More Perspectives (Four to be Exact) on Social Media ROI

Ann All

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:

  • Swimfish CTO (and prolific blogger) John F. Moore believes "the cost of not doing anything [with social media] outweighs the cost of doing something."
  • Marc Engelsman, VP of Digital Brand Expressions, suggests coordinating social media with organic search marketing efforts and paid search because "activity levels in social media have that viral component that can make it very powerful. Social media shouldn't be approached as a one-off or siloed activity."



Add Comment      Leave a comment on this blog post
Jul 22, 2010 8:51 AM Cameron King Cameron King  says:

Great post Ann. There is no doubt that the ability to measure social media ROI is of infinite importance to a business. However, are businesses being blinded by their 'old school' strategies on new-school platforms? Are they forgetting that the most important benefit - by a long shot, of social media is their new ability to connect and continue their dialogue with customers. How can you possibly quantify an online conversation with a customer? Solely by virtue that a biz is even having a conversation with a customer after normal business hours surely must equate to some reasonable measure of ROI. Are we missing the forest for the trees?


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