Anyone who reads this blog will know that I regard most questions involving ROI as being ill-conceived. Don’t get me wrong – I am 100% in favor of demonstrating the business impact of marketing. It’s just that ROI is rarely the best way of doing this. This goes for social media as well as any other form of media.
My recommendation is that, whenever you are faced with a request for ROI, you ask for clarification. Specifically, you ask which of the following two questions better expresses the reason for the ROI request:
- “Is it strategically important and economically rational for us to invest in social media?”
- “Would the overall effectiveness of our marketing strategy be enhanced by allocating a certain portion of our marketing budget to social media?”
If it is the first question that you are being asked, you should respond with an articulation of why customer engagement and community building is a vital part of the company’s “go to market” strategy. You should provide data on the major drivers of the customer purchase decision and the influence that social media has on each of these drivers, and at which points in the purchase cycle it is most effective.
If it is the second question that you are being asked, you can assume that the strategy is not in question, merely the most effective way of achieving it. In this case, you could propose a media mix model to show the impact of adding social media to the marketing mix on overall purchase volumes and margins.
Is it ever correct to respond to a request for ROI at face value? Yes, but only when you are being asked to evaluate social media as a standalone sales channel.
