Enough With Misusing Social Media ROI, Already

ROI-graph

I’m a little tired of abusing the term “ROI” – giving it new meanings just so they can say they’re measuring it. “Return on Interaction”… “Return on Engagement”… enough already.

Breaking news: ROI may well not matter for your social media program. (Edit: At least, not as a direct, immediate metric.)

Except this isn’t breaking news – people just don’t seem to hear it.

Here’s a definition of ROI from Wikipedia:

“Return on investment (ROI) […] is the ratio of money gained or lost (whether realized or unrealized) on an investment relative to the amount of money invested.”

There’s even a formula:

ROI

ROI is a finanical term. It has a set definition, which carries plenty of weight in companies. However, that doesn’t mean you can always relate your programs directly to it.

For the formula to work, you need to know the cost and benefits of your program in dollar amounts. You should know the cost of your investment, but the gain may be hard to attribute (especially to a single factor). What’s the gain from improved customer service? From relationship-building? From increased employee engagement?

Sometimes you CAN identify a specific gain from your investment. Sometimes you can tie specific activity to conversions and have a specific value for those conversions. In those cases, you’re in luck – you’ve hit the communicator’s nirvana. The rest of the time, just accept it:

ROI may not be the right measurement for you.

Does that mean your program isn’t valuable? Does that mean you’ll never get executive sign-off? Does that mean it’s not worth measuring your program?

No.

It means you find appropriate ways to tie measurement back to your objectives. Those last four words are key: “back to your objectives.” Because everything should lead back to them.

As we’ve navigated through this recession, we’ve seen clients become (rightly) more and more focused on measuring outcomes, not outputs. It’s music to my ears, because this gives us the opportunity to (a) measure the heck out of a program and (b) adjust programs to ensure they achieve the right results for the client.

Those measurements don’t have to lead to a financial formula; they just have to tie back to your client’s goals. Do they want to drive sales? Address customer issues? Be perceived as leaders in their market? I could go on and on. Each of these has different end metrics, along with different proxies along the way. They’re all valuable.

So, please – enough with “return on influence” and other variations on the term “ROI.”

The fact that you’re not measuring ROI doesn’t mean you’re not measuring success or impact. In fact, it may just mean you’re measuring the right thing.

What do you think?

Update: Oliver Blanchard made an excellent point that I neglected to include here – Ultimately, all of these measures SHOULD feed back to ROI. If your company isn’t tying its activities back to that eventually, you risk both the cost of an ineffective program and the opportunity cost of missing more effective investment elsewhere. I would add that there may be intermediate steps between your program and the ROI calculation. Making-up new metrics because you can’t tie directly to ROI does nothing to help you.

(Images: Investopedia, Shutterstock)

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  • ROI definition conversation aside, I think the larger point to keep in mind here is getting clients and organizations to think about integrated communications programs (including a social component) in terms of return on investment (the lowercase version, as Shel so nicely stated). And, as you said, Dave, showing a linkage back to the original objectives.

    As communicators and counselors, if we can demonstrate those kinds of results to our clients on a consistent basis, we’ll have made huge progress.

    Huge.

    @arikhanson

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  • I’ve never had a client ask about ROI — in the real, “dollars in return for my marketing/PR investment.” Every client asks about “results,” and the sophistication of what they expect in response to “How are we doing?” varies.

    For some, they mean “How many media or big-blog clips do we have?” Others mean “What’s our click/conversation rate on the site?” Others what to know about how some other relevant performance “needle” is on the move.

    It’s about meeting objectives we’ve set more than it is delivering a hard ROI.

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  • Wow Dave. Seems some were unclear of your meaning. Anyway I’d like to share 2 measurements of ROI that I have used personally. What I want to make clear here is that it is important to build a ‘static pipeline’ of metrics and measurements that DO NOT change. The tactics whether they are social, or television commercials are the flexible or creative aspect….

    Before this gets REALLY long, I will create a post on my site and trackback to your post.

    I have been using social media exclusively for PR and marketing in both my art business as well as working with Best Buy. I will cover the real measurements used in both.

    Thanks for more great ideas 🙂
    Keith

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  • I think social media ROI is fairly easy from a marketing stand point. In B2B marketing, you want to drive traffic from the web to your properties (like a blog or .com) and capture conversions in your CRM as leads. There are intermediate steps in there that have their own health indicators, like relationship building and output. But the bottom line hasn’t changed.

    In B2C, it’s either used for branding and is measured in terms of exposure. Or it’s used to drive traffic to marketing programs, like a coupon offering, which is measured in terms of conversion. Or it drives traffic to an ecommerce site where it’s measured in terms of sales.

    The hard part is getting the tracking all set up. You need analytics software to connect to market automation software with both dumping data into a CRM. While it’s conceptually easy, integration is time intensive and expensive, which makes it inaccessible to most people using social media.

    How many people are using a set up like Webtrends Analytics integrated with Eloqua, Radian6, and Salesforce? Probably not many. That is why people are struggling with how to prove ROI. We simply lack the integrated systems that do it, which is mostly a resourcing issue.

    Regardless, from a marketing perspective social media offers additional channels and should be measured in comparison to the other channels, like email and advertising, to know how much budget to allocate to it.

    Marketing isn’t the only thing you can do with social media, though. You can also use it to administer support. In which case you measure value in terms of reduction in phone calls, number of cases closed per person compared to other channels, and other traditional support and call center KPIs.

    HR has it’s own KPIs. So does Product. So does IT…etc.

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