The ROI Challenge of Social Media?

Much has been written about the ROI generated from social media, I’ve read many kinds of ROI’s, all trying to reflect efforts and its return. I came across an interesting example that says to provide real bottom-line value of a social media interaction per user. Let’s see what this example is and if and how this reflects value and ROI.

The example given is the “High Five” program by Devart’s dbForge Studio. As mentioned I an article about the single value of a social media recommendation, the values range from discounts to free licenses to $100 Amazon gift card.

ROI IntelligentHQ

Tweets, the easiest to perform, are rewarded with a 10% discount.  Facebook posts get 15% .  LinkedIn – the biggest B2B social network listed – gets the user a full 25% off a license cost.  But Devart goes further.  Put their corporate product badge on your blog and get 50% off , write a short review, get the product for free.  Write a longer review, get the product for free and $50 for Amazon.  Write 1000 words with links and get the free license and $100 bucks at Amazon.

What I like about this program is how the amount of engagement is reflected in the reward, definately creative!

From a single social action point of perspective, I would tend to agree that the value exchange is tangible, it’s even a kind of NPS (Net Promoter Score) mechanism in a creative way.

However, social media as engagement and communication channels is much more than these direct-‘sales’ campaigns.

The ROI of social media is like trying to ascribe ROI to a telephone line.

At one point there can be a conversion, there can be achieved a certain goal, but it’s hard to pinpoint what communication added up to the conversion. For instance, when we speak with customers, we ask them how they got on our website, they mention it was an article that triggered their interest, but what article it was, when and so on is forgotten.

What is ROI and why do I think it’s a challenge to ascribe single point ROI to social media efforts.

ROI is a performance measure used to evaluate the efficiency of an investment or to compare the efficiency of a number of different investments. To calculate ROI, the benefit (return) of an investment is divided by the cost of the investment; the result is expressed as a percentage or a ratio.

Return on Investment is a short term metric, a direct relation between cost and return is calculated, and (short term) objectives don’t have much room for tactics or actions that don’t add direct value to the ROI. Here’s where the complication is, communication and interaction often do not add direct value to a quantifyable objective (for example sales).

Social media however are platforms where people can connect and engage, it’s a long-term process where people and organizations focus on building trust and relationships.

The best example within Social Media is Trust. How can the long term process of gaining and retaining trust be expressed in a ROI? Surely, when consumers do a purchase (be it a soft or hard conversion), it is the only quantifyable and “visible” action/reaction within a much larger process by the company and other consumers. The latter is important and the crux within this question.

ROI and co-creation

Think also about this challenge, the notion of two seperated entities, businesses versus consumers and the interaction between these two, ending up in sales, profit, revenue, ROI and so on. If consumers become part of the business, how must these external entities be calculated and taken into account? It’s not only the -direct- cost business cost what counts, but also the indirect and consumer-added related costs which should be taken into account in order to understand the new relationships and impact.

I know and ‘feel’ there is a discrepancy between the two because true performance-based marketing is a domain I worked in for five years. There is a difference in these ‘accountable’ marketing tactics versus social media.

Another example is a personal example. I have been investing in building my personal and online presence since 2007. In terms of ROI, what did I ‘accountably’ gain from it? I don’t know because it’s a holistic approach I took. Content marketing, networking, visibility and so on.

But I do know that certain developments have contributed to the next steps. I think a base cost (both time and money) should be compared to other tactics to understand the performance in relation to these channels, not directly to the ROI.

Another dimension to take into account is the phases where each tactic is most suitable for. In many marketing funnels one would see that it it being used mostly for the first phases of the AIDA process, converting happens through SEM, Affiliate and so forth.

Forbes once wrote that marketing’s new role is to create and manage relationships with stakeholders, from this point of perspective, added with the increasing power of customer experiences, social media plays an important role as cost-effective enabler.

And to make a last comparison, with TV advertising companies also don’t exactly know what the ROI is but budgets still increase. Both channels are becoming more and more trackable and certainly at one point organizations can understand what communication and content is adding value and which not.

Where do you stand in the social media ROI challenge?.