Calculating the ever-elusive ROI on social media
For those in the business of eavesdropping, it’s not rare to overhear a pair of executives at a lunch counter talking about the ROI of social media. One will ask the other how to quantify its value and whether it’s worthy of all the hype.
If it’s the right set of businessmen, the answer to that question will be a resounding, “Yes! It’s worth the hype and more.” If it’s the wrong set of businessmen, the remainder of their lunch engagement will entail grumblings of how no one can put a thumb on social media’s potential payoff.
And that’s true. The ROI equation for social media is still an elusive concept. But because social media is really nothing more than a new way to communicate with customers, it’s a wonder that no one has asked what the value of e-mail correspondence or phone calls might be.
Regardless, for some decision makers, it’s all about the numbers. And that’s why marketing professionals and math nerds alike are trying to deliver on the how-to-calculate-social-media-ROI conundrum. A few of them are getting pretty close.
Take Joakim Nilsson, for example. He’s a social CRM strategist who aims to help brands excel in the transparent and digitally connected business landscape. He understands the difficulty of justifying new social media acquisitions like analytics and monitoring tools because he’s had to do it in the real world.
“As much as I’ve read about the value of a Facebook fan and the Return on Engagement, that stuff wouldn’t hold any water with my budget owners,” he said. “I’d need to show them things with a real monetary value – theoretical of course, but totally possible and justifiable cases.”
So he came up with the following way to calculate it and get the new tools he needs. It started with identifying the gains, which can be broken down into two categories: cost savings and revenue streams.
He discovered that a company could reduce its expenses through inbound call deflection and SEO back links by employing social media conventions. Social media could serve as the outlet for customers with questions or complaints, thereby reducing the need for call center operations. Furthermore, the SEO benefits inherently found in social media activity could eliminate the need for pay-for-play search results.
As for the revenue side of things, direct sales and the reduced amount of lost sales fortified the value of social media. Direct sales could be bolstered every time a business replied to an online comment. Those replies could then offer up an opportunity to include a link to a customer service contact form or a product page – and the resulting sales could be tracked using analytics.
When it came to the reduced amount of lost sales, negative posts about a company could be managed via social media platforms. “If you can assess and resolve these, there should, logically, be a reduced amount of lost sales, as fewer people will see the negative posts,” Nilsson explained.
Fully executing Nilsson’s method to calculate ROI would be a big project for any business. We understand that. But being able to have meaningful conversations about social media's ability to reduce costs? Now that’s valuable.
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