For the past 3 years (since I have been reading on this topic) there have been countless blog posts on Social Media ROI (Return on Investment; not the equally popular Risk of Ignoring). ROI has been incorrectly positioned to be the critical element to signal credibility.
I think ROI got a bad wrap.
ROI is thrown around anytime someone outside of Finance needs to justify a corporate spend. What I have found, is that execs first want to understand the costs of establishing a social media operation. Understanding the costs is how we started at Dell. Our social media operation was born out of a customer service crisis, over time as we evolved, our measurement improved to understand where Return was manifesting back into the business. Dell has even published some ways to measure the “R” (Twitter earns $2million, Groundswell Chapter 8).
My advice is address head-on the ROI question. ROI should always tie back to a business objective. No ROI is bullet proof; so don’t try to over-correct for Social Media ROI. Be honest, use assumptions (and footnote) in your ROI calculation. Don’t make the ROI a goal seek for a number that someone has stuck in his/her head. Dig deeper when someone asks for the ROI, it might just be the “I” they need.
Sean, you make a great point. Isn't the relevant business metric for return something called “profits?” ROI is a larger, more broad measure, into which a lot of benefits can be specified and understood, but it has to have a connection to profitable business operations at its core.
Comment by Jonathan Salem Baskin — June 17, 2009 @ 4:41 pm
Sean, you make a great point. Isn't the relevant business metric for return something called “profits?” ROI is a larger, more broad measure, into which a lot of benefits can be specified and understood, but it has to have a connection to profitable business operations at its core.
Comment by jonathansalembaskin — June 17, 2009 @ 4:41 pm
Jonathan
Thanks for the comment.
At the end of the long chain of events, then yes Profit must stand out (unless you are a charity). Customer Engagement via Social Media is one driver of profits by establishing/improving relationships with your customers, prospects, suppliers, shareholders, and public at large. And there so many other drivers of profit. Using Social Media to pinpoint impact on R, is difficult, but not impossible. It is really no harder or easier than other business activities that drive the R.
Comment by seanmcd — June 18, 2009 @ 9:46 am
Jonathan
Thanks for the comment.
At the end of the long chain of events, then yes Profit must stand out (unless you are a charity). Customer Engagement via Social Media is one driver of profits by establishing/improving relationships with your customers, prospects, suppliers, shareholders, and public at large. And there so many other drivers of profit. Using Social Media to pinpoint impact on R, is difficult, but not impossible. It is really no harder or easier than other business activities that drive the R.
Comment by seanmcd — June 18, 2009 @ 9:46 am
Jonathan
Thanks for the comment.
At the end of the long chain of events, then yes Profit must stand out (unless you are a charity). Customer Engagement via Social Media is one driver of profits by establishing/improving relationships with your customers, prospects, suppliers, shareholders, and public at large. And there so many other drivers of profit. Using Social Media to pinpoint impact on R, is difficult, but not impossible. It is really no harder or easier than other business activities that drive the R.
Comment by seanmcd — June 18, 2009 @ 10:46 am