One of the hotter topics in my corner of the Twitterverse is Return on Investment (ROI). How do you calculate the ROI of social media? What’s the ROI of Twitter? The questions are many, the answers too few. There have been several blog posts on the subject (here are just three examples – Tim Ferriss, Olivier Blanchard, Zygote ), and I plan to post an overview and synthesis of some of the better ones in the near future. One important question seems to be missing from much of the conversation, to what degree should social media be considered a cost of doing business (from a corporate/organizational viewpoint) rather than a distinct activity that must/should be justified by hard ROI?
If your customers want the option of customer service via Twitter do you really have an option long-term? If crises are often spawned in social media, how optional is listening/monitoring if you want to protect your brand? Increasingly, the corporate world will realize the options are all with the consumers/customers and how, how often, what and why we communicate will largely be in response to this dynamic. When voicemail came on the scene (patented in 1983), I’m sure the ROI pencils were sharpened and presentations made. When was the last time someone was asked to justify the cost of voice messaging or 800 numbers or email? They are all considered part of the cost of doing business today. In a relatively short period of time I believe many applications of social media – CRM, crisis monitoring and listening to customers/competitors/industry voices and many others – will be considered necessary, baseline activities to doing business in the 21st. century.
The ability and need to demonstrate ROI in social media should be considered contextual and dependent on specific program/initiative objectives. If the objective is ‘listening and learning’, what’s the ROI on insight? However, in other cases, program objectives will be to drive a specific business outcome, and demonstrating ROI will be expected and required if budgets are to follow. Dell offering product promotions on Twitter was closed-loop and easy to calculate ROI. HyperLocal marketing by Kogi or your local pizza shop on Twitter is measureable in incremental sales. You can calculate the ROI on a hotel or resort offering last-minute cut-rate weekends via FaceBook.
Knowing when social media should be considered part of the cost of doing business and making this case to your company or clients may just make the ROI imperative a little less urgent and more focused in the right areas.
Thanks for reading and please comment if you agree or see it differently!