One of the things that most confuses people about using Social Media is the concept of Return on Investment. Confusion about ROI in Social Media stems from several different areas of the overall process of trying to map traditional marketing tactics to a Social Media model. Today we'll look at exactly what "Investment" you're making in Social Media, so it will make more sense when you think about why (and how) one should measure them and any Return on them.
Money - In reality, there are two major things that can be invested in Social Media. Money is the first. Whether you hire a Social Media Professional to develop a strategy or Twitter for you, have someone on your internal staff build a Foursquare presence, have a writer blog for you, or put ads on Facebook, you are investing money in Social Media. If you are reaching out to your internal staff, the cost appears to be less, because they are there doing work for you anyway and all that's left is an opportunity cost. But any way you slice it, you're still paying for that work.
Because traditional marketing was based on investment of money, with well-established formulas for marketing campaigns targeted to specific media, specific demographics, times of day, expected number of viewers/listeners, etc., it all seemed rather straightforward. Any mathematical formula applied across variables will yield *some* kind of number. Online advertising doesn't yet have established formulas, and measurement has to change to account for changes in technology. Since technology is changing at a rapid pace, things like Pay-Per-Click become obsolete as soon as they become standardized. Ultimately what gets measured most are the easiest, least useful numbers.
Throwing money at Social Media will make it easy to measure the investment, but there is no tried-and-true formula to measure the return.
Time - In the currency of Social Media, Time is the Gold Standard. Every business wants to be able to send out a single status update to all their Social Media presences at a single click of the button and have business pour in. But Time is a counterintuitive spend. When it comes to relationships, the *more* time spent, the more you are indicating that this relationship is important to you. Consider the power of a lunchtime chat when catching up with a friend as compared to a holiday-season "update from the Smith family" letter. Which is more authentic? Which do you think shows that the other party values you? We know that we spend more time with people who are important to us than we do with people who are not. The truth is obvious to anyone who has ever received a letter from a company with the greeting "Dear Valued Customer."
Time is the one thing you *must* spend in order to create any sustainable relationship.
Time and Money are the biggest spends when executing any kind of Social Media plan. But they aren't the only things you're spending....
Reputation - When you've been in business for any length of time, you have built up a reputation. When you start to put yourself out there for people to communicate with, one of the first things you are doing is investing that reputation. If you've built an awesome reputation, people will want to be part of your network, to be part of your team. Conversely, if you've got a reputation for avoidance and obfuscation, when you venture into Social Media, you may be taking a gamble that your reputation will make you a target.
Investing in your reputation means you'll have reputation to invest when the time comes to enter the Social Media world.
Creativity - This seems obvious, but almost no one considers their investment of Creativity when they look to create a Social Media presence. For instance, you may look at your creative team and ask for something cool, innovative, engaging, but easy to manage and measure. And you want it in a reasonable time frame. In order to get even most of what you want, you need to invest a lot of Creativity in the process. There are limitations to hardware, software - and people. Imagining something completely new sounds great, but do you and your team have what it takes to get there? Or are you going to fall short and get something that's easy for you and less functional for your customers?
Consider the amount of Creativity you and your team have to invest before you start to dream.
Stake - Big corporations talk a lot about stakeholders. Stockholders, employees, customers all have some stake in the well-being of a company. Even in your small business, there are more stakeholders than just you - your family, your customers, your vendors all have some stake in your business.
You can leverage this stake if you need to, to invest in your ability to develop, support and grow a healthy Social Media presence.
Before you question what the Return on Investment of Social Media is, know what you're Investing in Social Media in the first place.