Everyone knows that before Social Media can be integrated into the DNA of the business world we have to deal with the ROI question.  It seems as though the search for the holy grail of Social Media ROI has been going on forever  (including a post on this blog almost two years ago) and yet we are no closer to reaching consensus. The conversation is being generated by some of the smartest people in the business and it ranges from simple formulas to complex templates, from “hard to measure” to “must be related to a dollars“.  Unfortunately I have no brilliant insights to add other than to suggest that if we haven’t figured it out by now then the magic bullet probably doesn’t exist. The CEO at my previous gig used to say that the only reason he would spend a dollar on I.T was if it either increased revenue, decreased costs or improved communication. I know social media is not I.T but my point is that every client has their own idea of value and we should align our ROI discussion with whatever that may be.

I’ve always had a strange sense of deja vu about this conversation and when this post popped into my reader it all came flooding back. I HAVE seen and lived through this before. Fifteen years ago I got into Business Intelligence when slick sales people were running around selling even slicker dashboards with lots of blinky lights. Then, as now, there were a small percentage of evangelists who were passionate about it and the ROI discussion was rampant even though we didn’t have the social networks to amplify the discussion. Unlike social media, a BI project would typically cost hundreds of thousands of dollars and management’s response was usually…”for a report?”.

As the BI world continued the search for the ROI magic bullet the technology was slowly evolving. The early adopters were able to learn from their mistakes.  Reporting, no matter how slick, was just a look back at what we did last week/month/year and by the time it was produced the client usually already knew what the results were. We learned that the real value was in producing information that was current, accurate, relevant, timely and most important , actionable. As the information started driving business critical decisions the timelines started shrinking and vendors started looking at real-time BI. My last project integrated real-time queries into an automated process and drove decisions based on pre-defined thresholds. The value of BI had been proven beyond doubt, the ROI discussion has been put to rest forever at this company.

At the end of the day we never did find the magic formula for ROI but instead were able to deflect the debate by focusing on adding the value the business was looking for. At my previous job it took eight years, for me personally it took thirteen. I don’t believe social media is dead, I believe it’s still evolving and if we look back and learn from the BI experience we shouldn’t have to wait thirteen years for maturity. So what are the lessons we should take from BI? These are the three that I think are most relevant to social media.

  1. always focus on adding value. ROI is about efficiency and if business sees the value, they’ll find a way to achieve the efficiency.
  2. listen to your clients, they may not always “get” social media, but they know what their business needs
  3. measure, analyze, plan, execute, repeat daily/weekly/monthly or as often as you can afford

The final word on social media ROI belongs to the clients, not the consultants. So while social media is not dead, could we please put an end to the social media ROI debate?

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6 Comments

  1. You ask “Can we please stop the Social Media ROI discussion already?” and all I have to say is: I sure hope not!!! As far as I’m concerned the subject is JUST beginning to be addressed. Why would you want to shove it under the rug and never get to the point where we can craft and execute plans of real value for clients and companies we work for, rather than floundering about aimlessly hoping something we do will work? This is a new industry, despite sites like MySpace and good old-fashioned discussion boards having been in existence for years. And the industry will change as it matures. We should embrace new methods, means and measures in order to create lasting goodness with our efforts. My opinion, at least.

  2. I need to add…. I definitely see your points about potentially much ado about little. But with any industry populated by “consultants” of varying expertise, you need the terminology, categories and solid skillsets defined by which standards and best practices and expectations can be set, because companies are going to hire employees and consultants to do this stuff. Because of that, the Social Media ROI discussion is timely and relevant, and that’s why I don’t want the debate to end, but rather am glad that it’s raging. We need to nail this down, before more dollars are wasted on more useless reports and failed campaigns.

  3. Kevin, thanks for including me in your links.

    You write: “The CEO at my previous gig used to say that the only reason he would spend a dollar on I.T was if it either increased revenue, decreased costs or improved communication.” Two of those are the very definition of ROI, and the third is the most important non-$$$ related impact on his mind. He defined value to his organization as 3 distinct elements: ROIr, ROIc, and improved communications. Isn’t that a pretty good illustration that for most CEOs (at least), ROI is pretty clearly defined in terms of value to the org?

    What I don’t understand is that while you pepper your post with great examples of ROI as a primary value to execs and end with three brilliant points, you open up the discussion with “unfortunately I have no brilliant insights to add other than to suggest that if we haven’t figured it out by now then the magic bullet probably doesn’t exist.” :D We HAVE figured it out! ROI is simply what it is. And as far as what matters to your clients, you’ve figured it out as well: Ask them and they’ll tell you. So where’s the question mark? There’s nothing confusing about this.

    I wish we could put the ROI debate to rest though since 1. ROI is and always will be what it is: Return on investment, and 2. Each company has unique needs, aspirations and objectives (including but not limited to ROI) that must be understood, mapped out, and plugged into every new program.

    Good post though.

  4. Your 3 points are grounding. As with many other new tools we learn and adopt or toss, the enduring “what to focus on” ideas like yours are the most intelligent. Our customers fundamentally pay us for solving a need or problem. So if social media helps us get them to a problem solved better or faster – ta da – payoff. If it gets in the way it is a wasted investment. We may live with a debate about HOW to use social media for a while longer, but the answer regarding WHAT is the ROI is clear.

    You may also be interested in this post: http://tinyurl.com/n6ewoj for a different take on the performance payoff question. Thanks for your post.

    As a consultant with way-longer time in the executive chair, my first kudos to you is your bold statement that the final word belongs to clients. Indeed.

  5. @michael @linda thanks for stopping by and taking the time to leave your comments

    @kris forgive me if there was even the slightest suggestion that we abdicate our responsibility to be accountable for the cost of the services we provide. I just happen to think that client success stories are the most effective way to sell any new product or service. I remember asking a real estate agent once what he thought a house was worth after we had taken the tour and his answer was “whatever you are willing to pay for it”. If clients see real value, I think they’ll pay for it, and a competitive market will ensure that the service eventually becomes affordable to everyone.

    @olivier thanks for your comments but I really don’t believe I’ve added anything other than to say “let it go and lets focus on what really matters, our clients”

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