One of the most common questions we hear from brand marketers is, “How do we measure the ROI of our social investment?” To which we reply, “What’s your ‘R’?”
Social ROI isn’t all that complicated. The confusion seen in the marketplace stems from a lack of asking the right questions at the outset. Without knowing what one is trying to measure it’s near impossible to determine ROI. Yes, for most companies the “return” ultimately comes down to revenue, but many brands aren’t using social to directly prompt purchases. And those that are also need to take into account other externalities, such as changes in brand loyalty and lifetime customer value.
Unlike traditional advertising, which is directly focused on brand perception and sales, social is a hybrid; it has components of email, TV, word-of-mouth and media. Social can be effective for customer retention, sales generation, brand perception shift and even awareness. Which means that the ROI of social is a topic important to all internal stakeholders. For some, this might be the reinforced brand loyalty and affinity sparked by resolving a customer service on the “wall” or in the Twitter stream. For others, it’s procuring the ideal employee from a job posting on the company Facebook page. And for another grouping, it’s impressions earned by successfully implementing a viral sweepstakes. Depending on one’s goals and expectations, the “return” on a social investment can be vastly different, illustrating why there are so many divergent opinions on social’s value. Nonetheless, this “return,” and the investment for that matter, are clearly important to all, despite the uniquely held goals.
With social media mirroring the effects of more traditional marketing channels, starting with the right definition of “return” is critical to demonstrating success in the medium. So, when you’re next questioned about social ROI, start by asking, “What’s my ‘R’?”