I actually forgot commenting on this excellent article, which I necessarily do not totally agree with.

As I see it, there is two purposes in social media for businesses today;
1. earn money
2. save money

To those two there are a wide range of other possible KPI’s/sub-purposes, which should be setup in an early stage and monitored closely.

Key Point Indicators are metrics telling you that you are heading in the right way, and all those really important things you mention in your post is KPI’s, not ROI.

ROI – In my humble opinion – Is one of the two main purposes (or both). And both of them are, in all ways of seeing it, possible to measure.

Either we have a different scope of defining ROI, or I disagree on most in your post!

I hope that we can meet up for that AW we have been discussing for a while. I’d love to take this discussion further over a glass of pinot noir

Have a great weekend,

Looking forward your response (Your’s as well @baekdal).

Best,
Magnus

Firstly, ROI is not good way to look at sales costs or consumption. My argument is that marketing isn’t an investment at all and thus you are unable to calculate return on investment. Some parts of social media spend can be counted as investments and it is important that you separate your work in social media into two different ways of viewing your spend in order for it to be compared with other investments/consumption.

You CAN however calculate the direct return of some media spend in traditional media and some campaign in social media. In most cases, Social Media is quite pale in comparison to for example SEO or SEM or TV.

However, if you use a combination of social media investments, with media consumption. Then the return of your media consumption will be much greater than if you hadn’t made the investment in social media.

So, to answer your question. You can measure ROI on social media activities, but only on some of them, the ones that actually are investments.

Just as when you build an apartment complex, you produce an asset in the empty flats you are producing, a follower on a Twitter account or a Facebook page is an asset. You DON’T earn ANY money by just “owning” them. You then need to put that asset to the market (or have someone else do it, as when owning a stock or a bond) in order to gain return from it. You need to interact with your Social media user, and you need to sub-let the apartment.

Secondly, what you measure as your return on an investment is always determined by the goals you set up when making it. If you only think money and not product when setting these goals, you will FAIL regardless if you are engaged in social media or not.

Ja, Okej – Och?

Den relationen är till för att 1.) Den personen ska köpa mer 2.) Den personen ska se till att någon annan ska köpa mer.

Allt detta går givetvis att mäta till direkt ROI.

Har jag missat något?

I agree with all that you wrote in your last comment.

And, yes you can make money by using “classic marketing” like Dell is doing with Dell Outlet. But Dell Outlet is also only one of Dell’s 34 Twitter channels, 33 Facebook channels and several other channels on other platforms (YouTube, flickr etc.). Dell’s overall social media strategy is all about investing in social media.

Not only that. Dell Outlet is actually 80% about building a long term relationship, because most of their tweets is replies to people questions. The success of Dell Outlet is as much about the customer relationship as it is about the discounts they offer.

But still. Special discounts are an important part of anyones social media strategy. As Razorfish found in November, 44% follow brands to get special deals. But instead of just using social media as an ad platform for special offers – use the special offers to build a connection between you and your customers.

—

- You wrote: “If you are only measuring bottom line effect then you miss a lot of what builds value over time such as customer loyalty index, returning customers etc.”

My article was specifically about NOT *only* measuring the bottom line effect. In my article I point out that people’s social media efforts must, in the end, result in a bottom line effect – otherwise you have no meaningful return.

But as I wrote in both myth 3 and 7, the way to actually get a bottom line effect is to focus on making remarkable products and experiences, and measuring your social media efforts as a whole (in the long term).

So yes, there is only one meaningful social ROI – the bottom line. But to way to measure that, is to look at a lot of other things, and see how they contributes to the “return” as a whole

My major concern with your post was that it seemed to state that there was only one return on an investment of any significance. I say it depends upon what gain you wish to get from your investment. If you are only measuring bottom line effect then you miss a lot of what builds value over time such as customer loyalty index, returning customers etc.

I agree that spend of budget in social media that aims to build relationships is an investment. However, I believe you can effectively spend money in social media that is not. Media consumption that doesn’t build trust can still be highly monetizing. Just look at Dell Outlet. A great example of classic marketing using social media channels.

I get what you’re aiming at when you say marketing is business development, but it is important to keep the definitions and labels apart. Marketing is not business development, but business development can/should occur if you use social media correctly when “marketing”.

Social media is largely about building a better relationship between you and your customers. As such, it is an investment, because you put something into it, and in return you get more out of it (e.g. a lasting connection, that can grow and expand on its own).

Building a relationship is not about “consumption” of media, because there is nothing following it (once it is consumed, you are left hungry – metaphorical speaking). Consumption is about the short term goal of creating awareness, like what you do e.g. via TV ads or billboards.

Social media is not about the consumption of media. It is about investing in your fans, so that the results are increased value over time. Which is exactly the effect you get via Twitter and Facebook.

Each investment is added to the previous one, and as such your fan base steadily increase over time. And the things you invested in one year ago, is still providing a return – because they fans stick around. The value doesn’t drop once the investment is paid.

Of course the biggest difference between my article and yours, is that I do not make a distinction between marketing and business development. In my world, marketing IS business development.