Tuesday, August 18, 2009

A Parable of Social Media ROI

What confuses people most about social media is that they think its a new way of doing business, a whole new paradigm. In fact, it's really the exact opposite - it's the oldest way of doing business. Talking with people, the people you want to sell to, is the very oldest way of building a good relationship with your customer base.

Social media ROI is puzzling to many businesses. They are used to measuring concrete numbers - conversion rate of site visitors to purchasers, and click-through rates. Because in social media marketing, the emphasis should be on the "social" part, the concept of ROI seems awkward. That's because good social media is not just a form of marketing - it's a whole business model.

I created this parable to illustrate the matter:

Imagine a town. There are three fishmongers in town. All of them have roughly the same fishermen's catch to choose from.

One of them seems to get slightly better fish, but he's a taciturn guy and rarely does more than grunt when you do business with him.

One talks a great game, about how his fish is the freshest (it's the same-day catch as the other two) and the cheapest (he's actually sometimes cheaper by a very little bit.) He talks a lot - always about himself or his fish.

One is a really nice guy. He knows your kids' names and what your business is. His fish is fine. Neither the absolute best, not the absolute cheapest, but he throws in a little bit of fishhead for your cat, because he knows she likes that.

Q: Which one are you going to go to first when looking for fish?

More importantly

Q: When a friend asks you for a recommendation, who are you going to recommend?

Chances are, you'll go to the third fishmonger first, before you go to the others. It doesn't mean you'll always buy from him - maybe he doesn't have the fish you want today, or he's not on the way home. But mostly, you'll try to buy from him.

You're most likely to recommend him, too, because shopping at his place is a pleasure. The guy who makes you feel good, who asks after your spouse and feeds your cat - he *cares.*

Here's the third and most important question....

Q: What's the ROI on the third fishmonger's strategy?

Let me know how you would describe it.
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