Is the Promise of Social Media Enough? What About ROI?
There's something missing, though: ROI. Let's start off by defining exactly what ROI is: gain from investment minus cost of investment, then divided by cost of investment. ROI is a financial metric, which means it deals with the amount of money that is invested vs. the amount of money that is returned, in dollars.
It's quite clear that social media is changing the way in which organizations do business, but is this enough? Can social media be adopted on the promise that it's going to change how an organization functions? What about the impact on the bottom line? What about the amount of money that social media can save an organization? It is around ROI that we are seeing the largest gap in understanding and in measurement. ROI is going to drive adoption of social media among many companies.
The common excuse among many social media folks is that "you can't measure the direct ROI of a billboard or a television commercial -- so why all the fuss about social media ROI?" Just because companies have trouble measuring offline ROI does not mean that we should dismiss online ROI. The online space has given companies a plethora of tools and information that allow for consumer tracking, analytics, direct response surveys, CRM databases, sales tracking, and pretty much anything else you can think of. There is no excuse for companies using social media being unable to track their ROI. There is also no excuse for consultants or agencies to peg offline measurement and ROI with online measurement and ROI, so stop doing it.
In the above examples, Kodak should have a solid number for how much money the company saved by reaching out to its Twitter followers to name a product, as opposed to hiring a design agency to do the work. Virgin America should understand how much it costs for the company to retain customers vs. acquiring new ones, and should also understand how effective social media is at retaining customers. Both saving money and retaining customers impacts the bottom line.
Again, yes, social media is valuable; yes, it can make and save money; and yes, it's going to change the way the many companies do business. However, as mathematical physicist and engineer Lord Kelvin famously said: "When you can measure what you are speaking about, and express it in numbers, you know something about it; but when you cannot measure it, when you cannot express it in numbers, your knowledge is of a meager and unsatisfactory kind: it may be the beginning of knowledge, but you have scarcely, in your thoughts, advanced to the state of science."