The ROI of Social Media

The ROI of Social Media seems to be a hot issue on the minds of most business owners and for good reason. If I were planning to allocate my scarce resources (money.. or even scarcer time) I sure would like some reassurance as to how much money I will receive in return. This is a fundamental human reaction that ties in with fear. Fear of the unknown, Going into uncharted waters, which can be scary and stop many from venturing far from the shore. On the flip side the biggest “risks” or being the pioneer of something new, often then to lead to the biggest rewards.

Okay, inspirational words aside, what is the ROI of Social media? Well, lets first examine the ROI of that billboard your company has put up, or the print ads you are running, how about those TV spots? The truth of the matter is that the ROI for all marketing activities have been wish-washy at best. It is simply impossible to measure and take into account all the complexities of how customers interact, view, interpret, and make their buying decisions. Not to mention trying to put an arbitrary dollar sign on it. (Anyone who claims they can, keep them close, as 2012 is fast approaching)

When it comes to Digital Marketing and Social Media, there has never been a more measurable marketing discipline. Click throughs, impressions, traffic, bounce rates, specific customer journeys through a site, and other analytical data paint a pretty vivid picture. Not only that, they can give you some great actionable insights into what to tweak and areas to improve upon.

Two Ways to Measuring Social Media ROI

The C.R.E.A.M. Approach.

Tracking back the specific click throughs in your purchasing funnel through your analytics. Then using this to determine which converting customer came from which social media platform. This works well for E-commerce and lead generation focused businesses because their determined goal equates directly to $$. On the other hand, brick and mortar businesses do not always have this luxury. Without some type of specific end goal to assign a dollar sign to this type of analysis is impossible. (This is why email newsletters or some measurable call to action is a must on any businesses site)

What about brand centric websites that do not generate direct sales through their website? Good Question. There are numerous “media metrics” that can be assigned to social media efforts. Metrics such as impressions, sentiment, share of voice, engagement, followers, friends, and the like. None equate to hard number though. It’s almost like a faith based initiative.

While you may not be able to see a direct increase in sales, you may be able to deduce some cost savings or other spill over effects.

The Spill Over / Cost Savings Approach

These metrics fail to translate directly into money signs, so the importance may escape the number crunchers in your next meeting. But don’t give up, the potential savings can be huge for companies transitioning archiac forms of business services to new agile social media platforms. One example (as played out as it is) is how Comcast took on a new approach to customer service by using twitter to engage with customer complaints and thus reducing the load on their call centers.

6 cost saving concepts to factor into your social media ROI

• The branding potential – saves money needed on potential advertising
• Increased customer service - cut costs of call centers and other bleeding departments
• Increased customer engagement – brand evangelists spread W.O.M. with more credibility that the company could ever muster on its own.
• Strengthening of existing customer relationship – Whats the lifetime value of your customer? How have your efforts made retention easier / more cost effective?
• Being viewed as an industry leader – lower time and money spend on chasing leads. If you are the obvious expert people will be banging at your door.
• The long term SEO benefits – Cut costs on Pay per click models.

You can slice and dice social media metrics in a variety of ways. So it is important to decide which factors you are going to measure against when the time comes to figure out your ROI throughout the course of your social media efforts.

At the end of the day perhaps the altruistic effects of your social media efforts provide value beyond that of a mere green piece of paper. The entire premise of Social Media is having a give to get mentality. Anything else will run the risk of your company being viewed as the cash hungry monster that it very well may be.

Put out good quality content that interests your audience and be authentic in your efforts and you should be seeing the positive effects of your social media campaigns. If you have to resort to calculating these numbers to convince your boss that what you are doing is working, you might be doing something wrong.

Social Media ROI from the Pros

If you enjoyed this post and would like to dig even further I highly recommend watching Christopher S. Penn’s Presentation on Social Media ROI.

You may also want to check out “Social Media ROI”  with Olivier Blanchard Part 1 Part 2

What is your take on calculating Social Media ROI?