You used to send out 5000 direct mail pieces and got responses from 98 who were ready to buy. You ran through the numbers, calculating how much money, and time was spent on the mailing and how much revenue it brought in. You were able to produce a number fairly easily that represented how much money you made minus all costs: your ROI.
Estimating the ROI on your social media expenses is difficult. Given the nature of online interaction and its rapid changes, it may always be problematic. Theories, methods, tools, expert opinions are everywhere. However, according to a recent study by Adobe, Because social marketing is still so new, best practices for measuring the effectiveness of social efforts are still evolving.
Many senior marketing professionals express skepticism about the concrete value and measurability of social media – even as they continue to commit more of their budgets to social media.
You may be just concentrating on developing customer relationships online and aren’t putting enough time or money in to worry about ROI. However, the day is coming when those numbers will take on more importance for your business. By 2016, Forrester predicts that more than half of the money spent in US retail will be influenced by the Web.
This shift in the forces that influence customers has been taking place for a few years. Consumers and businesses are increasingly relying on online word-of-mouth to make their buying decisions. This is why there is greater emphasis on engaging prospects on social media sites.
Companies serious about calculating the payback on social media use a variety of yardsticks: followers, likes, comments and page views. They might even consider related factors like a reduction in customer service call volume or web traffic. These don’t translate into neat columns of cause/effect or actions/results.
You can monitor your social sites at no cost by setting up Google Alerts, Twitter Advanced Searches, LinkedIn Searches and Facebook Page Insights. If you’re willing to pay a monthly fee, you might take advantage of more sophisticated ROI social reporting tools through services like Google Analytics or Social Report.
Acknowledging the Grey areas
There is no good way to relate all of your social media activity down into numbers that your FD/CFO will consider true ROI. You can do some quantifying, “slices” of online social media activity.
Social media is constantly in a state of flux. There are so many intangibles that you believe have an impact on your company’s bottom line, factors like:
- Higher search engine rankings.
- Reduced costs of sales and marketing efforts.
- Deals that you know were completed because of your relationship-building.
- Overall brand awareness.
- General goodwill, a problem you solved or simply a comment you made that culminated in a sale perhaps months later.
- Increased website hits.
If you’re struggling with producing credible ROI numbers that justify your social media efforts, you’re not alone. Equate your staff’s online activities with actual sales where you can and continue to evolve your social strategy.