"Not everything that can be counted counts, and not everything that counts can be counted."
- Albert Einstein
Say hello to my little friends, R.O. & I.
Yes. Return on investment have become the bane of an entire new media industry. However, avoidance is not the answer.
While the question of “what’s the R.O.I. of social media” is difficult to answer, it is necessary as it forces us to dig deeper. The result is maturity.
This conversation is important as you are expected to answer it not just today, but and also over time. The source of the question though, may also impede innovation and experimentation. Why? The answer in of itself is as elusive as the question asked. As much as the previous sentence sounds like a riddle, it is a very real observation. Often it is asked without a clear understanding as to whether or not the answer will actually change the company vision or the current course of business. Sometimes it is genuinely asked to do just that, change the vision and the course of business toward relevance. Either way, this is an opportunity to show how new media enables desired business outcomes.
Before we tackle the question, let me share a quote with you. After hundreds of executive discussions, I’ve stitched together a recurring theme that I believe will help you…
"If you come to me with a request for budget and resources for social media, to make it a priority for our business, you will lose every time…If you tie social media to our business priorities and objectives and demonstrate how engagement will enable progress, you will win every time. Social media must be an enabler to our business, just show me how."
- Your CEO
Your job is to connect the dots between the value of new media, the expectations of your customers, and the business roadmap the company is operating against.
So, when it comes to R.O.I. in social media, perhaps we’re asking the wrong question.
Again, the answer is difficult, but not impossible to answer. If I ask you, “how are you?” you will probably respond with “fine,” “ok,” “good,” or “great.” But if you take a moment to think about it, each of those answers begs a follow-up question to deepen the conversation, “why?” Or, “why do you say that?” Otherwise the question serves no real purpose other than to casually acknowledge another person or to run through the traditional ritual of easing into a conversation. The same is true for R.O.I.
If we are indeed to discover the “Return,” we need to tie it to more than the “Investment,” we need to understand the circumstances, intentions, and potential impact and outcomes business leaders need to see in order to understand new or foreign opportunities. Said another way, we need to define the “R” that defines tangible success and work out a formula that allows us to find the answers. Therefore, R.O.I is specific to an outcome or a goal, which means that there is no one answer.
To help, Susan Etlinger (@setlinger), my colleague at Altimeter Group, recently published an open research report, “A Framework for Social Analytics.”
The report opens puts ROI in context to help you focus on business value in your social media efforts:
"What is the ROI of social media?” This is one of the most frequently asked questions related to social strategy. While 48% of social strategists reported earlier this year that their primary internal focus is to develop ROI measurements,2 ROI is just one metric in the social business toolkit. Rather than focusing on social media as a monolithic entity, businesses should evaluate it based on its contribution to a range of business goals. Says Richard Binhammer, Strategic Corporate Communications, Social Media. and Corporate Reputation Management, Dell Inc., ‘There is no single ROI for social media."
As we see in the executive quote earlier in the post, tying social media to business objectives and metrics helps them see a clearer picture. We have to remember that executives most likely do not use social networks personally. It’s impossible for them to see what you see, therefore taking the extra time to connect the dots helps you make the case and in doing so, brings the R.O.I. answer into focus.
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Susan also does a wonderful job of not only showing us how businesses should view R.O.I, but she also helps businesses identify how to develop analytics frameworks that define the “R” or the return for specific business objectives.
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Prep work: Assess how your business is measuring R.O.I. on other fronts today
Step 1: Align your strategy with business objectives
Step 2: Determine how you will measure success and also define critical milestones
Step 3: Evaluate your organization’s readiness to measure social media and bridge the gaps
Step 4: Choose the right tools to measure progress and outcomes
Remember, there is no one way to measure R.O.I. There are many business pillars that stand on a solid foundation for growth. Susan introduces the Social Media Measurement Compass (see above) to guide businesses as they’re planning social media programs. Remember, social media doesn’t just belong in the marketing department, a social business is customer-centric and social media enables more effective engagement, learning, and adaptation. Therefore, it is the responsibility of other critical business functions to engage.
- Innovation: Collaborating with customers to drive future products and services.
- Brand Health: A measure of attitudes, conversation ad behavior toward your brand.
- Marketing Optimization: Improving the effectiveness of marketing programs.
- Revenue Generation: Where and how your company generates revenue.
- Operational Efficiency: Where and how your company reduces expenses.
- Customer Experience: Improving your relationship with customers, and their experience with your brand.
The three tenets of social business, Connected, Engaged, Adaptive create a transparent relationship with customers that opens the door to meaningful metrics to measure success and improve everything in between. In the end, understanding the relationship between business objectives and social media tactics will create a series of relevant strategies and critical links that in of themselves serve as opportunities for measurement and the establishment of R.O.I.
"We cannot measure, what it is we do not know to value."
COMMENTARY: Okay, let's assume you've: 1) developed an understanding of the Social Media ROI Pyramid; 2) Aligned your social media strategies with your business objectives, determined what social media metrics you want to measure, evaluated your organizations readiness to manage social media activities and initiatives and have chosen the right social media analytical tools to measure performance within the context of the Social Media Measurement Framework; 3) Are collaborating with customers, measuring your marketing activities, improving the effectiveness of your marketing activities, understand how your company generates revenues and incurs expenses, and activiely improving customer relationships in conformity with the Social Media Measurement Compass, then what?
Arm yourself with the social media analytical tools that best meets the needs and requirements of your social media marketing organization and fits within your financial constraints. Social media analytical tools can be relatively expensive, so don't buy more than you will actually need, and make sure those tools can meet your measurement requirements. There are literally hundreds of social media analytical tools, apps and management systems available today. If you are a small business organization I highly recommend that you read my blog posts dated October 13, 2010, February 10, 2011, February 14, 2011, and February 28, 2011. I also highly recommend that you review my hundreds of posts on social networks and social media marketing HERE.
Courtesy of an article dated September 1, 2011 appearing in Brian Solis blog
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