The ROI of Social Media

Business, they tell me is all about the ROI, the return on my investment. I get it. I do. However, the term ROI refers to a specific financial equation. Marketers, and I’m as guilty as any of us, throw the acronym ROI around casually and as such are paving the way to our own disaster.

Return on investment is a financial calculation used to determine the profit generated by a specific investment, expressed as a percentage of the original investment. Marketers more commonly use the term ROI as a synonym for results, but ROI is a well-understood and specific financial calculation in the business world, not a friendly acronym to be tossed around like API, B2B or CRM.

Marketers who use a financial term to describe non-financial results can create mayhem and false expectations. When the COO or CFO hears a marketer say, “Our social media program will yield ROI,” they won’t be content when those results are largely conveyed as retweets, sentiment, or number of followers. Which brings me to the point of this post, while the value of social media marketing is, in part, the value of all good marketing  (increased revenue) the total value of social media marketing is too comprehensive to simply refer to that value as an ROI.

The best way to measure the impact of social media, as with other diverse efforts in business, is to use a wide range of metrics that are both directly and indirectly financial. Dr. Robert S. Kaplan and Dr. David P. Norton, in their book, The Balanced Scorecard: Translating Strategy into Action, offered an approach for avoiding narrow ROI-based performance management. Instead presented a means to capture more completely the benefits of corporate initiatives. The Balanced Scorecard they prescribed monitors business impact from four areas: financial, customer, internal processes, and learning and growth.

This line of thinking can offer us much when it comes to calculating beyond the ‘more sales please’ goal of social marketing. We marketers need to be more direct and accurate when we speak about scoring our success. Our measurement of that success needs to include ROI, but also – and perhaps more importantly to the business just beginning social marketing – customer attitudes and engagement factors, the increased value to internal social assets, the successes of managing or mediating risk – the attacks to the brand reputation and perception.

Social media and marketers need to begin talking about how we score our success and stop talking nothing but the ROI of Social Media! I know I do.