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Does The Best ROI Come From Social Media?

Marketers who attempt to calculate the ROI of their social media efforts tend to come away either confused or disappointed. On one hand, it’s very difficult to directly measure the return on investment of social media marketing, so marketers end up creating ‘soft’ metrics that attempt to quantify the value of a Facebook like or Twitter follower.

On the other hand, attempting to directly measure the uptick in sales following a large investment in social media often produces distinctly disappointing numbers — some marketers have estimated their social media efforts to produce a third the ROI as PPC advertising and 1/25th (!) the return on investment as email.

Therefore, it’s fairly accurate to say that under no circumstances does social media produce the best ROI of any advertising method. This fact begs the question — if attempting to measure social media ROI produces such abysmal numbers, why then are so many companies and brands spending money on social media efforts?

Does The Best ROI Come From Social Media?

 

Social Media Isn’t Advertising

The answer lies in the nature of working with social media. Compared with traditional or online advertising — where you pay to put a message in front of so and so many people — social media is a very different beast. Rather, social media should be seen through the same lens as public relations efforts used to be seen.

Social media excels at getting other people talking about your company, and talking with your company. It is a good vehicle for shifting consumers’ perceptions of what your brand stands for. And it is an excellent way to handle customer service and reputation management, as it allows your staff to respond quickly and ‘put out the fire’ before it grows from a small flame to a giant conflagration.

Social media generally does not reach consumers when they are looking to spend money. Social media reaches consumers when they are bored and looking for distractions. Therefore, attempting to generate conversions from social media produces inherently poorer results than traditional advertising, which seeks to find ‘buyers’ instead of ‘talkers.’

Tracking Social Media’s Bottom-Line Impact is Nearly Impossible

It is not too difficult to keep track of metrics like followers, likes, retweets, etc. These allow you to measure abstract concepts like ‘engagement’ or ‘reach,’ which are excellent metrics when you are looking to create a loyal following or change the perception of your brand.

However, let us consider the problem of the marketer who wishes to put a bottom-line value on these numbers. How does one value a ‘like’?

A consumer really loves a particular product, and happens to be a fan of one particular company, so he goes to that company’s page and gives them a ‘like.’

On the other hand, that consumer’s friend has little interest in those products or that company, so despite seeing his friend’s interest — he does not give the page a ‘like.’

At the end of the year, the consumer has spend hundreds of dollars with that company, whereas his friend has not. Yet this has very little to do with the Facebook ‘like’ — and everything to do with real world likes!

This is the crux of the social media metrology muddle. Does a follower or fan spend more just because they already love the company, or because they were engaged online?

For that matter, how do you avoid double-counting? What happens when a fan on Facebook buys via an organic click on Google? Are you going to attribute the sale to SEO and to Facebook?

What Works Instead

Rather than using social media for directly acquiring customers, this is why those ‘in the know’ tend to focus on its applications to more abstract branding and customer service tasks. In those domains, measuring results is fairly straightforward, even if it’s difficult to quantify the precise impact on the bottom line.

When it comes to acquiring new customers, it’s much more effective to use traditional advertising and promotional methods. Even if it seems old-fashioned, giving away non woven bags at an event or in the store is an excellent way to turn potential female clients into walking billboards (and future repeat customers). ROI here is clear and provable — the business can watch sales in a given area and see if the promotion worked or flopped.

Conclusion

Businesses who expect to see high ROI from social media are likely to be disappointed. Social media is not well suited to advertising, as people there are not ready to buy. Rather, social media is an extremely effective for branding campaigns and customer service efforts.

To bring in new customers, businesses are better off using traditional promotions in concert with social media.

Images: ”Business concept: pixelated words ROI on digital background, 3d render  / Shutterstock.com

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Alex Pejak is an economist currently working on a few projects in Australia. She is passionate about market research and project management. She is also interested in topics related to business IT and career development.

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Comments
  • Thanks for another great post Alex. I agree that measuring ROI can be very difficult from Social Media. You can see increased website traffic from it but as you said using it for branding and customer service is a great idea. I look forward to your next post

  • Alex Pejak

    Thank you, Sian. I’m glad you like the article.

  • aubrey ramirez

    The thing is, to convince clients to spend money on social media strategising, you have to make the case for why it’s worth them spending their money with you.

    So what tips or methods do you use to try and keep clients interested in investing in social media campaigns?

    I think from an overall, integrated, holistic approach there is a massive value. But of course if you start using the word ‘holistic’ they might run screaming out of the door! Thanks for the article.




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