The ROI of Measuring Social Media ROI

December 4, 2008
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You can spin it and call it anything you want but the point is that there needs to be something to show for using social media and that “something” needs to be worth more than or as much as what was put in…why?  Let’s say your company set up a social media campaign that cost 100k a year.  The campaign was generating links, building relationships with users, coming up with product ideas, and just overall making customers happy.  Let’s also assume

You can spin it and call it anything you want but the point is that there needs to be something to show for using social media and that “something” needs to be worth more than or as much as what was put in…why?  Let’s say your company set up a social media campaign that cost 100k a year.  The campaign was generating links, building relationships with users, coming up with product ideas, and just overall making customers happy.  Let’s also assume that the company tried to put an ROI or dollar amount around the social media campaigns/strategies that they were creating and each time the ROI amounted to something much less than the cost of 100k for the year.  Then what?  Do you cancel all social media efforts?  Do you close down the blog, suspend the twitter account, remove the facebook fan page and just pretend it never happened?  Then what?  What do you think will happen to your users that used to talk to you and engage with you?  You can bet that they aren’t going to be very happy, in fact your users may reach out to social media to bash your company for bailing out on them.

The ROI before engaging in social media and the ROI once you engage in social media are different.  Before you engage in social media your ROI is usually a guess or an estimation of what you want or hope to achieve.  Once you start social media your ROI changes depending on how your users respond to your campaign/ideas/strategies.  If you started a social media campaign and then found out that your users really hate you, then your ROI now focuses on maintaining a positive brand image (in addition to the other things you had).

The assumption that companies make is that social media needs to bring in a dollar amount at the end of the day, I’m going to play devils advocate and say when it comes down to dollars and cents, social media is going to lose you money!  Now if your a company, you probably don’t want to hear this.  However, think of social media as the extra bonus that your customers get for your product or service.  “Hey if you buy our product you are also going to get to build a relationship with us, help us come up with product ideas, get access to special promotional offers, etc.”  Think of social media as the “free prize inside.”  Companies create offers, discounts, deals, etc. all the time that don’t necessarily make them money.  Think about the Super Bowl ads that cost around 3 million for a 30 second spot, you think you are going to put a dollar amount on your ROI from that?  You think you are going to see these “results” that you care about?  Absolutely not.  Social media does not cost millions of dollars and you will probably see a much higher success rate?  How high?  I don’t know, engage in social media and find out.

Let’s use a different example.  Remember when Apple released the 3g Iphone and then lowered the price?  There were a lot of people out there who were pretty angry because they purchased the iphone before the price drop.  What did Apple do?  It gave folks who purchased the phone within a certain time period a refund for the difference.  Did this make them money? No.  Did it keep customers happy?  Yes.  Let’s also look at call centers and customer service support centers from around the world.  All day people call in and complain a product or service.  These departments exist to make users happy and so that customers will continue to shop with them and tell their friends about their products.

I don’t think we should convince or persuade anyone to do anything.  If you don’t want to use social media then don’t use it.  The clever executives and managers understand the value of a relationship, they understand that having users interact with and participate with a company is one of the most valuable things a company can ask for.  Want social media examples or case studies? There are plenty.

check out this list from Peter Kim

or this list from Now is Gone

In fact, has anyone come across horrible social media examples that have actually really hurt a business, product, or service?

The truth is that measuring things is not THAT big of a deal.  If companies really wanted to they could spend tons of money on creating expensive software, creating correlations, trying to predict behavior, etc.  For social media at least, the ROI of trying to measure ROI may not be worth it.  If we are talking about spending thousands of dollars on a social media campaign/strategy and double that on an advanced analytics package then why bother?

I really want people to start thinking about social media and communications differently.  I want people to understand that justifying something based on a dollar amount is not always the most logical thing to do.

What do you think, am I just nuts?


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