Social media and ROI indeed have a love/hate relationship. Businesses are struggling to determine whether ROI should be captured and what actually goes into an ROI calculation.
Defining ROI itself is the gain from any spending taken away from the cost of the investment divided by the cost. This calculation works out a percentage either gained or lost from the original investment.
In the past company profits were generated from sale employees physically selling products in a shop, cold calling over the telephone and perhaps even door to door knocking. These are all around today but for how long?
As Technology and the Online World evolve, so has its audience. Most companies are embracing this change by running surveys, collecting data such as customer details (phone number or email address) via all sorts of mediums. Details can be collected in store, on the phone and online. Phil Clarke of Tesco said “‘Using Clubcard data, we would show, for example, offers of our everyday Value range to price sensitive customers, and offers of our Finest range to more upmarket customers.” Analysing the data they have collected, Tesco can target their audience straight down to an individual shopper.
In October 2013, Morrison’s supermarket chief executive Mr.Philips said “The online market is one of the fastest growing parts of the grocery industry. Mr Philips has blamed his company’s declining market share on not having an online grocery operation.” 
I also found Morrison’s had teamed up with “Ocardo, which will enable Morrisons.com to commence grocery deliveries to customers by January 2014.” 
Morrison’s realised that an online presence is a must for any company to continue successfully trading for the future. An example to them would be Tesco and how they started their website and social media platforms back in 2006. Social media for Morrison’s is a must also, as it will spread their awareness and hope to gain cash into their tills.
As we look at a few examples which is already available to companies, pay-per-click advertisement has helped drive sales. We can look at what search engines such as Google, Yahoo and Bing offer, ie SEO. Search engine optimisation has come a long way, but even today a Social Media Manager may view it as not being reliable. It is tough to calculate a ROI for it, it can take years, not weeks to see the fruits of the labour.
Smarter companies didn’t just wait to see if SEO worked for others, they went full steam ahead attacking keywords like “home mortgages”, “cheap travel” and “black dress” which derived high amounts of revenue for them.
Companies and Marketers are becoming paralysed with attempting to determine the ROI of social media by incorrectly using inappropriate tools and measurements. We don’t even know how far Social Media can go? Where does it end to be made clearly measureable?
Social Media is something the likes of which we haven’t seen before so it can not measured as a ROI. As a result I would prefer to ask “Social media verse Return on Engagement?”
A ROE measures the effect your companies social media activities have on engagement social media platforms. I can assume that engagement with content leads to larger awareness, which then leads to higher likelihood of consideration, which then leads to a greater likelihood to buying.
Breaking down ROE I look at two popular social media platforms companies use today:
- Facebook – The number of engaged users is calculated by adding the number of likes on a post, the number of comments on a post, and the number of shares on a post. The idea is to drive the total sum of “likes” on the companies page.
- Twitter – The number of engaged Twitter users is calculated by adding the number of replies to the number of retweets and then dividing it by the number of followers. This gives you an understanding of how well your Twitter page is doing.
Knowing the number of engaged users and capturing the instances on key posts or tweets is very valuable to any company wanting to succeed in using social media.
Social media touches every aspect of business, and it should be viewed more as an extension of good business ethics. When done correctly with strong content companies will see the harvest of sales done the line.
I’m not saying you can’t measure certain aspects of social media but I strongly argue that you are greatly undeserving your current and future efforts by not understanding that social media touches every aspect of your company.
I believe it’s important to stress to companies, businesses, churches and the rest. There is not a choice in whether to do social media – the choice is in how well you do it!
Companies invest time and money into social media because they hope to still be standing in five years time.
I found this interesting video about Social Media Marketing for Small Businesses – its worth a watch! http://www.youtube.com/watch?v=cONhBSNWaPY