On ROI and social media

roi

Let’s say you’re single and removed from the dating scene. It’s been a while. You get out from time to time in your own circles, and occasionally meet a prospective special someone for drinks, but on the whole maybe you just don’t care, maybe you don’t think you need to. You’re getting along just fine.

But now it’s catching up to you, you’re feeling lonely. Everyone’s talking about all the fun they’re having, all the crazy parties and quiet romantic evenings. It’s everywhere, on the TV, in the news, and especially online. You feel your livelihood slipping away. And here’s the worst of it: you’re just plain horny. I mean really horny. Jesus. You’ve got to get out there before you go crazy.

So you start hitting up the clubs. This is not your scene but you know, in time, you’ll catch on. All this new lingo to learn, people talk so fast. And they call this music?

But you’re getting it, step by step. That’s the easy part. Now you’re making dates, catching some good shows, picking up checks (or working wiles for free meals, as the case may be).

But on the whole you’re just not getting any tail. What’s going on!?

Here’s the problem: getting tail is all you’re thinking about. You’re dancing/eating/talking with a girl (or guy) and everything you do is a means to an end that gets them in your bed. Skin-deep, everyone can see right through you. Our Lady Transparency only offers her blessings when there’s actually something to show, something to be transparent about.

Sure, we all want to get laid. Our primal drive is ultimately a primary component of our motivation. But there’s more to life than this. You’re only a layer or two of social construct away from straight-up announcing to your date upon first meeting that you want to do them. Right now. “I want to be on you,” as Ron Burgandy would say. So what separates us from the animals?

Now let’s say you’re a business. You want to get into social media, everyone’s talking about it. It makes you money! Money buys you things! And stuff!

(Oh yeah, and it increases the scope and depth of what you can accomplish as a business by helping you refine and grow your service, do more good while doing less harm, make more people happy, make less people disappointed, and through the power of rapid communication and collaboration, make the world a better place.)

So you auto-follow hundreds of thousands of “people” on Twitter, and reel in your fishing net, smiling at your harvest. You’ve built connections! Your auto-response to new followers tells them you’re so glad they of all people have found you. That you want to “get to know them” better. Read my blog! Subscribe to my mailing list! Let me know if there’s anything I can do to … I mean, for you.

But you’re skin-deep. You look desperate. Sure, you’ll see some short-term success, which might lead you to think you’ve got this whole thing figured out. But you’re going to hit a roof unless you’ve got something more to offer than just a desire to make money and the ability to regurgitate what everyone else is doing.

For many business moves, your ROI is the first concern. Should you choose this vendor/material/market over the other, if at all?

But social media, nay, the internet (remember that word?) is a technological extension of people. Plain and simple.

If you’re scrutinizing the ROI on people, you’re going to fail. Nature has ways of self-correcting selfishness.

ROI is a means to an end, not vice-versa.

13 Replies to “On ROI and social media”

  1. smart businesses see multiple avenues to increase profit. smart businesses also always function with their bottom line in mind. no one likes businesses using social media who seem to be driven solely by profit and aren’t contributing to the conversation. but maybe we shouldn’t be so quick to poo poo the idea of “return on investment”. everything from customer service to workplace culture are designed to help businesses reach a goal. Often there is (and should be) more than one goal in mind, but be sure that those goals always end in $.

  2. I’m not naysaying ROI as a concept at all, just its place in the food chain.

    Mortgage lenders put ROI before people, and in the long run their ROI became shit.

    Microsoft put ROI before creativity and stability, and in the long run lost out to competing products.

    Focusing too heavily on ROI leads to decreased ROI, maybe that’s all I’m saying.

  3. I’m not sure I agree that the problem is the concept of ROI, basically what you are referring to is insincere advertising. If I walk into a shop and the guy just tells me endlessly about there products with barely any interest in me, then I would argue that is the same as creating an online social persona that then does nothing but attempt to push a fixed agenda. Social media is based on a part of the human condition that doesn’t mix well with advertising, then again who really likes being phoned endlessly to be offered amazing deals. However, if an organization is looking at social media then I think RIO is important, if you are going to invest in building bridges with your potential customers you should work out if it is going to make sense and create value. I don’t think it is that building bridges through social media is always a win. Can you honestly say a funeral director should create a twitter account to connect with his customer base?

  4. I kind of see insincere advertising as a symptom of the type of mindset that encompasses an ROI-driven approach in social media. The two aren’t necessarily related, but from my experience, more often than not they are.

    Part of what I’m arguing here, and what I was saying in my original tweet about this:

    “@jruckman: if you’re a biz, you’re trying to get into social media, & you’re thinking in terms of your ROI, you’re already missing it #shallow”

    … is that if you’re approaching this stuff from the angle of ROI, it doesn’t bode well for your success, as it suggests a mindset that encompasses an array of other fallacies as well.

  5. Insincere advertising is more a symptom of not understanding your customer base, in a simple form it is self-promotion in place of gathered respect. Social media does allow you to connect with your clients in new and interesting ways, and through a conversational market style you are able to gain respect and ultimately brand that.

    However, before you start you should ask ‘whats in this for me?’, and that is the ROI question. There was a time when we told every company we met that they needed a website, but did they really? Does the corner deli need a web presence? The same basic question needs to be asked for a social media presence, if you are the local launderette do you need to engage and build a relationship with your customers. Is it worth spending an hour a day tracking building that identity, will more people was their clothes there because you do, and how many more, worth the hour you lost doing other things for your company.

    If there is an image problem with social media it is the theory, much like back in the 90’s with websites, that everyone will benefit if they get it right. I’m not sure that is the case, and if you want to work that out you need to understand your business and understand the return on the investment you will be making (be in $2k on a website, or an hour a day on your facebook/twitter status).

  6. I dunno, I don’t feel like I’m bashing the concept of ROI altogether, though maybe that’s how I’m coming off.

    But I think before I ask “what’s in it for me?” with well, anything, I should be asking questions more interesting like, “what’s something cool I can do to bring people together around what I’m doing?”. Ideas precede return.

    I mean yeah, there are definitely some sidebar examples of businesses that wouldn’t really benefit from social media, or an internet presence at all. (Although check out @dcccharlotte, a local dry cleaner using Twitter, pretty cool.)

    But on the whole, for me it’s pretty much a no-brainer that bringing people together around something is always going to make that something better. Even if it doesn’t immediately make you more money. It might only make what you do better. You can’t always measure return like that. Not quantitatively anyway.

    This might be more a question of the scale and perspective from which we measure ROI. Is it the return from a particular client, project, quarter, product cycle, something larger? And is it your ROI from the perspective of yourself, your company, our culture, or our planet?

    The concept of ROI is healthy when observed and measured without being blinded by the low-hanging fruit of short-term gain. Most especially when dealing with people.

    You can’t quantitate relationships. It’s like the wave-particle debate, once you think of something as dynamic as a relationship in terms of measuring it, you weaken what it is. Maybe that’s all I’m saying. Still not sure yet.

  7. It is an interesting conversation – since when you consider making it better, then your presence is market research or customer feedback. However, people have to approach it with that in mind, then the ROI is measured in product improvement. Currently people see a buzz, and one that will change over time, understanding what you want to take from a social media presence does require more thought (as you point out). Though it is an investment and you should expect a return – it just might be a better product rather than a new customer.

  8. It’s impossible to truly make sense of the three-day, multi-party #ROI conversation. Instead, I’ll try to capture my thoughts in 10 points:

    1. Companies spend money to make money. Metrics help them measure past investment performance to guide current and future decisions on how to allocate time and money. ROI is only one of many metrics that could be used to measure financial return: NPV, payback period, IRR, option value, etc. ROI = return on investment, usually $$. “Return” is tied to a specific timeframe.
    2. Measuring and predicting aren’t the same thing, and aren’t used the same way.
    3. If you don’t have any experience with something, and if there aren’t terribly good metrics, benchmarks of sources of comparable information for your strategies and tactics, it’s going to be pretty hard to predict future performance.
    4. We have many ways to measure social media, but gauging the impact (the true test of a metric) is pretty poor. At the moment.
    5. This isn’t a new issue: marketers have faced the problem of measuring impact and making decisions about marketing spend for every new marketing medium, ever. Sometimes they never really know. But they still spend money on marketing, and develop metrics to justify their investment. Give it time.
    6. Since metrics are pretty poor at the moment, and since metrics won’t be terribly useful for many newbie marketers, making decisions on their first campaigns and first tests of social media based purely on ROI is going to be pretty tough.
    7. Social media is actually a pretty large collection of potential strategies and tactics, each with their own timeframes, commitments, costs and potential benefits (i.e. ROI). Smart companies don’t make large investments or commitments without first testing; testing builds experience, best practices, and creates some measurable results to help make predictions.
    8. For many strategies, small commitments are rational, possible, or necessary before large commitments. Small commitments done without the obligation to continue indefinitely creates a *real option*: the right, not the commitment, to undertake a business decision in the future. ( it’s actually a specific term in finance / corporate strategy: http://en.wikipedia.org/wiki/Real_options_analysis )

      Real options have value, in both the strategic and measurable financial sense, in that investments in the present create the opportunities for future cash flows (i.e. your point in the comments “Even if it doesn’t immediately make you more money.”)

      These potential cash flows have value, but it’s impossible to create them, or even begin to predict them, without making certain investments in the present.

    9. Considering the short-term and long-term impacts is a pretty important distinction: we really don’t have enough data on long-term impact yet to truly estimate the ROI over that time period. Again, a justification for thinking about investments into social media as creating real options.
    10. At the end of the day, companies make decisions for financial reasons, even decisions about relationships: how, who and when to form them with, how much to value them, and even when to give them up. Relationships end up in financial transactions at some point, directly or indirectly. If they don’t it’s merely activity without accomplishment.

    Make sense?

  9. i liked all taylor’s points, especially 6-8.

    i didn’t read much of the original article so this may have been covered, but i suspect that many of the returns are non-financial in nature.

    for example, for the large companies that i work with, one of the principal things social media is great for is managing a large number of relationships. those relationships are activated in lots of different ways and have different ends.

    the analogy of dating to marketing in SM is very apropos, though. i found this to be a verrrrrrry practical way of thinking about that similarity:

    http://www.doubleloopmarketing.com/

  10. Adding my humble, if late to the party, point of view.

    I think people are mixing and matching a few things in this discussion.

    Taylor makes some great and well thought out points. Businesses are in business to make money (for the most part). I think we can all agree on that point.

    How they go about making money is quite a different thing. Much depends on the vertical and much depends on the company culture, values and philosophy.

    Some are numbers driven and numbers focused. The biggest decision criteria for these companies are real, proven forecasts of the amount of money that is most likely to be obtained by an investment. Most B2B companies fall into this category. “If I invest in opening a new plant in Russia, the likely return on my investment is xxx and my NPV is xxx.

    Some are customer service, customer loyalty driven. They put a premium on great service even though it is difficult to show the financial payoff from investments. L.L Bean, Zappos, Four Seasons come to mind.

    Some are brand driven (notice I didn’t say marketing). By this I mean companies that have a laser focus on what they do and don’t do and spend time, budget and energy to position that brand in consumers minds and to bring the brand to life with product, experiences and communications. Apple, Virgin, Harley Davidson, GE come to mind.

    Obviously companies have traits in each of these camps but when big decision time comes, a dominate trait usually surfaces.

    In talking to companies about social media, the first thing I do is try to gauge the companies camp.

    If they are a brand company, what better way to bring your brand to life then through engaging conversations and value added content. NAme another method in which real relationships can be formed on a mass scale?

    If you are a service dominated company, social media is a wonderful vehicle to serve customers in ways they never imagined.

    If they are a finance driven company, this one is tougher. I usually point to activities they are already doing that do not have financial measures. Almost all use a PR agency. How do they know if that is paying off? What does a mention in a trade mag get you. Another way to position social media is to let them know that it could be a cheaper way to obtain current results. For example, a company could lower their SEM investment because social media is a huge SEO driver. We all know its so much more than this, but when you are talking to finance or financial driven decision makers, these are the types of things that usually grab their attention.

    That said, I hear the loud and clear the conversation regarding the tone of social media efforts. Regardless of the goal and the type of company, social media efforts most follow the notion of value exchange and the basic rules of conversations. Who is going to listen to someone at a party who just tells you how great his job is over and over. Brands that just talk about themselves and talk about how great they are will find as many friends as that guy at the party. So many brands are new to this and are trying to figure how to go about it. Those of us who make social media our profession need to help them along and steer them away from mistakes.

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