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Why there’ll never be a ‘standardized’ social media ROI metric

On 04 May, 2012
Measurement, Return on Investment, Social Agility, Social Value
By : Niall Cook
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Views : 2036

It’s the marketer’s equivalent of the quest for the holy grail: a common, standardized metric than can measure the return on investment in social media. And preferably free.

Like the grail, belief in this mythical metric and interest in its potential whereabouts never seems to cease. The latest quest comes in the form of a survey of 329 senior executives in North America by PulsePoint Group and the Economist Intelligence Unit, as reported by eMarketer. Amongst its findings:

  • The vast majority of companies who had invested in social media saw a positive shift in their bottom line as a result.
  • 84% of executives polled said that social media campaigns had increased the effectiveness of marketing and sales efforts, while 81% said a social media presence had helped their companies increase market share.
  • Almost seven in 10 respondents said they had seen a spike in their sales by letting customers talk about their brands on social media platforms, even if some of that dialogue was negative.

All good stuff so far, once you put the question of cause or effect aside. But watch out, here comes that elusive grail again:

  • Almost half of executives said that the major impediment to social media campaigns was the lack of a standardized metric that can measure a return on investment.

Don’t get me wrong. I’m not one to flippantly dismiss the need for some kind of social media ROI measure. I truly believe that marketers need something more than fans and follower metrics to make social media investment decisions (and their CEOs and CFOs certainly do). But I don’t necessarily buy the ‘standard metric’ argument.

Why? Because we already have one. It’s called Return on Investment, it’s standardized, and as I’ve said before, it’s easy to measure:

(Return minus Investment) divided by Investment

So when these executives say they lack a standardized metric to measure return on investment, what they actually mean is that they don’t know how to (or don’t want to pay to) quantify the return they are getting. And this is a big problem, because it means they don’t know where to direct their limited resources to best effect, what different strategies they are considering might deliver, or how to justify further investment in social media at board level.

So the good news is that we already have a standardized way to calculate social media ROI and it’s free.

The bad news, however, is that calculating the Return part of the equation is specific to your objectives, communities and measures of business success.

So there will never be a standard. But I have no doubt that the quest for the holy grail of social media will go on.

Bonus link: The numbers that really matter to your business – Debra Ellis on why everything is relative.

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About The Author

Niall Cook


Number of Posts : 54
All Posts by : Niall Cook

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