Why you can’t calculate an ROI in social media – and that’s okay

I hear this a lot at the conferences/events I attend:

“How do I calculate a ROI in social media?”
“How do I go back to my manager and justify the spend we did in social media”
“Why should get I get involved if I can’t accurately determine its value”

In a corporate world of ever shrinking budgets and more and more marketing data than one can process, “ROI” has been a rallying cry for many digital marketers. This could be be one of the reasons why some are so scared of social media, while others are still afraid to jump in. I’ll attempt to answer each question below:

“How do I calculate a ROI in social media?”
In many forms of digital media, you can spend 1 dollar knowing you will earn 1.30. Through advanced analytics, an astute digital marketer can determine what sales were generated by what ad and the exact cost and gross margin with each sale. Awesome! Unfortunately, you cannot do the same in social media, just yet.

But what can you do?
You can place a value on each facebook fan (estimates range from anywhere from 10 cents to 2 dollars per fan)
You can place a value on each follower on Twitter
You can place a value on each retweet (if one item was retweeted by 5 people with 1000 followers, you can determine that the retweet had anywhere from 4000-5000 impressions)
You can place a value on each youtube video play
You can place a value on each customer service question answered on facebook/twitter as opposed to the phone or email
You can place a value on every “like” of an item on facebook
You can place a value a value on every @reply that mentions your company name
You can place a value on every mention of your brand on twitter

As stated in my previous post, it is up to the brand to determine it’s social media goals and that the brand needs to be more aware in planning social media strategy. When the brand determines it’s social media strategy and goals, it can then begin to create their own ROI. It is up to the brand to determine that if extra money/time is spent on social media, that the end goal is for more 1. retweets 2. more customer service questions answered 3. more @ replys or a combination of all three (or none at all).

“How do I go back to my manager and justify the spend we did in social media”
By following the aforementioned advice, a digital marketer should be able to determine the exact social media goals and what constitutes success for the brand (and really, it does vary from brand from brand). Use the metrics and show that 10 questions being answered via social media saves money in customer service. Show that 3 retweets created more brand equity than a small advertising buy. Show that two @replys mentioning the brand lead to more sales. And then show how additional spend / time / effort can lead to increases in these metrics – and that’s a win win for all involved.

“Why should I get involved if I can’t accurately determine its value”
Because simply, social media is here to stay. I’m not going to mention all of the facts (like how facebook has 500,000,000 members, that youtube is the #2 search engine in terms of search volume, how there are millions of tweets/day on twitter, etc etc) but I will mention that companies not involved in having an active social media presence are at a distinct competitive disadvantage – because simply – your competition is there, taking full of advantage of the many free options and servicing your customers – the ones who want to interact with your brand on social media, but you are failing to appease.

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