Return on Investment. It’s the key phrase managers all over the world look for when putting up a business and/or making any move that involves their budget.
The advent of the digital age and the proliferation of intangible assets has made measuring ROI an almost impossible task. Business in the 21st century has long grown from the old days of measuring expenditures—in the manufacturing industry for example—and calculating the revenue dollars investments in equipment, staff, etc. would generate.
With intangible investments now being made in social media, doing the math to figure out ROI isn’t so simple anymore. This is especially tricky, when you know that investing in certain social media tools can lead to your Facebook followers growing from hundreds, to tens of thousands.
So, how do you go about explaining this to the higher-ups?
Think of Social Media as a Package
Business advisor Mike Bailey notes that given the difficulty in identifying the specific action, or actions, that caused a consumer to go from simply browsing, to making a purchase, throwing social media into the mix only compounds things and makes calculating ROI near impossible.
Many business owners make the mistake of thinking that social media can be used as a tool on its own, hence mistaking it to be a quantifiable investment.
Social media however doesn’t operate standalone, it cannot be evaluated this way. Bailey quotes Dr Anthony M. Cresswell of the Center for Technology in Government, University of Albany, who said:
“Conducting a meaningful return on investment (ROI) analysis in … technology is a little like saying you want to live a healthier lifestyle.”
In the context of fitness, getting fitter and healthier is a combination of several factors, from having a healthier diet, making several visits to the gym, using the stairs more, running 5 miles daily, to sleeping better.
You can’t pin it all on one thing only, and the same concept applies to social media.
When one of your customers converts and buys one of your products, it could be due to one of several reasons, or a combination of them. The customer might have followed your brand on Facebook for months, only making a purchase after seeing a promotion on the social network. The consumer might have read an article or ad online that lead to your Facebook page. He/she might have even learned about your brand through ‘old’ media platforms like TV.
So as you can see, it’s hard to give credit to where it’s due with social media.
Explaining to Clients
So how do you go about explaining to people how effective social media , because let’s face it, while it’s true that social media offers a plethora of benefits for business, the people making budget decisions want facts, not rhetoric.
After stirring up discussions on LinkedIn groups, Bailey found one answer that made sense, one that also had a precedent.
His recommendation is to stop thinking of social media as a revenue-driving tool. While it’s sometimes capable of doing is, the core of its impact likes in raising awareness and cultivating engagement with your target audience. Social media essentially taps into the oldest, most effective form of marketing: word of mouth.
And word of mouth, through social media, reaches an audience business can’t even imagine, much less understand.
Reach is where you can make your most compelling argument for social media. Clients and business owners are accustomed to the metrics that come with traditional advertising, and while it may be losing market share to digital media, agencies respect it because it’s well-established.
True, paid social media campaigns offer similar metrics to justify social media expenditures, but even non-paid social media activity can provide figures for you to work with. These are:
All of which are now recognized as metrics for social-media measurement, and available on most free social media analytics systems. From here, it becomes easy to make comparisons with traditional platforms for marketing, with metrics that they can understand.
The opportunity will then revolve around how social media has the potential to reach a huge audience, all while delivering a lower CPM (cost per thousand impressions) than traditional marketing tools.