Are You Getting the Highest ROI (Return on Investment) From Today's Marketing?

Has your company spent seemingly countless hours tweeting on Twitter, networking on Facebook and writing the company blog? Have you found yourself wondering if it’s all a waste of time? Maybe that last Facebook fan page contest saw fewer entries than you’d hoped for, or that last Twitter-only coupon had fewer redemptions than you’d expected, but perhaps that’s not all that matters.

According to the the latest report by analyst firm Forrester, many people are looking at the face-value dollars and cents of social media marketing and, put simply, they’re doing it wrong. Beyond clicks and coupon redemptions there lies a case for social media marketing that shows its value is well beyond what we see on the surface. Analyst and report author Augie Ray writes in a blog post this morning that traditional measurements of success for return on investment in social media marketing lead to an incomplete picture. Many marketers can draw a straight line between investments in social media marketing and financial results, but many more cannot.

This doesn’t mean social media marketing is ineffective; it just means that marketers have to recognize benefits beyond dollars and cents. Facebook fans, retweets, site visits, video views, positive ratings and vibrant communities are not financial assets–they aren’t reflected on the balance sheet and can’t be counted on an income statement–but that doesn’t mean they are valueless. Instead, these are leading indicators that the brand is doing something to create value that can lead to financial results in the future.

 Ray suggests that we look at ROI in terms of four perspectives – financial, digital, brand and risk management. For each, however, Ray says that we should go beyond the surface to evaluate success. Financial ROI, for example, can be measured in terms of online coupon redemption, but also in other ways. He gives the example of online retailer Petco.com. It has found that “Products with reviews have return rates that are 20% lower than those without reviews – and the return rate is 45% lower for products with more than 25 reviews – saving on shipping, restocking, and customer service costs.” Similarly, looking at risk management, Ray notes that “this perspective is not about creating positive ROI but reducing unforeseen negative ROI in the future.”

By estimating the likelihood and potential cost of PR issues over time, a company could also estimate how much it might save by way of using social media.

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