Social media and public relations programs create value and in some cases generate demonstrable ROI. The two concepts are different in important ways. They are related like the rectangle and the square. Remember that silly distinction you learned in elementary school? A square is a rectangle, but a rectangle is not a square. ROI is a form of value, but not all value takes the form of ROI.
ROI is a financial metric – percentage of dollars returned for a given investment/cost. The dollars may be revenue generated, dollars saved or spending avoided. ROI is transactional. ROI lives on the income statement in business terms.
Value is created when people become aware of us, engage with our content or brand ambassadors, are influenced by this engagement, and take some action like recommending to a friend or buying our product. Value creation occurs over time, not at a point in time. Value creation is process-oriented. Value lives on the balance sheet.
From a sales process perspective, the ultimate value of a social media program may be in increasing the number of people who are likely to buy our products and services. Other programs may be designed to improve or protect corporate reputation or to build and enhance brands. Much of this value is said to be intangible. It is goodwill that becomes tangible at the point in time a transaction occurs. When buying decisions happen, your investments in marketing, brand and reputation work together. They become tangible. You can measure the ROI.
Many of the well-intentioned but misguided attempts to rename or reinvent what ROI means in social media – return on influence and return on engagement probably getting the most play – seem to be the result of an inability to distinguish value creation from ROI. We know social networks have the ability to create value through customer engagement and community building. However, ROI can only be measured by their ultimate impact on downstream metrics like sales, employee retention and customer loyalty/repeat purchase.
Your investments in social media or public relations remain an investment, creating additional value if done correctly, until which time they can be linked to a business outcome transaction that results in ROI.
Trying to get, keep or increase your budget for social tools, people and programs? Estimate ROI where you can, but also try to articulate the value your programs will be creating, and how this value aligns with, and contributes toward achieving one or more desired business outcomes. Propose metrics to track and assess progress in exposure, engagement and audience influence. This is a better conversation to have than, “Let me tell you about Return on Influence…”