The Real ROI of Social Media

There’s been plenty of hype over the past three years about how social media can revolutionize business in general and marketing in particular. Indeed, some brands seem to be making serious use of social media platforms, especially in the area of branding. The question skeptics continue to ask, however, is what is the real ROI of social media?

Part of the problem of answering this question comes in that it can be challenging to measure ROI. Some goals of social media are sufficiently vague as to be hard to express in actual numbers.

The problem of clarity

Perhaps the biggest barrier to understanding the real ROI of social media is understanding what you’re using social media for. If your social media strategies are designed to “increase collaboration and interaction with the target audience,” you’re going to wind up with a rather nebulous objective.

Here’s another problem about the clarity of objectives in regard to social media: if your social media strategy is designed to replicate something that can and should be done internally, you’re almost always better off doing so. An enterprise-wide internal networking strategy will have more measurable and immediate return than a social media approach.

Collaboration with peers vs. contact with customers

Focussing on those specific objectives is key to getting anything at all from your social media ROI. For example, improving communication with your potential customers provides a very different return than collaborating with others in your industry. The same holds true for employee collaboration.

The Real ROI formula for social media

Generally speaking, your ROI should be relatively simple in terms of how the formula works. You start by adding the cost of the strategy including work hours, contracted expertise, advertising support for the social media strategy, and even space dedicated to social media in your other online assets.

Those are the costs of your strategy. Now, you need to be able to identify in a very specific and dollar-value way what exactly it is that you’re getting from social media. That can take several forms, including:

• Market research. You can perform a number of market research tasks via social media. This includes things like focus groups, but you can also broaden it to things like surveys. While the more broad activities aren’t as statistically accurate as they would be in a general population survey, they do give you a good feel for how the folks in your target market think.
• Brand recognition. It’s always tough to calculate ROI when it comes to branding. Yet, branding is one of the most important marketing activities you can engage in. It’s a constant balancing act between promoting brand name recognition and actually being able to show that the brand name recognition brought in sales.
• Traffic to other Internet properties. One way to use social media is as a gateway to your website. Social media can be a strong source of traffic to your site (although it will not likely ever generate the kinds of traffic volume that good SEO will generate). In addition, social media sharing of your other web properties will ultimately help increase their Google Page Rank, and help them do better in the search engines as well.
• Actual sales. This is the area that many social media strategies forget. It’s absolutely possible to funnel your social media efforts into direct sales. If your business falls into that category, of course, it’s much easier to measure ROI. The key here is not to steal sales from your other properties, but rather tap into social media as a new sales channel altoghether. The last thing you want social media to do is take sales away from your sales force or from your primary web site.

Taking it seriously

Calculating the ROI of your social media endeavors is important. Simply throwing a bunch of social media activity out into the ether without knowing what it’s really doing can have a detrimental effect on your business.

Not taking your social media ROI seriously enough is worse than neglecting social media altogether. The global marketplace continues to shrink, and effective use of social media is key if you’re going to take advantage of every opportunity.

This post originally appeared on  Avenuesocial.