ROI = (Gain from Investment - Cost of Investment)
Cost of Investment
This formula is often used to quantify the return of an investment and is popular to determine the success of a campaign. Companies that are using social media as a marketing tool are struggling to quantify ROI. The goal of social media should be more about engagement and speaking with your audience, instead of focusing on the direct return on investment. So it’s time to jump in (with a strategy of course) and start participating in the conversation regardless of ROI.If you are adamant about quantifying ROI think less monetary and more qualitative. Then your ROI would be to see an increase in trust, interaction, word of mouth and loyalty. These are all qualities we want from our customers, so why have we come to expect ROI in dollars? It’s just the way the business world is programmed, well it’s actually the way we are all programmed which is why I challenge you to think in qualitative terms. Instead of asking how many phone calls will I get from this investment, think how will this investment allow the customer to trust me more and recommend me to their friends. Keep in mind that social media is also like traditional media in that you are receiving eyeballs but with the added feature of receiving interaction as your return on investment.
For example, if you succeed in creating engaging conversation that evokes customer loyalty and trust, you will be able to sell more products. The difficultly comes in separating this number from your other marketing tactics. You also need to keep in mind the difference of a social media effort to inform vs marketing over social media platforms (@delloutlet uses Twitter for customer service)….this could be a blog in itself!
This interaction IS easy to measure, but not with traditional metrics. Some metrics could include the number in influential people on Twitter who retweet you, influential bloggers who link to you, and even your increase in Pagerank on search engines. You can also track how many potential leads come into your website from social media platforms. Social media challenges you to create your own metrics for success based on your campaign. Our favorite example around Travers Collins is the “My Starbucks Idea” campaign (http://mystarbucksidea.force.com/ideaHome), which was developed to give their customers a voice on what they would like changed. Their goal was to increase satisfaction and loyalty to the brand by listening and then implementing. Their metrics: # of good suggestions and # implemented.
It is going to take some time before the old way of defining ROI as sales or revenue increase to fade when referring to social media ROI. But pass this along and before we know it, Return on Investment will be linked to loyalty, interaction, trust and word of mouth.


