Measuring returns on investments from social media deployment has its challenges, but it is a necessary step for businesses to justify expenditure and efforts spent on the technology. Market experts, though, note that ROI metrics need not solely be based on hard dollar figures and can include parameters on customer engagement and brand equity.
While the biggest returns on investment (ROI) metric is typically about sales numbers, when it comes to social media, comparing the number of Facebook pageviews to "hard dollars" is difficult, said Jake Wengroff, global director of social media strategy and research at Frost & Sullivan.
Despite the challenges of measuring and proving social media ROI, it is a necessary task since all businesses are focused on the bottom line, he told ZDNet Asia in an e-mail. "Every cost center, from marketing to human resources, is under fire to perform," Wengroff added.
The necessity is further amplified because social media is increasingly a marketing staple for more businesses, noted Ryan Lim, business director of social media marketing agency, Blugrapes.
"ROI must be measured for any serious investment into marketing and promotion of businesses," Lim said in an e-mail. "The measurement justifies and accounts for future investments and efforts in growing and nurturing the consumer base within social media. Social media ROI has become mandatory, instead of optional."
He noted that the main difficulty of measurement relates to the lack of metrics and methods that can specifically and accurately determine the returns of social media adoption.
Most metrics currently in use now were adapted from traditional digital marketing and advertising initiatives, he explained. "[There needs to be a] re-understanding of what social media has to offer in totality, and then create methods and metrics that can tell the bigger picture of returns", he emphasized.
That is why social media ROI benchmarks should include measuring both direct and indirect sales, Lim said. For instance, sales conversion should include direct sales as well as referred clients and prospects.
Wengroff concurred that sales volume should not be the only metric to gauge social media success, adding that there were other methods of measurement.
If a new connection made via social media eventually becomes a sales lead, and later a signed deal, the ROI would be a "non-brainer", he said. And if a social media marketing strategy aims to migrate users to a company's other assets, products or services, those migrations can also be counted and measured as ROI, he added.
Furthermore, as most social media sites are free for members to join, the biggest expense most companies incur with social media marketing would be time--rather than dollars--as it can be a strain on resources already stretched thin from managing multiple projects, he pointed out.
The Frost & Sullivan analyst also argued that measuring social media ROI would not be difficult in the long run.
Measuring brand equity
Lim recommended businesses looked at the extent of reach, leads, customer engagement and consumer brand equity or affinity, to better measure their social media returns on investment.
The number of Facebook "Likes" or Twitter followers measures the awareness level of a business as it communicates its product, service or message on social networks, after which they can measure the cost equivalent to promote their wares using other traditional media or channels, he suggested.
Engagement and equity or affinity metrics can show "how passionate consumers are about your company", or how loyal they are as advocates, he said. So returns can be measured in terms of how willing they are to act as a referrer and recommend or promote a company to their social circle on their own credibility, he added.
Jetstar's social media manager, Andrew Mathwin, said the budget airline does not specifically measure ROI for social media on its own or in terms of dollar figures.
Jestar uses social media for a variety of reasons, with sales as just one area of the strategy, including customer service, feedback and recruitment, Mathwin told ZDNet Asia via e-mail.
He noted that given this integrated approach, distinguishing sales driven by social media alone would present challenges. Instead, the budget carrier uses metrics that measure how many and the kind of conversations revolving around the company and its competitors, as well as brand engagement and customer sentiment. All of these provide a direct and real-time analysis of areas to continue or improve, he said.
Ultimately, Blugrapes' Lim argued that ROI measurement should not be campaign-centric but should be applied with a longer perspective.
Wengroff also emphasized patience when it comes to measuring social media performance and returns. "Communication via social media is often casual, so true ROI comes about when users are entered into a company's customer relationship management system for future follow-up."