As social media grows in significance, dismissive attitudes in the executive suite are gradually being replaced with skeptical questions about return on investment (ROI).
Every good business should be concerned with measuring the investments it is making for the returns it is getting. And this should be done consistently across all investments throughout the organization.
On the other hand, calculating the true ROI of social media engagement isn't easy.
ROI depends on what we're investing in social media
Let's start by considering what constitutes the investment when we embark on a social media strategy.
Financial investments are required to install the basic requirements of doing social media in a regulated environment: compliance monitoring and tracking systems and proper training and support.
But it doesn't stop there. Once you have the tools in place and everyone trained, you need content to talk about (other than marketing materials).
But great content isn't free and you have to invest time in writing or finding it.
This brings us to the all-important non-financial investments to be considered: your time, attention and creativity.
Someone needs to be participating in conversations, reaching out to others, and building relationships.
That's why social media is often referred to as earned media – you can't just buy influence and engagement.
ROI depends on defining what we mean by return
Viewed as part of a sales and marketing strategy, it makes sense to define returns in terms of our objectives for those activities.
Have we generated more leads? At what rate have these leads been converted to new business? Yet, there is something else happening in social that is not captured by this understanding of returns.
When you implement an effective social media strategy, you are engaging your markets on many levels at the same time.
Prospects and clients, centres of influence and competitors – we all inhabit the same social networks.
So, for instance, when you show knowledge and thought-leadership, you are simultaneously attracting new prospects, contributing to the retention of existing clients and reinforcing the value you can offer to your centres of influence.
Successful social media engagement drives not only sales objectives, but can improve customer service, strengthen corporate branding, build positive public relations and even drive recruiting.
Thus, it stands to reason that your understanding of social ROI should be similarly nuanced.
Is client satisfaction and retention increasing or decreasing? How about employee retention? Is your brand health increasing? What about your brand's social capital? These are all valid measures of your social ROI.
Social capital drives ROI
When I talk to people about social ROI, I encourage them to take a long-term view. That's because social engagement is fundamentally about relationships and trust. Building those things takes time.
If you want to achieve a positive ROI, your social media strategy needs to go beyond short-term sales objectives and strive for sustained growth in social capital.
Once you become an influential figure, you'll start meeting more people (online and in person), getting referrals, and having more meaningful conversations online.