What’s the ROI on Social Media ROI?

The most fundamental truth of ROI: It’s nearly impossible to measure for marketing, it’s the wrong place to start with social media, and it’s a virtual recipe for social marketing disaster.

March 1, 2014 // Chris Kenton

Social Media ROIAs more businesses dip their toes into social media, a growing number of marketers are trying to wade through the hype and figure out what might work for their company. It’s not easy. There are more gurus pushing more elixir for social media than anything I’ve seen since multi-level marketing. As a result, marketers are falling back once again on that trusty security blanket, ROI.

If you Google “Social Media ROI” you’ll find a trove of articles spouting all kinds of solid-sounding metrics and approaches, none of which point out the most fundamental truth of ROI metrics in the first place: It’s nearly impossible to measure reliably for marketing, it’s the wrong place to start with social media, and it’s a virtual recipe for social marketing disaster.

Measuring your performance is critical. But ROI is marketing Kryptonite. And yet, marketers don’t fight it, they drape it around themselves like a shield of accountability. As if coming up with numbers that look like a financial formula will win the blessing of any CFO.

ROI is a financial metric designed to drive short-term efficiency. In order to calculate it, you need to know what the financial outcome is—in revenue or savings—and the value of the investment that produced it. It’s typically used in finance as a quarterly metric to compare the yield of different investments, and ratchet up efficiency.

If your goal is to leverage social media as a short-term channel to ratchet up sales yields or slice support costs, I’ve got news for you. Your ROI will nosedive after the first quarter you apply such tactics. Why? Because short-term pressure consistently rewards behavior that turns customers into an artifact of your financial goals, rather than a member of your community. It’s exactly the kind of mindset that consumers embrace social media to escape.

Measuring the value of social media to your business is important. But it’s closer to measuring brand equity than ROI. It’s not easy, but it’s easier when marketers try to build a bridge with finance to find common goals, instead of trying to parrot financial concepts to create the appearance of accountability. If you want to know more about marketing and finance integration, check out the work of Jonathan Knowles, who I’m very proud to say has joined SocialRep’s board. He’s one of the world’s leading experts on Marketing Finance, and we’ll be talking a lot more about his concepts and their application to social media.


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