Social media: Pondering the corporate ROI

Social networking can deliver returns to enterprises as long as companies devote some time to them.Joe McKendrick at Smart Planet details some of the ROI discussions going on.

Social networking can deliver returns to enterprises as long as companies devote some time to them.

Joe McKendrick at Smart Planet details some of the ROI discussions going on. Citing Natalie L. Petouhoff, Ph.D., an analyst at Forrester, and her study titled The ROI Of Online Customer Service Communities, McKendrick writes:

What’s the cost associated with social networking? A hypothetical company with 500,000 customers that receives approximately 30,000 calls per month will probably need to invest up to $1.2 million in a social network over the first three years, Natalie and her team estimate. This includes costs for designing and maintaining the social media Website, integrating the site with internal sales, marketing, and knowledge management systems, paying a project and community manager to build and oversee the site, and analytical software.

However, payback is quick, Forrester finds. A company that invests $500,000 in the first year for a well-tuned social network will probably see a payback almost twice that amount.

Meanwhile, those $500,000 in payback will continue for years going forward.

Hell, if you can avoid a PR disaster like United breaks guitars the investment in social media may be worth it.

The challenge here is getting upper IT management on the social networking bandwagon. The biggest argument for these social networking experiments is really this: It's cheap (relatively speaking) and the returns are quick. However, measuring the returns can be a lesson in monitoring the intangibles. We recently investigated Zappos' social networking moves (PDF download) and the upshot was this:

  • Zappos didn't spend much on things like Twitter usage or Web community efforts;
  • There was a return;
  • But that return doesn't fit nicely into a spreadsheet.

That said social networking can offload some of the strain on customer service and that has real returns. Bottom line: These enterprise 2.0 experiments are cheap enough to launch liberally. A $1.2 million investment isn't chump change in a downturn, but let's face it: Larger companies blow that on fancy consultants for projects that don't pay off for years---if ever.

Also see: Oliver Marks' Collaboration 2.0 blog and Jennifer Leggio on social business.

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