Social Media ROI: Fact or Fiction?

Have you ever wondered what your tweets are worth? Thousands of companies all over the world have joined the social media (SM) phenomenon hoping to boost income in the process – but are they really getting anything out of it?

In this economic climate, all business decisions must have tangible benefits. Can Nike sell more shoes by maintaining a Facebook page? Can The Gap sell more jeans by posting Tweets? In the long-run, the answer to both of these questions is YES!

By building brands and attracting audiences, SM has the potential to increase a company’s return on investments (ROI). ROI formulas calculate the ratio of money gained and lost on a venture, relative to the money invested in the venture. These ROI ratios can help businesses answer the question: what is the cost of social media?

Methods of Achieving Social Media ROI

Finding the ROI of your SM campaign depends on the type of results that you seek. A few of the more commonly used SM business strategies include:

Direct Sales – Just as you’d expect, this involves the direct sales of merchandise or services through SM outlets. This is probably the easiest strategy to calculate ROI for.

Advertising & Brand Building – Alerting consumers of sales and promotions, and building strong customer relationships through various SM platforms.

Customer Support – Monitoring blogs, tweets and other networking sites in order to attend to complaints, assist with product dissatisfaction, and act as a general support source.

Direct Sales

In this strategy, the amount of capital invested in a SM venture can be easily measured against the cost of the investment.

Coffee Groundz Café of Houston, Texas, doubled their clientele when they developed an online “to go” feature for their Twitter account (@CoffeeGroundz). While Coffee Groundz employed a relatively local strategy, the direct sales method can also be implemented on a national scale.

Dell (@DellOutlet) reportedly boosted sales by $3 million due to their Twitter presence established two years ago. They were able to track which customers followed links through their Facebook and Twitter pages to calculate exactly where consumer revenue was being generated.

The costs incurred for hiring staff and infrastructure development make up the costs in the ROIs of these two SM ventures.

Advertising & Branding

The marketing characters of AMC’s Mad Men would go crazy for SM! Advertising gurus are constantly trying to increase their reach and frequency and when used correctly, SM does just that.

With the advertising and branding approach, ROI should be thought of more as a Return on Influence. Companies not interested in making sales directly through SM will often choose to use SM connections as a way to improve brand awareness and approachability. In this case, ROI is often measured with the help of various software and online programs, such as:

• Twitter Analyzer – This online tool helps uncover the topics, tweets and ideas that your followers find the most appealing. In clear visual displays, you can discover how influential your Twitter presence has become and which areas to focus on moving forward.
• Google Analytics – This highly innovative Google product (how many times have you heard that one?) collects and displays website traffic data. This information can be monitored to determine more effective advertising and marketing messages.
• StatCounter – Once added to the code of your website, this invisible web tracker will allow you to analyze and follow visitor activity in real-time, displaying valuable information for your marketing and communications department.
• Facebook Advertising – Although criticized for diminished returns, advertising on Facebook provides advantages with their “Demographics for Sale” model, as recently discussed on the SEOmozBlog.

Customer Support

In an indirect way, utilizing SM to provide customer support can increase your ROI by boosting brand satisfaction. SM is great for customer interaction and marketing, but recently – it’s become a therapeutic dumping ground where angry customers go to release their frustrations – rather than punching pillows or making angry phone calls, customers makes their issues public through blogs and tweets.

Comcast, in attempt to distance themselves from the lightening rod of patron scorn, has successfully assisted over 22,000 customers (including MetaSpring!) through their @ComcastCares Twitter account. Dell also combs the tweet-o-sphere for customers in need of assistance or looking for ways to improve their Dell products.

Although the cost of filling SM screening roles may be high in the short term, customers are, generally, extremely satisfied with the service which can lead to increased product development and a boost in ROI in the long term.

The ROI is Out There

Alright – so, what’s the worth of social media? As you can see, the answer is complex, but ultimately discernible. Regardless of the type of returns that your company is seeking (ie. increased brand awareness, revenue, or customer satisfaction), ROI can be calculated – with one tool or another.

With a little work and the right tools, social media no longer needs to be a “priceless” asset to your business…and that’s a good thing!