Why are we so afraid to say “I don’t know” the ROI of social media?

Olivier Blanchard calls a spade a spade.  And he calls ROI, ROI.  I like that.  He takes to task those social media strategists who try to get around the question of measuring social media ROI with nebulous assertions about how it’s now all about “return on involvement,” or ROI is for the nerds and the number crunchers.  Many of the assertions made by so-called social media experts are so fuzzy around the edges, or just so intellectually sloppy, it’s enough to raise the “BS” antennae of even the most trusting of listeners.

Click-through rates, positive mentions, blog posts, re-tweets, celebratory customer reviews, etc. are all very nice things and important to measure, but they are not return on investment.  Return on investment is money — nothing more, nothing less. It’s the cash that comes into your business as a result of any effort above the dollars invested in that effort, as determined by material costs, man hours, overhead and other charges.  It amazes me that anyone writing, speaking or advising clients about social media for business needs to be reminded of that.

I don’t know why so many thought leaders in social media, when asked, what was the ROI, are so afraid to say, “I don’t know”?  It’s not a crime that we don’t know.  It doesn’t mean that we won’t get better at knowing.  And it doesn’t mean we have no indication of the contribution social media is making to our businesses or that we should stop doing it.  But instead they hem and haw, go off on some tangent, or otherwise attempt to circumnavigate the question.

Recently, Chris Penn asked Mitch Joel this question when he interviewed him on Marketing Over Coffee.  Now, I love Mitch.  He’s a great guy, a great thinker, blogger and speaker, produces a terrific podcast, Six Pixels of Separation, and has just published a book of the same name.  He is one of our greatest standard bearers for social media.  But when asked this question, he equivocated for 5 minutes — okay maybe I exaggerate — but it felt that long to me, and as I listened I couldn’t help thinking, “Mitch!  Just say you don’t know!”  He finally did.

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Okay, so we know what social media ROI is, and what it isn’t, and we know we need to get better at measuring it.  To this end, Olivier Blanchard has uploaded to Slideshare a very good presentation on the basics of social media ROI called Social Media is Not Free.  It covers some fundamental thinking and data one needs to track in order to measure social media ROI.  However, I think we need to go further than what Olivier provides here, because the metrics he takes into account are virtually all within the digital space and don’t consider the  competitive environment.

Without factoring in other elements of the marketing mix, both one’s own and competitors’, it’s difficult to determine the specific role of social media in driving business success.  I can see Olivier’s design would work, perhaps, for a company whose sales, marketing and communications take place mainly on the web.  But for many other businesses, we won’t be able to get to a true measure of social media  ROI without taking into account other factors like advertising, media weights, distribution, in-store activities, promotions, events, etc. — both for our own brand and our competitors’ brands.

That’s a much more complex task than the one Olivier suggests.  (In all fairness, he does say these are the basics.)  I’m not a statistician, but it probably requires statistical and other analytical techniques that can help determine the different roles and contribution to sales that each element in the marketing mix plays.  This isn’t a new challenge.  It has always been hard to determine the precise ROI of each component of the marketing effort — even before the internet and web 2.0.

So why are we so afraid to say “I don’t know” when it comes to the ROI of social media?

7 Comments

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7 responses to “Why are we so afraid to say “I don’t know” the ROI of social media?

  1. Because simply when we say “I don’t know”, we won’t sell the project. That’s a cold logic beyond any reasonable reason to do so – but we have trained to say at least something to sell.

    • Stephen Rothman

      Gerald, what happens when you sell the project and then can’t show the ROI? I suspect you probably end up showing a whole number of things that provide evidence the program is working, be it links to a web site, positive comments, content that spreads, what have you. But shouldn’t we just call those things what they are, just not claim they are ROI?

  2. Patricia Romeo

    I spent about a month trying to figure out the ROI for internal social media in an organization. The light went on for me when I connected with a person from Microsoft that was involved in creating the ROI for email years ago. When I asked how to measure the ROI for social media, he said they never were able to measure the ROI for email, yet nobody would argue that email has created enormous organizational efficiencies. In other words, the social media ROI is an extension of the efficiencies built around organizational electronic communications. You cannot measure it dollar for dollar, but you are keenly aware of the organizational value they provide.

    • SuzyT

      Nice to see a fellow colleague here (Patricia)-I would agree on your comment 100%

    • Stephen Rothman

      Hi Patricia, I guess you’re referring to internal email as opposed to email marketing? Certainly email marketing, especially if its objective is to attract potential customers to a site where they can then make online purchases, would be one area of digital marketing where ROI is relatively easy to determine. Nevertheless, I see your point. I think it relates to something Olivier Blanchard wrote in answer to a comment about his presentation on Slideshare. It may be very quite difficult to establish a causal relationship between a social media initiative and actual sales, but a correlation is often evidence enough to make us feel fairly sure that our money behind the initiative is money well spent.

  3. Pingback: Social Media Intelligence. We sell or else. | davaidavai.com

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