July 3, 2015 Curve Admin

ROI in Social Media

“We do not measure the value in the phone anymore – we know the value.”
– Shel Israel

One of the biggest challenges facing businesses in their social media approach is the ability to show a Return On Investment (ROI)

Social networks are considered to be a powerful arena for online marketing. It provides a direct and targeted way to communicate with chosen audiences, and requires less spending than more traditional marketing techniques.

The problem is businesses are trying to justify their costs of social media using conventional advertising metrics, when social media does not fall into the category of conventional metrics. Instead of looking at social media’s ‘Return on Investment ‘ we should measure it as ‘Return on Influence’?

I recently read an article where they described “adapting traditional metrics to fit social media would be like sticking a square peg in a round hole.” With marketers’ apparent inability to measure ROI, it has become the most significant barrier to the adoption of social media tactics by their organisations (poll by Marketing Sharpa)

The reason organisations are finding it difficult to show an ROI is because a customer is worth far more than their initial spend, you need to factor in future purchases and the influence they may have through using social media.

Organisations need to ask themselves these questions and then place an ROI [Return On Influence] against each metric

1. How much does the average customer spend per transaction?
2. How many years do you expect a customer to deal or trade with you?
3. How much is a customer worth to you in their lifetime?
4. Is a customer more likely to purchase a product after some sort of social media interaction?
5. On average how many people does a happy customer tell about a product or service?
6. How much is it worth to convert an unhappy customer to a happy customer?
7. How much can an unhappy customer hurt you?

The main reason social media programs are successful is because they’re about PEOPLE, not MONEY! Consider the social media buzzwords – Community, Conversation, Dialog, Sharing – all of these are people-centric, consumer-centric. Social media is not about sales, it is about market share. It is not about profit margins, it is not company or brand-centric.

“We do not measure the value in the phone anymore – we know the value.”

There is a lot of truth in that saying – perhaps the time has come to look at Social Media ROI in a different way.