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ROI for Social Media? It’s way more..it’s a new way to do business.

How do we think about ROI for Social Media?  A few weeks back I asked for feedback for a talk I was giving and here are my learnings on ROI and measuring Social Media on marketing projects.  After reviewing the info, it changed the way I now  look at Social Media.  Taking it out from being a marketing strategy and tactic to being a real change in the way companies must do business, across all areas or what I am now calling a  TEC- Total Enterprise Change TM due to Social Media .

 An advertisment in Time Magazine this week, brought the point home for me.  The ad was advertising a new bank that wanted to position itself as the honest and straightforward bank.  Listing that they will tell you up front, how long your hold time will be when you call.   Hello… we are in the world of Social Media expectation, so they have missed the big concept. No one will wait any longer for customer service in the social media age, nor except that it is acceptable to wait.  It must be instantaneous and complete end to end and nothing more.

Many large online and offline companies are starting to change their entire business model due to Social Media.  The norm is becoming to say if you do not have Click to talk, video phone access, content scrapes, Twitter, Facebook, Digg, you are now behind the curve. 

Some of my CMO friends have asked, “When will people bore of playing with Social Media and go on to the next big thing”.  This is more than a big thing, it is a big way. This has and will evolve to change the way we live and who we choose to do business with, how we communicate and with whom. 

Think back to what you thought about the internet, well some said it was a craze, a thing that kids played with?  That was the thinking, I remember talking to the heads of ad agencies and being told that the internet would have no impact on advertising…..I could not believe what I was hearing, in those early days.  Now it looks foolish .

So if you’re thinking, I still do not get it?  Here are some examples to grasp the concept.   You have to understand the progression of ways of doing business in our time.  Think of the business progression from  mail, to phone, to typewriters, to faxes, to computers, to email, to websites, to cell phones, to texting, to social media.  It is the next way of how you will and must  do business.  Social Media is no longer a marketing tactic, thus if you are trying to put it into an ROI box, and then measure the ROI, thinking like this will very easily miss the point and you will miss the boat.   Today you could not think to function without email, this too will happen with Social Media. 

Social Media is the way you will conduct business, sell and take orders, service business, train employees and educate groups,  as well as it will be used for marketing.  So this puts the Social Media business transition into all areas of your enterprise, thus not as an ROI, but as a non financial impact item. 

When Social Media strategy and tactics ares used in a marketing program, then you can measure,  but it should be viewed as an impact to the TBE -Total Business Enterprise TM .  Thus ROI will need to account for customer service, operations, sales, call center, retail locations, accounting, IT and marketing, just to name a few.

So if you are still looking for an ROI formula here is what I would look at:

1: Establish a bench mark of pre or current social media off of which this can be based.

SM growth/loss-SM cost=Net SM cash flow. 

SM growth/loss + SM cost =SM Net Present Value,

Which gives you the delta for your ROI% on the return and establishes number of months for pay back.

3 Responses

  1. first of all, please improve your grammar. secondly, isnt that formula just basic math? what about ways to quantify and measure SM’s impact?

  2. I agree and have an editor that is going to start to review the format and edit, so it is more readable. Please remember this started out as a blog for my CMO friends, who wanted my info of what I was doing and how I was doing it. Sometimes I write it and need to have it edited and do not have the time. Now that will happen. Yes an ROI is a formular is simple math, nothing more, there is no mystery.

  3. I enjoyed reading your blog and l think you articulated the case very well for why social media should be viewed as an emerging technology and not as a fad. I also believe that measuring ROI can be a slippery slope when attempting to assess the value of a new technology, it’s not really the point. You can’t afford not to be engaged when these shifts occur.

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