As a consultant, I often have prospects trying to buy my services by promising me leads or “exposure.” Those results are beneficial but they don’t put food on my table or pay my rent. Know what does?
Money does.
Now take what I just said and translate that to a company. A business can’t pay its employees with tweets. It can’t build a new factory paid for with impressions. That takes money.
Are you really surprised then, when executives want a social ROI to forecast the revenue or savings potential from undertaking what could be a six- to seven-figure social investment? They need to know how much Money Out and In to expect to run the business.
To me, any corporate initiative should be able to stand the test of economic analysis -- and no, marketing isn't excused.
Follow the money
Today’s article is prompted by reading the Augie Ray article entitled The ROI of Social Media Marketing: More than Dollars and Cents.
At first I got stuck on Augie’s title because ROI is only about money (gains versus costs). Once I got over my stickler self, though, I found myself mostly agreeing with his thoughts.
Augie wrote (and I added the paragraph break to make reading easier).
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.
The reason I say “mostly agree” with Augie is because I’m concerned his phrase “marketers have to recognize benefits beyond dollars and cents” will act as an excuse to forego the economic analysis part of the process and that’s just wrong. There’s already too much of that going on.
At the end of the day, business is always about revenues and profitability. That means business activities always need to translate into economic results. Personally, I don’t see a problem. What is, though, is pretending otherwise. Do that and do yourself and your company a disservice.
(Note: If you toggle over to Augie's article, scroll down to find my comments. We're having a bit of a debate there).
Social ROIs are excellent
I love social media but here’s reality. A social initiative is just one corporate initiative in a field of opportunity. If you can't quantify an opportunity, then don't be surprised if an executive team looks to other initiatives where they can gain economic understanding of how the initiative will hit their bottom line.
That’s not executive short-sightedness. It’s smart business.
Want to know why many execs are dragging their social feet? Because they’ve yet to understand the economic value.
Here’s the ironic thing about this whole social ROI discussion, though. Social ROIs can be excellent, sometimes to the point of unbelievability. Really.
Click here to see an enlarged view.
Folks who can quantify their initiative (marketing or otherwise) using a set of defendable assumptions coupled with appropriate risk are showing their executive team they’ve thought through the strategy and its pending tactical execution. And if the value is there and is high enough, and the company has enough resources, executives are primed to give a Go signal.
What if the ROI isn’t there?
Here’s the reason I think a lot of folks balk at determining a social ROI. They have concerns the value won’t be reflected in the analysis even though they’re convinced it’s lurking there somewhere.
You know what? That’s a perfectly valid concern. Sometimes the numbers have so many unknowns that it weakens the economic results. Economic analysis is prepared for that, though. The more unknowns, the higher the risk.
Show that to your executives and let them decide with eyes open whether to make that risky play or not.
Summary
So show executives your social plan and how it will impact the company’s bottom line. If the value isn’t there, then you’ve answered an important question and allowed your company to move its focus to better initiatives.
If the value is there – and with a thoughtful strategy I believe it will be -- then why wouldn’t your exec team want to invest?