No matter how much companies would like social media to return a clear ROI, it remains a stubbornly murky goal for many of them. I wrote about this in April, commenting on the formula used by a social media consulting company that purported to show a Facebook fan is worth $3.60 to a company.
I'm not suggesting companies should forget about ROI when crafting their social media strategies. They still need to connect social media to business benefits. But they'll probably be a lot less frustrated if they concede up front that financial returns aren't the only reason for employing social media. Heck, they might not even be the primary reason.
Forrester Research analyst Augie Ray believes social media ROI falls under four perspectives: financial, brand, risk management and digital. Only the financial benefits, an increase in revenues or a decrease in costs, result in directly measurable ROI. Yet even with this seemingly cut-and-dried perspective, companies need to look beyond the obvious. Mike Melanson, writing on ReadWriteWeb and quoting from a Forrester report written by Ray, points out Petco has found customers are less likely to return products that feature reviews, thus saving money on shipping, restocking and customer service.
Companies can employ many of their existing brand metrics, such as awareness, purchase intent, preference and brand association, to evaluate the effectiveness of social media, Ray suggests in the report.
As an example of digital ROI, Swanson Health Products reported a 163 percent increase in search engine traffic to product pages following its efforts to enhance the visibility of product reviews to search engines. When I spoke to Ed Moran, Deloitte's director of product innovation, following the publication of the company's second "Tribalization of Business" survey, he suggested measuring the number of links to your site that originate from online communities as well as increases in search engine results.
With the risk-management perspective, companies benefit from reducing costs of potential negative ROI. The risk of negative ROI has increased dramatically with the growth of YouTube, Facebook, Twitter and other social channels. Remember a frustrated customer's YouTube video about United Airlines that got millions of hits about this time last summer? So in a sense, companies can benefit by using social media to counteract the viral effects of customers' use of social channels.
Another important takeaway from my interview with Moran: Establishing specific goals for their social-media efforts will help companies determine what to measure and what success will look like.
And a few other points that merit repeating even though I've expounded on them time and again in this blog: