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But Asking About ROI Is Asking the Wrong Question

So measuring social media and its value to a business has been—and is being—done. But this notion of a return on investment (ROI) is bothersome. We don't want you to think of social media marketing in terms of ROI. And no, we're not contradicting ourselves. We want you to think in terms of what social media marketing can do for your business. Those are two distinct ideas.

Asking "what's the ROI of social media" is pretty foolish. You should actually ignore the question...at first.

"What's the ROI?" is a cop-out question asked by people who don't understand all of what social media marketing can do for their business. It is also a financial metric, so asking that question implies that all you can get out of social media is money.

Social media consultant and author Scott Stratten once said during a speech, "The next time someone asks you about the ROI of Twitter, substitute Twitter with the word 'talking.'"

"What's the ROI of 'talking?'" he asked. "How much money do you make with this new 'talking' business? I don't understand why you're 'talking' to customers all the time."

Another social media author and public relations expert, David Meerman Scott, once shouted during a podcast interview, "What's the ROI of your secretary?!" His point was that you don't measure the ROI of the person who answers the phones at the front desk.

Although the three true business metrics—revenue, cost savings, and customer satisfaction—can certainly be affected by strong social media marketing, so can other areas of your business and marketing efforts. What if you want to enhance the awareness of your product? Do you measure that in dollars? No. Thus, ROI is often the wrong measure to apply.

Even if you are going to use social media marketing for a money-driven purpose, asking the ROI question first is out of order. You're asking what the ROI of your social media marketing efforts is before you ever get started.

The smart approach to gauging your potential success in social media is first knowing what social media can do for your business. You then set goals within those expectations for your efforts. You can gauge an ROI, but only if your goal is financial success and you've implemented some activity toward those goals.

Now, this is not to say that social media should not be measured. It absolutely should. That's how you'll know it's working. You should be measuring all of your marketing efforts, whether it's a print ad, a TV commercial, a trade show, or a direct mail piece. But we're willing to bet no one asked about the ROI of those things before you bought them. (We're also willing to bet that a lot of people aren't measuring them afterward either.)

If you ask the ROI of social media question before you ever get started, you're setting yourself up for failure because you don't know what you're trying to measure.

The honest answer to the ROI question for your business before you start a social media marketing effort is, "I'm not sure. I can't make any predictions or promises. I know what I've done for other companies, but every situation is different, and we won't know how you'll do until we try it."

This brings us back to why you might ask the ROI question in the first place. People who do ask typically ask out of fear. If they can be assured that they'll succeed, they'll try it. Otherwise, it's "What's the ROI? How much money will we make? Can you guarantee our success?"

Those who ask these questions don't understand social media marketing isn't just about sales; it can also be about customer service and satisfaction, reputation protection, loyalty and advocacy building, research and development, and more.

And we're not going to play along with the social media hippies and tree huggers and say ROI should stand for something warm and fuzzy, like "return on interaction" or "return on innovation" or "return on conversation because we're really bad with acronyms." ROI is ROI and always will be.

What you might get out of social media marketing is specific results. Just like other areas of marketing and communications, they might be good...or they might be bad. But asking what they're going to be at the beginning of your journey is like asking the final score before the game starts.

Knowing what you can get out of social media marketing makes it much easier to determine your goals, set expected levels of accomplishment, and ultimately measure what you're getting out of it all. Again, we're not talking exclusively about measuring your return on investment (ROI). Yes, you will invest money in your social media marketing efforts, just like you would public relations, letterhead, or even the graphic design of your company brochures. Yes, you should expect to see a return on the money you spend, but you should focus the ROI metric on your whole marketing efforts. Trying to drill down an ROI on one piece is, as we've illustrated, sometimes illogical. (That letterhead ROI is tricky, isn't it?)

But, to paraphrase a common theme from social media measurement expert Katie Paine, "You're not always investing in a financial transaction, so you're not always going to get a financial result." There are times when your results will be intangible but still important and useful.

For example, if you're facing some negative news about a product recall, your goal should be to protect your brand's reputation. Your measure of success won't be an increase in sales or profits, but rather an increase in positive reputation indicators, a reduction of negative search results on Google, an improvement in positive search results, or a reduction of angry phone calls to customer service. Still, if you're using social media to drive sales, facilitate research and development, or even enhance customer service, you can track financial results that come from audience members you've cultivated through social activities, or even retention rates among the same crowd. These measures can certainly produce dollar figures on a spreadsheet that will make the "dollars-first" executives take note.

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