One of the biggest challenges facing corporate leadership today is defining, quantifying, and tracking the Return On Investment (ROI) of all company-wide activities related to social media. In speaking with management (as well as numerous conversations with those being managed) the problem inevitably comes down to the lens through which each individual sees the company, and the unique role that social media plays within their discrete worldview. For example, the PR department of a company will tend to relate social media to “Impressions” because their traditional role has been to generate “Press” on behalf of the firm. While history has shown us that there is legitimate value in creating impressions and generating press, the challenge for leadership comes in determining a true ROI for this activity. In addition, the converse must also be considered – namely, what is the corresponding RONI (Return On Not Investing?), which begs the next question asking “How can you measure a lack of presence or impressions when your competition is talking to your market?”
Another perspective on social media ROI from within organizations comes from those specialists with a background in direct marking and sales, individuals who typically measure traffic and actual conversions as the primary metric of success. While this viewpoint is more aligned with upper management’s focus on bottom-line revenue, it too represents only a subset of the overall ROI available through social media.
While we could go on and on listing each department and their business case for social media, the most accurate and elegant answer also happens to be the shortest – it all depends on the business model and the goals of the company. To say that Google and Caterpillar would leverage social media in the same way would be as crazy as saying that their business model is the same.
In the course of developing industry standard best practices through our Social Impact Quantitative Management Audit (SIQMA™) Program over the past two years, DemingHill has identified a core group of Key Performance Indicators (KPI) as they relate to social media, which we’ve customized and prioritized for each client depending on variables like their market cap, business model, product maturity, price elasticity, and competitors. KPI can include anything from traditional impressions and traffic, to email opt-ins, mobile app downloads, case sales, purchase volume and dollar amount, coupon redemption, direct social influence, indirect social influence, new revenue channels, customer service cost savings, product development cost savings, marketing and advertising cost savings, HR cost savings, and new members, connections, and followers.
In summary, experience has shown us that the correct response to the short question, “How do I quantify the ROI of social media?” has an even shorter answer “It depends.” Let the debate begin!
Chief Content Officer