Many businesses and leaders are finally starting to join the social media frenzy because of the effective reach they have on consumers and the ability to reach thousands of people at once. However, for social branding tools to truly work for everyone, brands need to assess the impact they have on their business and their customers, in a tangible way. To do this, the return on investment (ROI) of social media must be measured, which can be somewhat difficult and confusing to do. As long as you remember the steps and pointers the researchers found, you should be able to see exactly how effective your social media investments are.
Return on investment is defined as (investment gain-cost of investment/cost of investment), with the expectation of investing less than what you will actually get in return. ROI is a business metric, not a media metric, so it will prove legitimate results. Oliver Blanchard, Director of BrandBuilder Marketing and Senior Strategist, has done extensive research on social media ROI and reveals some insights into how it can be measured. Something important to remember that he points out is that social media is not free; it takes time, energy, people and technology to achieve. There are two important and fairly simple reasons why it is necessary to allocate money for social media spending within the company. First, it will result in reduced costs for customer service, business intelligence, and market research, to name a few. On the other hand, it will simultaneously generate greater revenue by generating more transactions, more net new customers, increased customer loyalty and brand awareness.
At first, revenue generation from allocated resources used on social media may not be visible from a business perspective, even with increased website visits, more Facebook fans or followers on Twitter. The financial benefits may not appear overnight as there is a process he must go through to reach that point. In order to measure ROI with social media, you need to first make the investment, then take action using it, observe a consumer reaction, feel the non-financial impact where there is potential (including including website visitors, social mention, impressions, Facebook friends, YouTube videos, positive and negative press…) and finally comes the financial impact where ROI is measured and has discounted potential. It’s important to not just rely on the numbers, but what they end up leading to. Finding trends and following them to their point of origin is the key to measuring ROI.
According to Blanchard, it is necessary to start with a proof of concept by showing the growth of the company’s awareness, turnover and number of transactions and net new customers since the implementation of social media. This can be accomplished with charts and timelines that show a before and after concept. Transaction data should be specific by showing frequency, reach, and customer yield. By looking for patterns in the different areas that have changed since running the social media tools, it will be easy to see the impact. By stacking these timelines on top of each other, your business can create a picture of which efforts are working and which are not. Watch for correlations between events, such as certain blog posts equating to more customer calls, or positive online mentions and increased site visitors Using what you know, you can make it affect all aspects of your business, even your actual building traffic.