Social Media and ROI

How do you measure the ROI of social media? The first step is to define that which you're attempting to measure.

Wikipedia defines ROI (return on investment) as "a measure of investment profitability" and as "the ratio of money gained or lost relative to the amount of money invested." The wiki page offers an expansive discussion on the topic, but the bottom line comes down to a simple proposition: "If I do X, then I expect Y in return" – the difference between X and Y is the ROI (positive or negative).

There are many examples where ROI is fairly simple to measure: If I put $1,000 in a savings account, I expect to achieve an ROI measured in pennies. If I properly water and fertilize a field of wheat, I expect to produce a crop that ultimately returns a profit.

But in the field of marketing, ROI often defies such "cause and effect" simplicity. If you pay $10,000 for an ad, run it once, and nothing measurable happens, can you conclude that advertising doesn't work? Or that nobody reads the publication? Or that you completely wasted a bunch of money? Of course not, and the main reason is that marketing is not a one-time, flash-in-the-pan event.

Marketing is the orchestration of a journey of exposures, interactions and experiences that happen over time. Just as ads are conceived in campaigns acting in concert with other points of exposure (i.e., PR, seminars, trade shows, sales calls, etc.), social media is an increasingly important component that complements the rest of the mix.

Measuring the ROI of social media isn't about looking for a more granular level of accountability than what's expected from other marketing resources. The metrics that matter are in the realm of figuring out how to track progress towards long-term customer-centric goals such as:

• Building trust relationships

• Increased customer engagement

• Enhanced customer experience

• Rapid response to customer feedback

Stay tuned for much more on this topic in future blog posts.

BTW, one can never assume that the ROI of doing nothing equals staying even.