Return On Investment

“You can’t buy attention anymore. Having a huge budget doesn’t mean anything in social media… the old media paradigm was pay to play. Now you get back what you authentically put n. You’ve got to be willing to play to play

- Alex Bogusky, Co-chairman, CP&B

Social media is growing exponentially with many businesses applying it as a new marketing technique. Return On Investment (ROI) is difficult to calculate for businesses using Web 2.0 tools, as there are many different factors. However, some use social media marketing activities to calculate ROI. Some examples include:

  • Site traffic
  • Number of fans
  • Conversion
  • Number of mentions
  • Number of positive feedback
  • Revenues

(more information)

Susan Etlinger outlines another method to calculating ROI. There are six ways of measuring revenue impact of social media which is grouped into two different approaches: the top – down approach and the bottom -up approach. This is demonstrated in the figure below.

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The computing company, Dell, is a great example of how they have successfully used social media marketing. Dell was not off to a great start with a trip to hell, convincing that social media can greatly impact a company’s reputation. After this incident, Dell carefully tread the waters of social media and more effort was put in their social media campaigns.This is evident in their successful twitter campaign as they have earned $3 million from twitter alone.Social media expert, Richard Binhammer states “[Twitter] is a great way to fix customer problems and hear what customers have to say, it’s a great feedback forum and it leads to sales.”

Social media has not only been adopted for businesses to consumer uses, but also used within businesses. Some indications of a positive ROI of enterprise social software include:

  • increased employee engagement
  • decrease turnover rate
  • sales

An example of positive ROI of enterprise social software is IBM Connections. IBM Connections has allowed the company to see business value of social business. There have been fewer meetings and email, and improved internal coordination. IBM connections has allowed leaders to communicate more effectively and directly with all levels within the company. The implementation of enterprise 2.0 has saved time, increased productivity and streamlined communication.

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One thought on “Return On Investment

  1. Hello Marayka,
    Great post! I liked the quote you used by Alex Bogusky, it is spot on and explains how the internet and social media has changed over the past decade. At the same time, you have a great list of examples used to calculate ROI, I mean if you are a business owner you always want the best for your business and the worst off for your competitors. I also looked at IBM in my examples and how they calculate ROI and the results are surprising but not hard to believe as web 2.0 is the most important factor when it comes to return on investment and without web 2.0, you can automatically assume that the business will fail over time.

    Keep up the good work!
    Feel free to check out my blog at http://vatsalqutinb346.wordpress.com/

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