Home  › Social › Social Media

Get Serious About Return on Investment

  |  March 6, 2013   |  Comments

To get serious about ROI, articulate clearly your fundamental business objectives, the ones that talk about growing market share, boosting sales, or improving margins.

It's 2013, and we've been talking about social media as it relates to business for almost 10 years. So, you'll understand my slack-jawed response when I heard yet another social media "expert" proclaim, "You can't really measure social, so ROI can't be precisely determined." Never mind where or who said it. It is simply wrong. As a discipline, we can adopt a higher standard. It's time to get serious.

First, what is ROI? We all know it means "return on investment," but what constitutes "return?" I see so many definitions that seek to relate intangibles - direction, likelihood, engagement, and more - that it's no wonder people get confused and conclude, wrongly, that this can't be measured in a social context. So let's first establish that ROI is a financial (aka "numbers") measure that relates dollar cost and economic return through a precise formula. Sure, there are lots of other KPIs and raw measures that are important, but none of these are ROI.

ROI relates the dollars invested in a specific effort to the measurable economic outcome of that effort: more precisely, it is the ratio of an expenditure to the associated change in margin, generally as a result of a change in costs or sales. Social technology can certainly impact both, so with care the contribution of social can be expressed quantitatively and hence in terms of ROI. Don't let anyone tell you otherwise.

What are the sources of the core components of ROI? The dollar expense part is pretty easy, but be sure you're accounting for all of it. There are the obvious costs: if a technology deployment has a software cost of $100,000, that's part of it. But, as we say, "Wait, there's more!" Be sure to consider retraining, changeover costs, and internal deployment-related expenses. In other words, the costs that your organization would not incur if you were not considering this project. On that point, it's acceptable to cite a "direct ROI" that presumes part of your "job" is evaluating options and continuously improving. In that sense, you and your team are "sunk cost" and you can use that reasoning to simplify the calculation by eliminating the need to assess costs other than the direct cost of the technology. Whichever method you choose, just be sure to choose one and apply it consistently.

What about the benefits - the return? If your social program is limited to collecting "likes" on Facebook, good luck with this next part. Not that there is anything wrong with collecting "likes" or amassing "followers." The fact is that your customers are engaged with each other on the social web and you need to be there. "Likes" and "followers" are important KPIs and you should be tracking them. But by themselves they are not ROI.

To get to ROI, you need to venture further: why are you collecting "likes"? What is the connection between an incremental "like" and your fundamental business objectives? For example, if gathering "likes" provides a measurable or well-understood way to generate leads, then you're on your way to ROI. Leads have a value, and your organization knows what that value is. Your organization also knows what it costs you to generate each new lead. That means you can relate your Facebook investment to the value of leads through a KPI such as "likes" by tracking incremental "likes" and resulting incremental leads. It's not a moon launch, but you do have to be passionate about wanting to get there.

The "return" part of ROI can come in several forms. One of those is increased sales. Another is reduced expenses, for example, as a result of a project that makes your company more efficient. When you invest in a social engagement platform there are multiple potential sources of core economic value: as noted above, pre-sales engagement relates to leads converted. Post-sales engagement - aka "customer support" - can produce economic benefits through call deflection, early problem detection, and higher rates of purchase. That means peer-to-peer support communities, agent-based social customer care programs, and ideation platforms can all be tied back solidly to economic value. Hello ROI.

To get serious about ROI, articulate clearly your fundamental business objectives, the ones that talk about growing market share, boosting sales, or improving margins. If you start by connecting what you are doing with what the C-suite is doing you're on really solid ground. Think back to the point about "likes" and other KPIs. Relate them to sales or to the economic value of a lead and you've got a KPI that you can use to guide your efforts; one that can connect your efforts directly to the fundamental success measures of your organization. Then extend that to every measurable element in your social program. As good career moves go, learning to think and report in true ROI terms is among the best.

Confused image on home page via Shutterstock.


ClickZ Live Toronto On the heels of a fantastic event in New York City, ClickZ Live is taking the fun and learning to Toronto, June 23-25. With over 15 years' experience delivering industry-leading events, ClickZ Live offers an action-packed, educationally-focused agenda covering all aspects of digital marketing. Register today!

ClickZ Live San Francisco Want to learn more? Join us at ClickZ Live San Francisco, Aug 10-12!
Educating marketers for over 15 years, ClickZ Live brings together industry thought leaders from the largest brands and agencies to deliver the most advanced, educational digital marketing agenda. Register today and save $500!


Dave Evans

Dave is the VP of social strategy at Lithium. Based in Austin, Dave is also the author of best-selling "Social Media Marketing: An Hour a Day," as well as "Social Media Marketing: The Next Generation of Business Engagement." Dave is a regular columnist for ClickZ, a frequent keynoter, and leads social technology and measurement workshops with the American Marketing Association as well as Social Media Executive Seminars, a C-level business training provider.

Dave has worked in social technology consulting and development around the world: with India's Publicis|2020media and its clients including the Bengaluru International Airport, Intel, Dell, United Brands, and Pepsico and with Austin's FG SQUARED and GSD&M| IdeaCity and clients including PGi, Southwest Airlines, AARP, Wal-Mart, and the PGA TOUR. Dave serves on the advisory boards for social technology startups including Palo Alto-based Friend2Friend and Mountain View-based Netbase and iGoals.

Prior, Dave was a co-founder of social customer care technology provider Social Dynamx, a product manager with Progressive Insurance, and a systems analyst with NASA| Jet Propulsion Labs. Dave co-founded Digital Voodoo, a web technology consultancy, in 1994. Dave holds a BS in physics and mathematics from the State University of New York/ Brockport and has served on the Advisory Board for ad:tech and the Measurement and Metrics Council with WOMMA.

COMMENTSCommenting policy

comments powered by Disqus

Get ClickZ Social newsletters delivered right to your inbox. Subscribe today!



Featured White Papers

Gartner Magic Quadrant for Digital Commerce

Gartner Magic Quadrant for Digital Commerce
This Magic Quadrant examines leading digital commerce platforms that enable organizations to build digital commerce sites. These commerce platforms facilitate purchasing transactions over the Web, and support the creation and continuing development of an online relationship with a consumer.

Paid Search in the Mobile Era

Paid Search in the Mobile Era
Google reports that paid search ads are currently driving 40+ million calls per month. Cost per click is increasing, paid search budgets are growing, and mobile continues to dominate. It's time to revamp old search strategies, reimagine stale best practices, and add new layers data to your analytics.




    • GREAT Campaign Project Coordinator
      GREAT Campaign Project Coordinator (British Consulate-General, New York) - New YorkThe GREAT Britain Campaign is seeking an energetic and creative...
    • Paid Search Senior Account Manager
      Paid Search Senior Account Manager (Hanapin Marketing) - BloomingtonHanapin Marketing is hiring a strategic Paid Search Senior Account Manager...
    • Paid Search Account Manager
      Paid Search Account Manager (Hanapin Marketing) - BloomingtonHanapin Marketing is hiring an experienced Paid Search Account Manager to...