Social Media

How Do You Measure ROI In Social Media?

December 2, 2009

In the first 24 hours upon its’ release, “Harry Potter and the Half-Blood Prince” smashed U.S. sales records by selling 6.9 million copies in the United States alone. It took J.K. Rowling over a year to write, but took only an hour to make millions. With any task or campaign one engages in, the ROI on the project is at the top of the list. Whether it be selling a book or a new TV commercial for your product, the ROI is how success is judged. With the explosion of social media marketing, companies often find themselves going through the motions of creating Twitter accounts and Facebook fan pages, but without any true understanding of “why.” This is due in part to the difficulty in measuring ROI for social media.

The Conflict of Push Marketing and Social Media

The biggest reason why it is difficult to measure the ROI of social media campaigns stems from the premise of social media itself. When sites like Twitter and Facebook were started, the immediate goal wasn’t to monetize it, but rather to create a platform that allowed users to interact, share, and network with one another in a seamless and simplistic manner. As these platforms gained popularity, it also began to attract marketers and companies that were exploring new ways to ‘push’ their product out there.

Here in lies the problem. The concept of ‘push’ marketing is one that is used by most if not all companies, and involves creating a product and actively reaching out to consumers in hopes that they will buy it. Traditionally, this involved an assortment of strategies including cold-calling, advertisements, and extensive marketing campaigns all of which were geared toward and increase in sales. Here, a successful campaign involves an ROI where money was made. Plain and simple.

For social media, you have a dynamic situation. Social media offers marketers an endless array of possibilities. Not only does it give them the ability to reach out to millions of consumers, but more importantly, ones that will actually listen. While I did say listen, that is assuming of course that what you have to say has some value to it. For marketers, social media can be like Christmas morning when you can’t wait to open up your presents. So many exciting ‘gifts’ to open, that you only focus on that. You don’t take into account that waking your parents up at 5AM is ridiculous and that someone has to clean up the mess. You just focus on one thing, which is your own benefits. In the same sense, marketers that approach social media with the goal in mind to sell something and make money, are forgetting about what social media users want. They don’t want to read advertisements and they don’t want to take your survey on a recent dining experience. They want to be engaged and feel part of the community.

ROI Means Money

If you look up the definition of ROI you will find two words in the definition: profit and money. The return on investment can be simply defined as whether or not ones investment was efficient and more importantly, profitable. As we move into the social media landscape, companies that view social media as a direct way to make money will find that it is far more difficult than it appears.

Is it really possible to put a dollar value on every conversation you have on Twitter or Facebook? In reality, it is like trying to say that your conversation with your friend is worth X amount of dollars. While it may be possible, is it realistic?

If you look at the way social media is being used by companies like Whole Foods and Best Buy, you will note that the companies aren’t just trying to sell to the users that they engage. Instead, they are trying to enhance their experience as well as make them feel part of the community and express concern for their needs. A happy customer doesn’t necessarily mean they are going to buy more of your product, but what it does mean is that you have built a relationship with them. Directly, social media has helped forge a relationship and community between consumers and companies. The long-run impact will be the user becoming an evangelist for your company by sharing your content with others, and also increase the chances of them becoming your customer. So how do you put a dollar value on that if ROI is all about money?

Changing The Meaning Of ROI

So how do we measure the ROI of something that doesn’t directly yield immediate profit? Perhaps the key is to change the way we look at ROI first. As mentioned, ROI has traditionally been synonymous with “profit” and “money.” When companies spend thousands of dollars on social media campaigns, they expect to see results. Results, being profit and money. Social media unfortunately is neither. It is relationships and community. With that said, marketers and companies should not measure social media campaigns by dollars and cents, but rather by the quality of relationships they build and the strength of their community.

The strongest and most successful social media campaigns aren’t the ones that try and sell a product to you directly, but are the ones that interact and think outside the box. A great example is the MadMenYourself campaign by AMC and the hit show Mad Men. By giving users the opportunity to create personalized Mad Men avatars that they could export to various social media platforms, they were directly interacting and building a community with Mad Men fans while at the same time indirectly creating a campaign that would spread there content through the avatars. For AMC, the ROI wasn’t measured by the dollars it generated, but rather by the interest it peaked as well as the increase in fan base.

Seth Godin said it best when he recently wrote:

“Few businesses understand (really understand) just how much a customer is worth.”

As we continue to develop tools that will help us measure the success of social media campaigns, so will our ability to better understand the relationship and engagement between consumers and organizations.

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4 Comments

  • Reply Brenton Gieser December 3, 2009 at 2:45 pm

    Fantastic post Joseph! Working with brands in social media I find that many marketers are still stuck in the conventional concept of ROI. #23 in http://brentongieser.com/web-2point0/25-reasons-to-love-social-media is my way of saying that conversations and unique engagement will be more powerful then raw #’s with future companies.

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  • Reply Marc Beerens August 17, 2010 at 1:47 pm

    I think regarding ROI in Social Media we shouldn’t talk about Return on Investment, but about Return on Influence and/or Interaction.

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