Name one of the most overused words in business today. If you said “Web 2.0,” you’re right, but there’s one even more insidious: ROI. Many have posted about it, but when asked “show me,” most remain silent. So is there any tangible return on investment, or is it as much or a mystery as our friend here.
When does ROI work for social media? The type of use must be easily measurable within a quantified framework — in plain English: use must correspond to numbers, such as views or sales. Take a promotion or sales presence, such as http://twitter.com/delloutlet. The manager of the account would be able to link site sales directly through user activity. A telesales center would be another good candidate for such financial measures.
So what about other forms of use?
Measurement is indirect and based on “human capital;” if you’re looking for a definition, check out the work by Drs Kaplan and Norton at The Palladium Group. Social media is based on engagement — a measure that doesn’t lend itself well to measurement for either the employee or the audience. Engagement is also asynchronous – activity doesn’t always immediately result in a sale or greater satisfaction. This difficulty isn’t limited to social media: public relations is another profession that isn’t well suited for ROI. I don’t believe engagement can be measured adequately (why: take a look at chaos or complexity theories).
My suggestion: create a new class of measurements called strategic return on activities (SROA). Following the work of Kaplan and Norton, activity of staff would be measured in terms of alignment to strategic goals of the organization. Following the work in Strategy Maps, social media would be folded under the appropriate internal, customer and financial perspectives. The greater an employee (e.g. Web or community manager) is prepared and motivated to perform the job, the strong the impact on the organization and it’s customers.
Now I’m interested in numbers as well. Unless social media can directly impact revenue or costs, it’s a financial liability. To counter this, activity would be quantified in terms of time (as a percent of salary plus overhead), along with any investment in information technology. This is measured against the internal and customer perspectives: is better intel going to product development, or are customers indicating a greater satisfaction with social resources. Most importantly, does this change over time and correspond to investment in social media operations?
Coming up next: what activities will yield the greatest results.
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