The Tedious Question of Social Media ROI Social Media Simplify The Tedious Question of Social Media ROI Social Media Simplify

03 June, 2011

The Tedious Question of Social Media ROI







Guest Post by: Jason Falls


Whether you are just starting to deploy social media tactics or are ramping up a full social media marketing effort for you company, you either have or soon will encounter the question of return on investment (ROI) for social media. Because social media marketing is a relatively new and uncharted territory for businesses, executives want to know what they're going to get out of something that requires so much time and energy.
The problem with the question, "What is the ROI of social media?" is that it implies money is the only benefit. ROI is a financial metric. It is a numerical formula that looks like this:

(Gain from investment minus cost of investment) divided by cost of investment.

In my experience as a social media strategist and practitioner, social media marketing can do seven major things for your business:

Enhance Branding and Awareness
Protect Your Reputation
Enhance Public Relations
Build Community
Facilitate Customer Service
Facilitate Research & Development
Drive Sales or Leads

Of those benefits, only sales and leads, or perhaps product research and development can readily be tied to a financial output. The rest are measured in other ways.

So the question then is not, "What is the ROI of social media?" but rather, "What does social media do for the company concerned?"

When we can start asking about the intrinsic benefits, as well as the extrinsic ones, we'll start to understand what social media marketing does, how it does it, how you measure it and what you ultimately get in return. Having this understanding will allow your company's executives to feel good about investing the resources needed to produce social media marketing success.

For a more in-depth discussion of measuring social media, I recommend three books. Social Media ROI by Olivier Blanchard, Social Media Metrics by Jim Sterne and Measuring Public Relationships by Katie Paine.





About the Author:
Jason Falls is an author, consultant and speaker based in Louisville, Ky. His blog, SocialMediaExplorer.com, is consistently ranked among the top marketing blogs in the world according to Advertising Age magazine. He is also the founder and driving force behind ExploringSocialMedia.com, a learning community and consulting resource for businesses interested in digital and social media marketing.

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