- There is no ROI in Social Media
- There is no ROI in any marketing
- Asking for an ROI is like asking for ROI on email - you can't quantify it, but it clearly adds lots of value to the company, and would be a detriment if it was absent.
First of all, I agree with most of the points made in the article. I've heard David Meerman Scott compare finding ROI in Social Media to finding ROI in requiring sales reps to have smart phones. It's just a necessary part of business. It's a communication medium. And that's true. It's also a really crappy retort to an executive who is questioning the VALUE of the medium, your department, and your job function.We can all get in our social media groups and talk about how marketing definitions must change so we can have an easier time showcasing our successes with metrics that make sense to us, but not the upper level executives. But it doesn't change the reality that, like every other expense (utilities, including phones and email, aside) businesses expect it to lead to sales. Whether it's an ad in the yellowpages, or a social media campaign, businesses want to track back sales to the money spent on their marketing activities. Period.
Semantics
The authors at CopyBlogger suggest ROI is an inappropriate term to use, because it's only true appropriate use is in the context of a business investment (like an expansion, or acquisition) and the expected revenue from that investment. They suggest we use the term "profitability," instead.
As a realist, I'm going to caution against correcting your boss's grammar.
Regardless of what the accountants say, the people who actually run the company, and employee the accountants, view marketing as an investment. In the mind of every business owner from the sole proprietor working alone in a small plumbing business to the CEO of a Fortune 100 company, marketing is an investment - it's money they're spending (and risking) in the hopes of making more money off the messaging and publicity they gain from the expenditure. It's their money, they wouldn't spend it unless they knew they could make it back, plus some.
Stop Whining and Do It
Start with justifying the expense of social media marketing campaign. A finite time period, and a constrained set of variables will make it easier for you to show the ROI of that particular marketing expense. There are tons of ways - and a lot of options for tracking the path to purchase. You CAN show real world monetary profits from a social campaign. Figure out what those are, and sculpt your campaign around it.
If it's not possible with the constraints that exist in your business (I'm very familiar with this) - do some homework in advance - find your average lifetime value, per customer. Then segment out facebook fans, for instance, and show their average lifetime value. It's higher. I promise. Show ROI based on acquiring new fans, subscribers, etc. You may have to get creative . . . but you can do it.
In some circumstances, you can show sales lift, coupon redemptions, basket size variance . . . there is no limit to the ways you can show a positive ROI on your campaign. Find the one or ones that work for your company, and play to them.
Once you've established this, it's going to be easier to justify the ongoing expense of nurturing a proper social media strategy. You can also move into showing ROI by cost reduction (an active online community leads to fewer support calls, for instance).
Wrap it Up
We can dream all we want to about getting business and business leaders to use what we believe is the appropriate vernacular for social media marketing metrics. But what matters is giving them what they want. Call it ROI, call it profit . . . just don't call it impossible, unrealistic, or unreasonable. Or do... makes it easier for me to get a job when I talk to them later.
1 comment:
Casey, thank you for posting this. It brings up an important point I did not make in the story - how to deal with clients!
As a former consultant I can appreciate your point in dealing with others that use the concept of ROI and marketing.
The point I wanted to make is that part of the problem is in the way consultants and/or internal employees present online marketing initiatives.
Yes managers and clients want a return - but on what? To many times consultants are "selling" online marketing. My personal belief as a CFO is that what owners and managers really want is some sort of quantifiable result - profit being the highest result (usually).
For example, if a consultant said we want to use Twitter to engage with our customers, as a CFO I would stare blankly at them. But if the consultant said I wanted to decrease customer service costs by 15%, I would listen intently.
What owners and managers want to "buy" is something they can quantitatively understand. When people "sell" online social media marketing, they usually discuss the tactic and not the benefit. Hence the idea of an "investment" is based on the ability of the tactic to meet some unquantified objective - a risky proposition that leads to the ideal that is is an "investment" with some down side risk.
But if the "sell" was for a quantifiable objective, then the tactics become secondary to the buyer. The risk is in the ability of the party presenting to meet the objective they are selling.
In truth, the reason why so many people in your scenario use ROI is because what they are buying are usually tactics - not results.
Thank you again for your post on the article at Copyblogger.com and I appreciate you allowing me to bring this up.
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