The return on social media marketing

“When I’m asked about ROI of Social Media, sometimes an appropriate response is: What’s the ROI of your phone?” — Erik Qualman, Socialnomics

Social media marketing is getting a lot of business attention. Just today we got this email at Social Media Pilots:

I need to schedule a time to discover your costs for set up and creating a marketing program for my company that will not only help me be on social media but become discovered and actively visited for real estate. I attended one of your introductions sessions in April 2011 now I need to get serious about getting social media to work for my business and create some income from that source.

Do you detect a bit of panic in the letter?

How does a business know that social media is what they want to get into?

What makes it the “tactic du jour” versus the “tactic for all time”?

With hundreds of thousands of businesses now on Facebook and Twitter, is social media a fad or a force to be reckoned with?

For a business that already feels stretched thin, sometimes the idea of investing resources and time in something like Twitter seems foolish. So, what are the numbers? What is the return on investment of social media?

Louis Armstrong may have said it best, when talking about the appeal of jazz: “Man, if you have to ask, you’ll never know.”

Complicated relationship

ROI and social media have a complicated relationship. Certainly, a business can calculate ROI on social media marketing over time. And some businesses are now making millions of new dollars from their social media campaigns.

But that’s sort of missing the point. There is no straight line between social media and revenue. That’s because social media marketing adds a new and needed step to the marketing flow: conversation.

Marketing used to be a one-way street. You bought a television ad or a prominent highway billboard and it sent out a well-crafted message. You were speaking to your customers — but were you?

The hope was that if your message penetrated, if you played it enough times with sufficient reach and frequency, customers would remember you and perhaps patronize your business when it came time to buy. But the media buying and the messaging was never truly predictive.

And the audience could only be in a receiving mode. They could never really speak to you or get your attention. They were passive prospects.

Social media changes all that. The point of social media is to be a part of the conversation surrounding your business. First you enter the conversation. Then, slowly, you use the conversation to steer business. But it’s still a conversation! You don’t win at conversations, or even make money off of them. You make money on what comes after the conversation.

Conversations with others are opportunities for establishing and building your reputation, your image, your brand. In the conversations that are going on with literally millions of Internet users, people learn about you, learn about what’s interesting about your business, and come to trust you as a business entity.

As local media entrepreneur Joel Comm put it: “Like me, know me, trust me, pay me.”

Understanding ROI of Social Media

Certainly, there are ways of quantifying and calculating the benefits of social media. It’s just that seeing the whole picture is the most important thing, and no one number will show you the whole picture.

When looking at the ROI of social media marketing, two things are important to keep in mind: 1. social media investment matures over time, it is rarely immediate; and 2. social media yields returns in cost-saving as well as revenue generation. Any ROI calculation has to take both of these into account.

The return on investment of social media marketing can be quite high, but it all depends on how you engage and how far you take it. There are no rules in social media, which is both the best and scariest aspect of this new medium. Every company does it differently. It’s up to you and your business to make this work for you.

“What’s the ROI of your phone?” Erik Qualman, a social media maven, asks.

You can’t predict how many phone calls you’ll get from new callers. Or how long the conversations might last, or how many repeat phone calls there might be on that fancy apparatus called a phone. Furthermore, you can’t readily predict how much postage you’ll save by using your phone instead of sending a letter through the post.

But certainly, you need a phone! If you’re persistent and organized, you’ll turn the callers and the conversations into customers and ultimately revenue.

Next time, we’ll look at some of the deeper metrics available to measure how well your social media efforts are working for your company.

Until then, see you in the social sphere!

Laurie Macomber is co-owner of Social Media Pilots in Fort Collins. For more information about the firm’s monthly Flight School and Social Media Roundtables, visit facebook.com/socialmediapilots.

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