As we start to integrate Social Media into our business we need to consider ways to calculate and measure the return on investment it represents.
This on the surface is a reasonable request, there is an obvious resourcing cost to business, which initially will be our time - but where do we start to measure? We know that effective social media campaigns are long term, are about engagement and ultimately about relationship development; but can that ever equate to dollars and cents?
“To determine return on investment (ROI) for social we must put metrics around human interaction and communication – Is this even possible? “
To compare this with another technological innovation that is now integral to almost every business, the telephone, could we possibly measure its ROI? Most of us just factor it in as a necessary overhead and leave it at that, and we certainly wouldn’t consider being without it.
For any social media engagement to be undertaken successfully there is a great deal of planning and strategy to be undertaken first. Sure, a try it and see approach would be possible, and in some cases successful, but there are real risks that you may damage rather than benefit your brand or image. Clarity of purpose and a staged action plan delegated to capable people who buy-in and ultimately take ownership of your vision is a logical approach. Without this we will certainly waste valuable time and cause otherwise preventable roadblocks and frustrations moving forward.
If your goal is to achieve more online mentions of your brand or company then you must know where you stand right now, this is called benchmarking. It would also help considerably if you knew why you wanted to achieve this. You must find tools that can measure the impact of your campaigns (in this case a word search tool) and know how much resource is used to achieve this outcome in any given period. You should also apply a similar measurement to a complimentary or competing firm to see how they are doing over the same timeline. It would also satisfy your financial controllers (those that will ultimately allow or deny your social media marketing budget) if there is a pathway to you sales funnel so this PR is converted to a tangible revenue stream.
As a standard formula, ROI is pretty basic, ROI = (X – Y) / Y, where X is your final value and Y is your starting value. In other words, if you invest $10 and get back $50, your ROI is (50 – 10) / 10 = 4 times your initial investment. In this financial sense, ROI is measured purely in the context of dollars and cents, however, the principles can be applied to other forms of investment (i.e. Time).
So to begin you must have the end in mind. Planning and having solid goals and concrete baselines is crucial to calculating this return on investment. Add to this the comparative measurement of your competitors’ performance as a benchmark and you have the basis of some valuable metrics.