I don’t want to hear any of this “there’s no ROI in Social Media” nonsense anymore.
I also don’t want any more creative uses of the acronym ROI just to get around the tough question. Too many social media consultants are dancing around the question and they’re making us all look bad. Stop using Return on Conversation (ROC) and Return on Engagement (ROE) because you don’t know how to calculate ROI…and I’m NOT talking about people like Ted Rubin who use Return on Relationship (RonR), Ted knows how to calculate ROI, he also knows when it’s the appropriate topic to discuss. So if social media consultants really want to provide real value for their clients…
Get into it.
If a client wants to talk ROI then there are only two things to talk about:
1) Is ROI the appropriate metric relative to their goals?
2) If ROI is appropriate for their goals, do they have the capability to track income and expense accurately?
That’s it! Let’s break it down…
Is “What’s the ROI” the right question?
It may sound silly–since businesses run on money–but sometimes ROI isn’t the appropriate metric. You see, not everything that a company does is directly related to income. Sure, in some roundabout way everything has an ROI but sometimes it’s simply not worth measuring. Sometimes the end goal of the expense is to fulfill some other business need that eventually, hopefully, translates to revenue or preventing the loss of revenue.
For instance: What is the ROI of the telephone? What is the ROI of a logo? What is the ROI of travelling business class instead of coach? What is the ROI of a business card? All of these are expenses where the ROI is trackable to a certain extent, but would be more trouble than it’s worth. Some things are just the costs of doing business.
If the goal of a company is to build awareness, ROI isn’t the right measurement, awareness metrics are more appropriate. If the goal of a company is to generate more leads, then ROI isn’t exactly the right measurement, cost per acquisition is more appropriate. If the goal of the company is sales, then ROI is spot on.
ROI is a simple formula: ROI = (Income – Expenses) / Expenses
If there is no income in the goal, there is no ROI. It’s that simple.
When “What’s the ROI” is the right question.
When income is part of the equation I’m all for tracking ROI…let’s do this. However, fair warning, it’s not always easy.
You see, to properly track ROI, a business needs to be able to do two things accurately:
1. Track income accurately all the way back to the (singular) source of the income
2. Track expenses accurately including each and every penny spent on a particular initiative.
Again, ROI has only 2 figures to deal with: income and expenses. If either of those numbers is inaccurate, the ROI is inaccurate.
Therefore, if a company wants to know the ROI of Linkedin they need to know the following:
Expenses: The cost (expense) of the time each employee spends on Linkedin + the cost of any products, services or materials used to improve, embellish or brand each individuals Linkedin profile + the cost of any Linkedin upgrades, if applicable + the cost of meals and entertainment, meetings or other sales expenses + anything else I’m forgetting to mention that is related to the companies marketing and relationship building on Linkedin.
Income: The amount of revenue generated by each person met on Linkedin, lead nurtured on Linkedin or revenue value of Products/Services purchased via any links originating on Linkedin + anything I’m forgetting related to revenue originating from Linkedin.
Any sale coming through social media, must be tracked back to the origin of the content or relationship, and tracked through until the completion of a sale. This of course leads into the question of origin. What if you met someone at a live networking event, connected on Linkedin, followed on Twitter and 8 months later closed a contract…where does the attribution go? Which was the interaction that influenced them?
And then there is the question of time: how much time should be included in the analysis? If you’ve been blogging since 2006 and just picked up your first client through blogging in 2012, do you have to calculate the value of all 6 years to get an ROI? Is it the value of the time it took to craft the post that brought in that visitor? These are the hard questions to factor in.
Herein lies the problem with Social Media ROI
I can track the ROI of all sorts of things and I’m not even a math guy…spreadsheets give me a headache, but the concept is simple: capture all of your income and all of your expenses relative to an investment of time and money and you can calculate the ROI.
The problem with doing this for social media is that tracking everything can be a nightmare. With the exception of e-commerce platforms that use social media to drive traffic to a website where people make purchases, it can be difficult to get a grip on all of the inputs. Even with automation there’s a lot of gray area.
So here is my advice to any social media consultants out there: UNDERSTAND ROI! Stop dodging the question and actually get into it with your clients. If they want to measure it, fine, measure it. Often times you can make quite a pretty penny just spending the time to collect all of the data or to build the system capable of tracking all of that data. Most of my clients recognize that they are better off focusing on the value they get from social listening, the brand positioning they get from content marketing, the relationships they get from engagement, than they are trying to figure out the ROI of Twitter.
For the clients that want to measure their ROI, I’m very happy to do that and factor in how the time it’s taking me to calculate ROI affects the ROI. I suggest you all do the same or run the risk of damaging your credibility as a business consultant.