a new piece of equipment or set of procedures. Social media participation may require an investment in money for such things as branded blog design and paying employees to spend time representing you online.

Expenses for social media participation are meager compared to many other things you do. The main investment is time. Your Twitter person or corporate blogger can spend a lot of time, and they can even get sucked into wasting time on trivial matters, just like with telephones and email.

You need to establish guidelines for how your social media participants conduct themselves, how they represent your company, and how they interact with social network members. Blogocombat, online debate, and the handling of trolls, abusers, and spammers must also be dealt with prior to engaging in social media.

Surely you see how major players in business have leveraged social media to gain substantial advantages. Many new products have been launched successfully with social media playing a large role. When you have a blog and a Twitter presence, that are genuine and transparent, you have a great venue in which to promote your values, offerings, and what differentiates you from competitors.

But how do you measure good will, customer satisfaction, and the ability to present your side of a controversy?

Social media, primarily blogs and Twitter, enable a business to enter the realm where potential and current customers are swarming. You don't jump into social media to hype products or make sales pitches necessarily -- you optimize customer relations and customer service.

You participate in social media to position your company as customer-friendly.

You interact with members of online communities to prove that your company can solve their problems. Customer service, letting people contact you quickly and easily, with complaints, questions, suggestions, and praise -- this is the Main Idea of Social Media.

Thus, you can't necessarily measure the impact of your social media involvement. Social media participation is similar to other hard-to-measure efforts, like advertising. ROI on radio and television advertising is notoriously fraught with difficulties. ROI on public relations is also not easy.

How about doing an ROI analysis on your mission statement? Or positive attitudes in the workplace?

Have you run an ROI analysis on smiling? New carpet? Golden parachutes (hush money)? Executive parking spots? Promotions? Raises? Bonuses? Titles? Conference attendance? Artwork adorning the halls? Email?

Have you banned frivolous Forward Emails?

Business does certain things, simply because (1) they make sense, (2) they're right, and (3) your competitors are doing it. You sometimes have to bite the bullet and invest some time and money in something, even when it's not entirely clear what the FINANCIAL payback will prove to be.

Social media is a company's opportunity to put a human face on their business, to make it easy for customers and the public to contact you...in a manner that THEY want to do it.

Competitive advantage can't always be nailed down to numbers and cash flow.

I'm sure when the telephone was invented, most business thought it was a time waste and trivial.

"Who wants to be interrupted by phone calls? I don't want customers yakking at me on a telephone. I want them to jump on their horse and visit the store. Time spent on the phone is time away from physically present shoppers. No thanks!"

How about an ROI on ROI?

It's hard to do ROI on training, for example, because it may take a long time for the training to pay off in increased productivity. Often training is bad short term, but good long term.

Social media is simply mandatory, not subject to ROI as final arbiter.

To measure everything according to Profit and Loss or Revenue Generated or Time Saved or Complaints Decreased is an accountant mentality, which is good where applicable but can be a bit ridiculous where irrelevant.

Customer perception. How do you measure that in revenue flow? You can't.

If your competitors are engaging in social media, and maybe even getting mainstream media buzz from it, from some popular innovation or startling application, where does that leave you? Playing catch-up in a mad panic?

Remember the telephone and email.

At first, these seemed trivial, bizarre, distracting, prone to abuse and misuse.

It's going to be a Darwinian Economic Recovery: only the strongest and smartest companies and employees will survive. Mediocres, slackers, lazies, and late adaptors are doomed. If you're not a pioneer, willing to take risks, bold enough to strike out on your own and try new things, you don't have a very bright future.

Master the new technology and the new media.

Come to social media with a positive attitude and an altruistic strategy. Enrich social networks with your expertise, insights, and solutions.

Social media can be a secret weapon in your arsenal for success, whether or not you can do an ROI analysis on it.

It can be stress-relieving and reassuring when you know you're doing everything possible to promote and protect your business. Social media is a mandatory element in the mix. Now figure out how to use it in an economical, customer-centric, and productive manner.

Let me conclude these preliminary remarks with a quote from the remarkable uber-blogger and social media specialist Shel Holtz, from "If You Do Your Job Right, Nobody Will Ask About Social Media ROI."

You can’t point to the value of that improvement on a balance sheet. But nobody will ask for ROI if your plan goes like this:

1. We’re being hammered in online discussions. It’s surely affecting purchase decisions. Right now, nearly half of all comments about us are negative.
2. We plan to initiate a variety of social media efforts designed to turn the situation around.
3. We’ll monitor the space to assess whether our effort is having an impact. Our goal is to reduce negative commentary to 20% within two years.

Measurement of communication—any communication—is all about the degree to which you achieved the measurable objective that drove the communication in the first place.

Also see: David Meerman Scott's "Epic ROI Rant".



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