The Social Media ROI Conundrum

Social media ROI has been a hot topic of late and will be a primary focus of many marketers in 2011. Whether that leads to marketers determining satisfactory methods of calculating social media ROI is still unknown, but they sure will be trying.

This is evident in a recent report by the Altimeter Group, which shows that developing ROI measurements is the primary focus of 48 percent of social strategists.

This is also backed up by a recent eMarketer report that shows the increased focus on ROI metrics. Specifically, the report shows the heightened focus on measuring conversions and revenue from social media efforts.


Before you go headlong into the arduous process of trying to determine your social media ROI, it’s best to take a step back and evaluate what is true ROI and what are the other benefits of social media that may not fall into a direct ROI calculation.

ROI can have different meanings to different people, but it’s really a financial calculation and should be treated as one when looking at social media metrics.


If you’re properly measuring your social media results through web analytics and tying it in with your CRM data, you can measure the direct gains from your social media investment. In addition to having your web analytics configured properly, you’ll generally need to augment the data with additional metrics to help bring together a more complete picture of your gains.

This is where a few simple questions in the checkout process (e.g., “How did you hear about us?” and “What drove your purchase decision today?”) can add additional insight. In the latter question, it’s generally a good idea to allow for multiple selections since consumers are likely to have had multiple touch points with your brand that drove their purchase decision.

This type of measurement can help uncover the direct impact of social media investment and aid in your social media ROI calculation. The issue, however, is that social media is about so much more than just the direct gains from your investment.

There are many other benefits of social media that may not directly impact your bottom line, but they do impact the short-term and long-term health of your brand. As a result, these may not fit into your ROI calculation, but they shouldn’t be ignored when assessing the value of social media.

Four of these benefits are discussed below, but there are likely others that may play a role in your brand’s health.


Brand awareness is critical to the long-term success of a brand. If you haven’t put effort into building awareness, you don’t stand much of a chance in being part of the consumer’s consideration set when they are looking to make a purchase.

If you’re not in the consideration set, then the cost of your investments is more often than not going to result in a negative ROI. So while branding efforts aren’t going to have instant gratification, they are critical to the long-term health of your brand.

From a branding perspective, a great benefit of social media is that your loyal customers will often be more than happy to help build awareness for your brand. By engaging in social channels on behalf of your brand, these loyal customers turned ambassadors can help reduce the burden placed on your shoulders while adding credibility to your brand’s message.

This doesn’t, however, mean you shouldn’t pay close attention to the conversations your ambassadors are engaged in. You always want to keep your finger on the pulse of your brand by understanding how it’s perceived and the conversations that are taking place around it.

Public Relations

You never want to spend the time, effort, and resources building a successful brand only to have it come crashing down because of a situation that you let get out of control. That’s why PR is another component of social media that ties into the long-term health of your brand but may not have a direct impact on ROI calculations.

Instead of building instant ROI, your PR efforts in social media will be more about preventing negative ROI in the future by protecting the brand and managing risk.

Customer Service

Keeping your current customers happy is another essential component of building the long-term success of your brand. Not only will satisfied customers tell their friends about their positive experience with your brand, but they’re also more likely to become a repeat customer and a repeat customer is significantly less expensive to keep than generating a new customer.

A happy customer also isn’t going to be talking negatively about your brand in social channels. In fact, a happy customer may advocate on behalf of your brand if negative conversations do take place.

So while social media may not be your primary customer service channel, it definitely should be incorporated into the mix to help heed off any negativity that may arise from an unsatisfied customer. This in turn can create a more positive overall tone of the conversations that may negate a negative swell that could bubble up into a public relations nightmare.

All of this can lead to long-term health benefits for your brand while having the potential to reduce the burden on your call centers in the short term.

Consumer Insights

Social media can also be a great channel to gain insight into consumer opinions about your brand or product. These can be incredibly helpful when developing a new product or improving on an existing product.

While these insights won’t have an immediate impact on your bottom line, they can help ward off costly blunders where time and resources are devoted toward a product or product improvement that doesn’t satisfy consumers’ needs and as a consequence isn’t adopted by consumers.

Social Media Value vs. ROI

These are just a few examples of how social media can benefit your brand without directly tying into an ROI calculation. Just because these aren’t part of an ROI calculation, however, doesn’t mean their costs shouldn’t be justified.

While the calls for the justification of social media budgets are underway, in many cases an answer to those calls has yet to be heard because people aren’t sure how to respond. What ends up being heard may well be a crowd of disparate replies that varies depending on the goals and objectives that are outlined for each social media program.

While I’m 100 percent behind the efforts to establish the value of social media, I would argue that there is a real difference between value and ROI. Examples like the four given here and others like them demonstrate efforts that will benefit the long-term health of your brand and over time will impact ROI. While their true impact likely won’t be felt immediately, it is still generally a good idea to try to establish a measurement framework that can be used to determine their value.

An analogy can be drawn with your own personal health. When you eat healthy and regularly exercise, you’ll likely see some short-term benefits, but it’s the long-term benefits that will provide the most value to you. If healthy eating and exercise are part of your daily life, you’ll be less likely to develop chronic illnesses that decrease your quality of life or worse kill you.

In other words, taking care of the health of your body in the short term will have an enormous impact on your long-term health.

When looking at the value of social media, don’t be shortsighted and look only at the immediate ROI, but instead look at how social media can impact the long term health of your brand. This is where you’ll find the true value of social media that goes beyond the immediate ROI.

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