This post is part of the Social ROI Blog Carnival at Think Customers: the 1to1 Media blog. Visit the blog carnival post at the link above to check out the full list of posts from numerous well-known social media thought leaders.
There are many ways to measure the success of social media at an organization. Some of these metrics are often focused only on tactical results (ex: number of followers or fans). Other metrics tie directly back to the bottom line (ex: value of sales coming directly from Twitter). On occasion, we see true ROI calculated from social media initiatives.
Most companies, however, view social media ROI in the same way they view the legendary pot of gold. They believe that it is there, and they keep looking for it even though it eludes them. Finding ROI in your social media initiatives doesn’t have to be imaginary. As we move into 2012, I fully believe this will be the year that executives begin asking the difficult questions to their social media teams, including what kind of returns they are getting on their social media investment. In order to answer this question, one must consider the true cost of managing a social media program.
What are the costs?
In order to consider calculating ROI, one must understand the costs involved with social media. Some of these are fairly clear, including cost of the platforms (such as community software or social media monitoring tools), cost of social media consultants or agencies (to help create strategy or execute campaigns), advertising spend (yes, you probably need to spend money advertising your social media efforts), and cost of personnel involved in social media (community manager, customer service social response team). Other costs are not quite as obvious. These include the opportunity cost of personnel that may be involved with social media in some aspect (ex: an executive spending time writing a monthly blog post is not spending time doing other things), the cost of training employees in social media (even those that are not executing social media should be trained on it), and the cost of social media influencer programs. I encourage you to understand these costs for both social media campaigns as well as your overall social media program so ROI can be calculated on both.
Measuring the gains
There is more than one way to measure the gains from social media. The first area that usually comes to mind is revenues; this is often a bit difficult to determine from social media, much as it can be difficult to determine from other marketing programs. However, the fact that social media is a web-based activity gives companies (especially those in the Business to Consumer space) the opportunity to measure actual product purchases coming from social media. Dell is one of the most commonly cited examples of this from their Twitter Dell Outlet account. Sanuk is another example. Per social media manager Rachel Gross (shared in an interview I did with her for my book, p. 44-46), even though Sanuk doesn’t often post direct links to their website from their corporate Facebook page, they are able to track conversion rates. They do this by looking at how many visits to their website (via Facebook) result in a sale, thus measuring their return on using social media as an engagement tool.
The other side of the coin from revenue is cost savings. One of the largest areas where companies can find significant returns on their social media investment is in customer service and the use of online branded communities. Most brands that host a peer-to-peer support community find that they are able to directly measure the number of calls deflected as a result of the answers provided by community members to each other; this occurs for both B2C as well as B2B businesses. Companies such as Best Buy and Verizon (where I was most recently actively engaged in this as the community program manager) see these gains and are able to use them to calculate an ROI on their communities. While we are on the subject of online communities, there are other benefits that can factor into the ROI equation. For example, Verizon’s residential community also has an Idea Exchange, where customers have the opportunity to help Verizon improve their products and services, as well as innovate around new products. The returns for such a community can include additional sales from new products as well as improved uptake of existing products with current customers due to improvements made via the idea site.
Finding the Pot of Gold
While you may not find the elusive “pot of gold” in your social media programs right away, more than likely you will see both direct and indirect benefits by engaging with customers and prospects via social media. Hopefully this post has helped you get past thinking only about the numbers of followers and fan your sites have. Read some of the other posts in the Social ROI Blog Carnival to learn how you can better answer your executives when they ask you what your company is getting out of social media, and let me know what your key takeaway is from the carnival.
(Photo credit: DNY59)