Is Our Addiction to ROI Killing Social Media?

Guest post by Matt Ridings, founder of MSR Consulting, a Digital Relationship Marketing Agency in St. Louis. He’s @techguerilla on Twitter.

I had an interesting phone call with a prospective client. I didn’t know him, and hadn’t worked with his (large) company. He was looking for a social media vendor, and was referred to me by a mutual contact who had attended one of my training workshops. In that workshop, we discussed social media ROI realities.

Our mutual friend has apparently emphasized the importance of well defined, realistic, ROI. And his belief that if an agency couldn’t provide that, then they weren’t any good. Sounds reasonable, right? Not so fast.

Social Media ROI AddictionThe reason this prospective client was calling me was because the firms he had shortlisted did *not* have explicit ROI objectives, and he was now terrified since he believed he was dealing with snake oil salesmen. I had him remove any identifying traits from the proposals, and send the summaries to me along with his explanation of what objectives he had given the agencies.

He was right, none of the proposals had included specific ROI objectives. But overall, they were sound. Given his objectives, which were wide ranging, they didn’t look very different from something I would have written, and I told him so. The key is that while these proposals may not have spelled ROI objectives per se, they *did* focus on making sure that the activities that could be measured were being measured.

Sometimes social media measurements can be tied directly to financial transactions, but sometimes they can’t. And that’s not always the fault of the agency, but the nature of what the client can measure, and what they commit to measure.

Social Media ROI is Always Doable. It’s Not Always Practical

What do I mean? Let’s take a customer service activity, how do I *directly* measure the ROI of helping a customer? What about activities designed to increase brand recognition? Brand perception? Secondary lift? One of the proposals sought ROI by setting a financial baseline today, and then reviewing sales growth over an extended period of time matched against the activities taking place in that time period. Of course, that is not true ROI, which requires an actual, definable “return”. Tracking overall sales growth and plotting activities alongside can demonstrate correlation, but not causation. And in many cases, that’s all you can do.

At some point you have to be able to say that this ‘program’ (which can contain as few or as many activities as you like) is beneficial, even if you can’t explicitly measure all of the data points that took place within that program. True, you can absolutely measure ROI precisely if you want to badly enough. But when does it become too much trouble? If you’re spending more time counting than you are doing, has your ROI focus run amok?

You measure what you can measure with a reasonable level of effort, and then you try and make as much sense out of it as you can. That’s the way it’s worked in marketing forever, and social media isn’t any different.

This overwhelming ROI focus is tough for agencies because it’s rare that a client actually provides an agency everything they would need to produce an accurate ROI. Are they prepared to hand over salaries of those people who interacted with the project? Internal materials costs? Profit margin per product? Many of those financials, which the enterprise considers ‘fixed costs’ are necessary data points if you’re going to *truly* calculate ROI.

The “investment” portion of ROI is often much trickier to figure than the reward, and most of the time the company itself isn’t keeping track of data that’s granular – much less giving those numbers to their agency.

Social Media ROI is About Defense, Not Offense

What a client really wants is a way to say semi-definitively that the decisions they have made were worthwhile. Social media ROI is about defense, not offense. You should measure as specifically and rigorously as you can, but the inability to precisely measure ROI shouldn’t be an obstacle to social participation, and too many companies are using “we don’t know the ROI” as a smokescreen for their fear of openness.

Any project needs to be able to “prove its worth”. If it can do that with a high enough degree of certainty for an executive to make decisions, then isn’t that okay? Maybe instead of me ranting about social media ROI for all this time I should have just been saying that all along.

Because sometimes, that’s enough.

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