Some Thoughts on Social Media ROI

17 Nov

As social media becomes more popular, the central question emerges: how you measure the ROI on what you spend?

Indeed, social media makes tracking and quantitative measurement easier than in traditional media setting. But an emphasis on ROI may mislead social media strategy. Reasons are two-fold: 1) It’s true any business decisions should be inevitably justified through a ROI perspective, but this neglects the fact that “brand awareness, engagement and word-of-mouth”[1] are the mediators for excellent financial performance. An over-riding ROI standard impinges the cultivation on these brand equity elements, where social media has an edge compared with traditional media. 2) social media itself is in its infancy in terms of its role in marketing or business. A mere ROI perspective may overlook social media potential in long term strategy. For example, a ROI measurement might kill a social media campaign that fosters great brand engagement but little direct sale increase.

The CEO of DDBO New York, Andrew [2] shows some interesting research results that actually try to quantify the value of a Facebook fan, which ranges from $3.60 to $136 annually from different research companies. What conclusion he then draws is how valuable these figures are?–which dimensions of brand equity were these monetary results gauged against? Was the link between the value and sales clear? was the value always positive? DDBO’s research showed the relationship between quality (social media relationship between company and consumer) and brand performance is much more positively related than quantity of these relationships.

Above-mentioned views are coincidentally converge on the incompleteness and misleadingness a ROI approach for social media practices. It is important that we realize social media is a totally different animal, we should not put financial returns as primary focus, rather, we should invest in its potential in building strong customer relationship and creating unparalleled brand experience.

Inspired by and also referred to the following articles: [1] Hoffman D.L. and Fodor M. (2010) “Can you measure ROI of your social media marketing?”, MIT Sloan Management Review, Vol 52, No.1, 2010 Fall  [2] Robertson A. (2010) “For Brands on Facebook, Fan Quality Trumps Quantity”


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