She literally screamed out, it’s all bullshit! What the hell is the ROI of social media? You tell me, is there any ROI? I was quite taken aback, considering that she made a living selling customers on social media, and more so as we were on a dinner table, with kids and friends. My initial surprise at the outburst from a professional in the field, turned to a realization, that there are many others who have the same question. Too many people are not clear about the ROI of Social Media.
First, What is ROI?
Before diving into explain the ROI of social media, let me look at the word ROI, I know it sounds silly, but bear with me. ROI – Return on Investment is a number which tells you how much you stand to make on your investment.
e.g. ROI of a Fixed Deposit (Certificate of Deposit). You put in $100, and based on the interest rate the bank offers you get your $100+x, where x is the amount of money you earn, i.e. the return on your investment. ROI is a financial term. It is money which you’re making, by investing in some asset, or some kind of activity.
What is the ROI of social media? Hmm something is not quite right about that question.
Social media is not an investment vehicle, you invest in a particular social network, e.g. Facebook or Twitter by performing certain activities there. When you think of ROI of anything you need to think of what have I invested and what is the return I’m getting. However, sometimes calculating the return of an investment can be difficult.
What is the ROI of your business card?
That would be a little difficult to know. However, it’s quite situational. For instance if you gave your card to a few people and because of that one of them called you and gave you a business opportunity, You’d be then able to calculate the value of handing the cards out to people. Yeah I know I’m making it sound a bit too simplistic, but you get the idea right?
What is the ROI of your phone?
Similarly, what if I asked you the ROI of your phone? Ok, here again, if you’re lets say an outbound sales person and making calls all day, then the ROI would be based on the business you got by making those calls.
There is obviously in both of these examples the unknowns, i.e. lets say your business card got passed on, and two people copied your number and called you, and so on and so forth.
What is the ROI of your website?
One more example, What about the ROI of your website? Is that more tangible? – So for example you might measure it based on the number of people who connected to you via your website and gave you some business, or bought a product from you online via your site. It’s a little easier and direct. Though ROI calculation can get complicated here if you have a multi-channel strategy (Check the reference section below if you want to get in depth information.)
How to think about Social Media ROI?
When trying to figure out the ROI of activity on social media, you’re going to calculate it based on how much money you’re putting in via resources – people, hard cash, advertising on social networks, costs of content creation, daily posts and other activity, which you do on a particular social media network, and then you’re going to evaluate the amount of business, the amount of sales this has generated for you . So in essence it is the value you derive from the social media marketing or networking activity or whatever type of activity you do on a particular social media network.
Types of activity you could do via Social Media Networks
- Selling Products and Services
- Prospecting (could be as part of marketing and selling)
- Competitive Intelligence gathering
- Understanding gaps, issues and opportunities in the market space by listening to and analysing customer interactions.
- Customer Service (Answering customer queries online versus the traditional call centre)