Ever since it’s entrance into the realm of marketing there has been a shadow over the head of social media.The big question that everyone keeps asking is – where is the ROI. Every good marketer understands that marketing is not an expense; instead it should be an investment in growing a company’s sales.The challenge with social media is in proving the ROI the same way you would with traditional media. This is of course assuming that you are tracking and measuring the ROI of all of your traditional media channels.

Customer Warning: Avoid the No ROI Guy

If there is one character that you should avoid like the plague, it’s the no ROI guy. This is the person that tells you there is no way to calculate ROI, but you should keep spending your time and money on social media campaigns. Anyone who can’t or is unwilling to talk about what benefits social media provides is not someone you should be using to represent your company.

Calculating Return on Investment

Before we ask the question of what is the ROI on social media we first have to look at other things that have changed the business world.

  1. What was the ROI to your company when you started to use a fax machine? (if you were in business back then).
  2. What was the ROI to your company when email became main stream?
  3. What is the ROI of bumping into a customer on the street and talking to them in a friendly manner?
  4. What is the ROI to learning why your customers are unhappy with your product and finding a way to fix it?

From these examples you can see that there are many positive things that happen to businesses that we have to either spend money on or have taken up are time but are also difficult to calculate an ROI on. We know all of these things have helped us significantly but can’t put a dollar value to it. To properly measure social media we can’t use typical direct marketing measurements; instead we need to find different metrics to look at.

How to Measure the Value of Social Media

We have already explained that looking for a direct measurement is not always so easy, while not measuring anything is never a good business practice. The way to measure social media is to find something between these two. If you can't look at hard metrics you have to create soft metrics that as a company you deem successful. The best way to do this to create a benefits list and weigh it against the costs. This is not an exact science but then again most things in business aren't.

Sample Social Media Value Document

The benefits we have experienced from our social media campaign are:

  • Increased exposure to 2000 people on Facebook and 4000 people on Twitter
  • Answered 8 customer questions on how to better use our product
  • Collected 12 positive reviews that help new people make a buying decision when looking at our product/service.
  • 2 new sales that we can track back to exposure on social media
  • Product demos on youtube have allowed 300 people to better understand how to maximize the use of their product.
  • Discovered 3 unhappy customers and were able to fix their problems to prevent them from giving us a bad name and turned them into satisfied customers.

The costs of our social media campaign

  • $500 a month
  • 20 hours a month of employee time

After creating this list all you have to do is look it over and decide if the benefits your company received was worth the time and cost. If the answer is no, you have to revaluate how you are using social media and find a way to improve the cost by being more efficient or effective.

You should also note that the first time you made any change in your business results took time. When you started using email you had to learn how to use your email system, what to say, and how to interact with customers. Now you’ve had it so long that we read and write hundreds of emails a day. The more familiar you become with social media the more efficient you will become, and the more effective it will be.