Taking the Long View: Social Media’s Real ROI

By Ian Lurie

If you’re measuring every dime spent on social media and expecting a clear ROI, you’re doing it wrong.

Social media doesn’t generate near-term ROI. It fixes rattles and makes people happy. By doing that, it helps you secure long-term ROI.

Cars, rattles and social media

I bought a new car three weeks ago for an embarrassing, midlife crisis amount of money. Shortly after that, I heard a funny rattle in the right front of the car. Not much, but it was enough to bring on accelerated buyer’s remorse.

The manufacturer fixed the rattle, and cured my malaise. An engineer probably spent 20 hours going over the car, piece by piece, until they found the rattle and squashed it like the middle-aged joy-crusher it was.

In terms of ROI they never should have done the work. It was a terrible deal for the car dealer and the manufacturer. They could have said “Turn up the radio and you won’t hear the rattle.” It’s not like I could get a refund. I’d already paid for it. It wasn’t a safety issue. I’m sure this didn’t exactly fall under lemon law statutes, either.

So doing this work didn’t increase their near-term ROI. It hurt it. There is no data-driven reason for them to do what they did.

Of course, common sense dictates fixing the problem. If you’re a manufacturer and you sell someone a premium sports sedan, you want them to be happy. If they’re unhappy, you’ve gained a serious detractor who will:

  • Never buy from you again;
  • Do everything they can to steer others away from you and your brand;
  • Spread negativity around your brand like manure on a spring flower bed.

Turning a potential detractor into a fan doesn’t provide a measurable return. It just makes sense, because it builds long-term ROI.

Social media just makes sense, too

Social media works exactly the same way, except you have the opportunity to influence conversations around your brand before someone becomes a potential detractor.

Companies try to measure social media’s near-term ROI. And, with a few notable exceptions, social media campaigns lose money. We measured results across 100 client accounts and found that social media investment – in monitoring, having experts answer questions, and generally pay attention – broke even or lost money in the near term 85% of the time. Eighty. Five. Percent.

We don’t make that much money from social media services, either. We have little incentive to get clients using it, even if we were just trying to squeeze budget dollars out of accounts. Of all the services we offer, it’s the lowest earner.

Why keep using it?

Because it just makes sense. Social media lets you take care of customers and potential customers. And it builds long-term ROI like no other channel, by letting you:

Answer Questions

You can answer questions. Specialized Bicycle Company does live streaming Q&A sessions with cyclists all over the world. Alaska Airlines uses Facebook to keep customers informed regarding potential delays during the sequester. If that keeps just a handful of customers happy, it pays off:

wtia-alaskaair

If you want to do the same, try a tool like inboxQ. You can get a feed of relevant questions from Twitter, filtered and sent directly to your Hootsuite account.

Can you measure the ROI? No. Is it worthwhile? Absolutely.

Make Eye Contact

Bill Marriott blogs regularly about his travel, his business, and current events. He’s not interacting with most Marriott customers, but he’s providing media direct access to his brain. That puts a face on Marriott, and makes it more likely media will contact him with questions. He’s made ‘eye contact’ with the media.

Samsung retweets and answers occasional posts from fans. Again, eye contact. Does that mean Kelly will immediately go out and buy more Samsung products? No. Does it mean she’s more likely to do so later on? Yes.

wtia-samsung-twitter

This kind of interaction humanizes big and small companies. It gives your consumers—whether you’re B2B or B2C—more confidence when making purchase decisions.

You can monitor social media mentions of you and your company using a host of free tools, from Google searches to SocialMention. Or, you can invest in more powerful paid monitoring suites. Either way, it takes 30 seconds to respond to a customer, but they’ll remember it for far longer.

Measure Something Else

When most companies say ‘ROI’ they mean ‘sales, directly generated,’ aka near-term ROI. They can measure that:

  1. Take clicks from social media sources © and revenue generated from those clicks®.
  2. Calculate r/c.

But even if they focus 100% on near-term ROI, they’ll have to account for:

  1. Social media ‘assists,’ where a click from social media was somewhere in the sales cycle, but not first or last.
  2. Expanded reach.
  3. Reduced cost of acquisition in other channels.
  4. Total lifetime value generated by social media.

Marketers can use a host of different formula to mash this all together. And, there’s no lack of tools claiming to accurately measure social media ROI.

But those marketers have an alternative. Skip the near-term stuff. Instead, track things that might generate long-term return: The number of positive contacts via social media. Answer a question, add 1. Help out an existing customer, add 1. Aid a non-customer in need, add 1.  And so on.

They can also track the total number of mentions, retweets, shares, likes, and other interactions their organizations see over a given period.

Correlate each metric to overall Internet revenue. Marketers who do this track long-term ROI, and get better insight into social media’s true value.

Remember those 85% I mentioned earlier? The companies that don’t see a positive near-term ROI? When you test a 30-day period and measure correlation to conversions, where a conversion is any potential revenue-generating action (a lead, a purchase, or other signup), social media is the third most-influential factor. The only factors that beat it: Overall site traffic, and traffic from unpaid or ‘organic’ search results.

 wtia-correlation

Keep Your Eye on the Real Target

The problem with ‘social media ROI’ is that marketers usually attempt to track dollars generated directly from social media. That distracts from the real goal of any social media team: To improve the audience’s overall opinion of your brand.

That has huge implications for growth over time. Marketers need to keep their eye on the target: Use social media to strengthen brand and long-term ROI.  Then measure its effectiveness at doing so. The long-term payoff is huge.

Who is Ian Lurie?

Ian Lurie mugshotIan Lurie is one of the world’s top experts on Internet, search and social media marketing. He is founder and CEO of Portent Inc., an Internet marketing agency that has provided Internet marketing, including search, social and analytics services, since 1995.

He co-published Web Marketing All-In-One for Dummies and wrote the sections on SEO, blogging, social media, and web analytics. He also wrote Conversation Marketing: Internet Marketing Strategies. In addition, he writes regularly for the Portent Blog.

Ian has spoken at various marketing conferences, including Ad::Tech, Search Engine Strategies (SES), Search Marketing Expo (SMX), MozCon, Blogworld and Pubcon. He brings humor, deep insight and actionable advice to every event.

Ian was recently elected to the Board of Directors of the Search Engine Marketing Professionals Organization (SEMPO). He has a B.A. in History from UC San Diego and a JD degree in Law from UCLA. He has lived in New Jersey and Los Angeles, and currently resides in Seattle with his wife and two kids.

Portent, Inc. is a full-service Internet marketing agency founded in 1995.  Portent helps its clients achieve their digital marketing goals through effective search, social and inbound marketing strategies.  Clients see an average online revenue increase of 30%.

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