Social Media & Return on Investment

Based on the survey results from our members, calculating the return on investment of social media is one that many members would like to learn more about.  In fact, this is topic on many minds.  In an April 2009 survey, MarketingProfs.com found that 70% of surveyed companies believe that they are not adequately measuring their work in social media.  

The Return on Investment formula is (Sales Gain - Investment Cost) / Investment Cost = ROI.  With finite projects like the sales increase from new product sales, calculations are more straightforward.  But, in the social media world the formula might look something like "Blog Comments * Conversation * Twitter * Facebook Friends = Success".  People identify more with the qualitative benefits of social media than the quantitative - those qualitative benefits being "Loyalty, Trust, Brand Awareness, Interaction" and associate Twitter followers with Loyalty.  The problem is that Loyalty doesn't always translate into sales gain.  

The first step in this process is to choose a metric.  Dell has successfully used Twitter to generate over $3.5M in incremental sales.  They offer discounts, news and provide information on product features direct to their followers.  Other metrics you may choose to measure are:

• Number of web-site visitors who fill in request form (remember you can track where your site visitors come from)
• Page Rank
• New Customers & Sales 
• Reduction in customer service response time or increased customer complaints resolved per representative   

With any project, its important to measure, analyze the results and adjust your plan accordingly.  

As we researched the topic of social media, we read the work of Olivier Blanchard (@thebrandbuilder).  His focus is social media metrics and he sends out regular Tweets on this topic.