As an entrepreneur, ROI is probably not top of mind, it’s more likely about breaking even, hitting growth targets, securing customers and making sure bills can be paid. Additionally, when you start thinking about social media in the context of your startup, measuring social ROI is also unlikely to be a key driver. What might happen is that after a number of months, you may well wonder what’s the point of bothering with social at all? How do you measure the ROI from social?
Given the rise of smartphones and tablets, the argument for whether your customers are on social is for the most part pretty irrelevant; there are plenty of stats about the growth of Twitter, the fact that if the number of Facebook subscribers equated to a countries’ population, it would make Mark Zuckerberg the leader of the third biggest country on earth! But what should you as a small business look at if you are trying to measure the ROI from social?
The cost of social
It’s obvious that ROI is based on cost and return; fortunately working out the costs of social, for the most part, is fairly straight forward. Setting up Facebook, Twitter, Instagram, Youtube and LinkedIn accounts won’t cost you a penny unless of course, you advertise, and then working out the costs is similarly pretty straight forward. The other cost, of course, is your time spent ‘doing social’. Working that out can be based on what your hourly rate would be. There is, of course, one cost that is impossible to calculate – the opportunity cost. For the time spent on the tweet, post, like and re-share, what else could you/those in your business have done? Irrespective of how you add all of that up, it’s an easy number to calculate when compared to the return.
The ‘vanity’ of social
You may well have come across the term ‘vanity’ metrics – namely where measurements from social such as followers, likes, friends, +1s and favourites are meaningless when compared to the number of calls to an enquiry line or number of demos requested. The argument goes that value of those numbers is for your ego alone and bears no relation at all to the well-being of the business. But taking the vanity side out of the argument you have to start the entire social discussion with the following question: what is the purpose of doing social? Why bother?
The ‘value’ of social
This depends on context; are you looking to sell products? Spread the word? Recruit great staff? Secure funding to help the business grow? Attract resellers or partners? There are probably a whole host of questions I have missed but for each question, look at each social platform and work backwards. For Twitter, a follower is a person – this could be a customer a competitor or a prospect. Similarly, a ‘like’ is a person who has endorsed the company. A reshare or +1 of a blog means that a person has read the article written (compare that to ABC circulation numbers) so when you then look at what you are trying to achieve it does not take long before you can move towards some meaningful numbers.
The ROI equation
I am doing some work with a social media platform provider called Sentiment and its approach to ROI is simple. Social should either increase revenue or reduce costs in servicing customers compared to other channels e.g. voice, email, web chat. Granted its focus tends to be for larger brands, but a small business does think in the same way. If I spend 20 minutes on the phone with a customer when a quick 5 minute post on my Facebook page removes the question, I have saved 15 minutes. 40 new followers to my blog means I don’t have to purchase a new list of names for the next marketing campaign.
The ROI social loop
Given that technology moves at such a fast pace, the only thing a small business can do is constantly evaluate its social progress (provided this exercise does not take too long either) against its business objective. Chances are you do this instinctively, given that you track the bottom line closely to do this for social could in the long term pay big dividends.