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I’m sure you’ve come across these objections… “Where’s the money?” “Prove to me social media marketing works.” “Show me the metrics!” If you’re just getting started with social media marketing, get ready—these challenges are coming. Perhaps you’ve asked them yourself.

“It’s not possible to quantify social media marketing,” says one pundit. “Anything can be measured,” says another. Then come the phrases such as return on invested time, return on objective, return on participation, share of voice, and the list goes on endlessly.

If you’re a little confused, you’re not alone! The dreaded “How do I measure the effectiveness of social media?” is one of the biggest questions marketers want answered, according to the Social Media Marketing Industry Report —a study of over 800 social media marketers.

So what is the answer?

I gave myself a mission: Find out the best way to measure social media return on investment (ROI). I queried marketing executives at major corporations, scoured all the leading thinkers’ writings and contacted my peers. What follows is an important discussion on measuring social media return.

Start by Defining Social Media

The first thing I discovered is it’s essential to rethink the common phrases we use. And that starts with social media.

Social media is bigger than you might think. Social media communities could include sites like Twitter, Facebook or LinkedIn. But they also may incorporate people commenting on your blog and your YouTube videos. They may even include forums and private communities hosted by your company.

Think about your social media activities the same way you think about the groups, clubs and organizations you belong to (i.e., poker gathering, parent-teacher associations or even your church).

You participate in real-world groups because there’s a lot of intrinsic value—something that’s hard to measure. Maybe you do it for your kids, to give back to others or to find companionship.

Your customers and prospects are all there too, in one group or another. Just like in the real world, they’re organizing online.

Chances are pretty good that people in your target market are involved with multiple social networks, whether they realize it or not. Be honest, that’s what turned the marketing cogs in your mind in the first place, right?

Now an important question… Why are you here? Why is social media marketing attractive to you? The answer to this question will take you one step closer to determining social media ROI.

“At Avaya we use social media mainly to support our customers,” said Paul Dunay, Global Managing Director of Services and Social Marketing at Avaya.

Why are you using social media? Here are a few ideas (a possible cheat sheet):

  • Gain more exposure
  • Find prospects and leads
  • Increase site traffic
  • Find new business partners
  • Improve search engine rankings
  • Reduce marketing expenses
  • Close more business
  • Improve brand awareness

And the list goes on. Come up with your list and you’ve got a starting point for a good ROI discussion.

What’s Your Investment?

The next question is what do you mean by return on investment (ROI)?

In the traditional marketing sense, ROI means for every dollar invested, a measurable return can be calculated. Back when marketing was predictable and the channels were few, this was a science. Invest more in channel X and watch the sales flow in.

Social media changes the game. Social media marketing doesn’t need to cost much. Actually, for most businesses it doesn’t cost anything.

“The problem with trying to determine ROI for social media is you are trying to put numeric quantities around human interactions and conversations, which are not quantifiable,” says social media strategist Jason Falls.

Folks who say you can’t measure ROI use some strong analogies.

For example, they’ll mention real-world networking. What is the ROI of passing out a business card while in the grocery store line or shaking hands at a networking event? Yes, everything has a cost. Business cards cost something and maybe you paid admission to the event.

But what about activities that are so instinctive that you could never really measure the cost? How about sending an email to a customer that simply says, “I appreciate you.”

Tim Ferriss, author of the 4-Hour Workweek, argues, “Whenever technology becomes fashion, ROI tends to get lost in the excitement of the latest .com catwalk.” He was referring to the media sensation with Twitter. Ferriss is a big proponent of measurements and argues you can actually calculate a return on your social media activities.

But, to calculate a return, your investment must be measurable. It really is hard to measure the cost of social media activities. A tweet here. A Facebook status update there. A LinkedIn friend request…

Time is the most obvious choice to measure. It’s a fixed asset we all wrestle with.

If time is your metric, then naturally you’ll be able to determine how much time you’re putting in as a starting point. Why not come up with a value for your time? For example, a guy I know puts a $250 per hour price tag on his time. So every 4 hours he puts into social media each week is costing him a grand.

But let me warn you… If time is your metric, you need to be fair in your calculations. All marketing activities take time; for example, writing copy or proofing ads. If you use time as your measurement, just be sure you measure time for your other marketing activities as well, for an apple-to-apple comparison.

Once you know your investment costs, it’s time to look at returns.

What Return Are You Hoping For?

What do you hope to achieve? A key to measuring return is determining what you’ll actually track.

“One thing many people do is measure how many Facebook friends, LinkedIn connections, and Twitter followers they have. In my opinion, that’s a hollow metric. It’s not important how many names we collect, but rather how many we engage, build relationships with, become our brand advocates, and exchange info with,” said marketing consultant Elaine Fogel.

The range of measurable returns is wide and deep.  According to marketing measurement expert Katie Delahaye Paine, State Farm measures employee morale and Red Cross measures how sites like Twitter save lives and avoid harm.

Yes, there are hard metrics you can track.  Consider Avaya. “We measure the number of social media mentions per week of Avaya, and the number of support issues we resolved that week,” said Dunay.

In other cases it’s about growing a targeted following. “For networks like LinkedIn, if you are starting a group, it is simply the member count of the group or the number of particular people (like CEOs) who join,” said Mark Amtower, a government marketing professional.

Greater exposure may be another goal.

“Are you using social media to spread your message? Then count the mentions. There are no silver bullets, but the more specific we can be with our marketing goals as they pertain to social media activities, the better,” said Joe Pulizzi of Junta42.

The Next Step

Once you’ve got a clear understanding of the investment and the desired returns, you need tools to track the results.

I’d like to hear your thoughts. Are you struggling to answer the social media ROI question? Let’s engage. Tell me what you think below.

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