An interesting infographic by Inventhelp has been making the rounds entitled, “How to Determine Facebook and Twitter ROI” (return on investment). What’s a little shocking (even by the low standards of infographics) is that it doesn’t broach the subject of social media ROI at all. It’s a collection of exceptional and / or misleading data, among these:
– It details a 33% increase in sales of Jimmy Choo trainers attributable to Twitter, which is not accurate. Twitter was a smaller piece of a larger Foursquare campaign that gained traction when picked up by traditional media.
– It intimates that 10% of Joie de Vivre’s 10,000 Twitter followers participated in a single $79 per night promotion. In the Techcrunch article that the info was derived from, the $79 promotion was an example promotion of deeply discounted rates being offered last minute through social channels (not just Twitter), and they estimated they had sold 1000 in a year, not just with one campaign.
– It details a digital campaign for Edible Arrangements which led to “double digit” increases in annual sales, yet the campaign only lasted for 30 days.
As Christopher Penn points out on his blog (I think it’s in his book White Belt Marketing as well), return on investment (ROI) is a pretty straightforward calculation:
(Income Earned from Marketing Efforts subtracted by Marketing Expenses) divided by Marketing Expenses
Respective of the platitudes on the infographic that’s how you measure ROI. For social media ROI, one would have to have a mechanism that specifically ties the social media activity to income earned, so saying that annual sales increases are attributable to one month of promotion may not be accurate… or it could be. If it is, it is an exceptional example and not something particularly useful to emulate.
ROI is generally tied to a timeframe, and the capability to achieve positive ROI within a specified time with social media (especially on the outset) is difficult. The reason that bigger businesses won’t participate in social (except to advertise) is that the resources necessary for a scaled engagement would be massive. In his book Enchantment, Guy Kawasaki uses the New York Times as an example of how difficult an engagement of that magnitude would be. Yet lack of ROI isn’t something unique to social media. Ad Age reported earlier this year that a majority of companies surveyed didn’t use ROI metrics to inform their marketing plans.
Every sales guru from Zig Ziglar to Jeffrey Gitomer preaches the power of relationship in sales. What social media offers is an opportunity to personally connect with people with unprecedented scale and targeting. Trying to gain immediate, short-term social media ROI shows a lack of understanding of the channel, especially in light of the fact that most companies aren’t holding traditional channels to that same standard. Sadly I don’t think that this is the point that the infographic was trying to make by not discussing social media ROI, but it bears repeating that social remains a huge differentiating opportunity for small businesses. The big companies are reticent to commit the resources necessary to engage.
It’s worth noting that measuring social media is a little more complex than simply calculating return on investment. It may be smarter to determine a strategy and develop intermediate metrics that escalate to measuring long-term returns. If short-term ROI is a concern it might be worthwhile to devote resources to paid search or advertising each being more congruent to a short-term strategy than social.