Social media ROI: you need to pay to play

by Sandrine Plasseraud in News on 7 October 2009 at 16:26 Google+

Social Media ROI

Having worked client side for over 10 years before joining We Are Social, I totally get the ROI culture of most companies – this is how things work, especially in these recessionary times when every penny counts.

The frustrating thing is that measuring the ROI of social media is tricky (as Scott Monty, Ford’s head of social media famously said “What’s the ROI of putting your pants on in the morning?”). However, I joined a social media agency not only because I am passionate about social media but mostly because I am 100% convinced that social media 1) will become a core activity for businesses of all shapes and sizes and 2) it will transform the way companies operate. To me, social media is a long term commitment.

With that in mind, Chris Lake draws a very interesting parallel between social media and e-commerce:

We’re still hearing a lot of hype about something that is unproven, in ROI terms. That remains true, although some companies are generating ROI today, whereas others may take a hit before seeing a return. If you buy into the idea that this might work, then you need to be prepared to wait in order to see some positive results.

There are parallels with the great leaps into e-commerce a decade ago (amazingly some retailers have yet to dip their toes into the water). The cynics at the time doubted that selling things online would ever become a mass market no-brainer, as it is today. I wonder if the same applies to adopting social media?

There’s no doubt that the internet has done wonders for many companies. Tesco may pull in around £2bn of sales from its online operations this year, and perhaps £100m in clear profit. And John Lewis now counts its website as its biggest store, ahead of the huge ‘flagship store’ on Oxford Street. If that’s not progress, I don’t know what is. Not that it happened overnight. ROI obviously wasn’t generated immediately. Both Tesco and John Lewis needed to pony up a large wedge of development money in order to set up their websites, and to recruit appropriate people to run them. They had to pay to play, in order to transform their businesses.

The next decade will be the age of customer engagement and customer satisfaction. Don’t want to miss out on the next big revolution? Then start engaging with social media now.

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  • mrtomasz

    Really interesting article. I think a lot of companies need to work out what they mean by ROI. If you want to see a direct attribution of every £1 you put in as a sale in your back pocket, then yes, you might struggle to prove a pound for pound return on Social Media. If however you count buzz, positive sentiment, brand awareness and engagement as returns, then it becomes a whole lot easier.

    Of course the bottom line matters, but that kind of sales led approach won't fly anymore. Brands now need to evaluate their communications on so much more than just sales, and like you say, Social Media is a long term commitment so why not get started ASAP?

  • http://blog.digitalingredients.co.uk Stefano Maggi

    As Chris Brogan says (http://www.chrisbrogan.com/the-audacity-of-free/) it makes a lot of sense to charge for value: consultancy needs to be perceived for the return it brings.
    The “free” part of social media is about the tools, but it doesn't mean this should apply to strategy, thinking, tactics, design and production related to consumer engagement.
    Using a tool is usually free, understanding the best way to use it rarely is. It requires skills, experience, passion and dedication.
    Wouldn't you charge for them?
    ROI is an excellent point to prove investments are worth in this space, but are we sure consumer is a totally new field? What if we call it influence marketing? It's something that's always been there, even if with different methods, environments strategies and tactics. There are ways to measure ROI, effective ones, as Amber Naslund says (http://altitudebranding.com/2009/03/get-a-yards…).
    So pay to play, start with baby steps and adapt as soon as you get your first measurements done.

  • http://www.aghenorblog.com/2009/10/07/social-media-roi-2/ Social Media ROI | Aghenor di Stefano Vitta

    [...] gran bel post su We are social, con diversi spunti da leggere di cui segnalo in particolare la comparazione fatta [...]

  • http://online-strategist.com/ Oscar Del Santo

    I agree with Sandrine that evaluating the ROI for social media engagement is still a work-in-progress. But that must not deter companies from benefiting from joining the conversation through the social media in a myriad ways.

    Listening to customers and followers in real time conversations, for instance, is a great way to drive product/service improvements without investing massive amounts in the R&D department. What is the ROI of that?

    As the image points out, ROI in the social media has to take into account many variables other than hard sales. As social media metrics improve, we are bound to witness more accuracy and accountability. In the meantime, organizations of all kinds will miss out wonderful opportunities if they turn a deaf ear to the conversation that is already taking place around their product or service.

  • http://www.jmorganmarketing.com jacobmorgan

    I run a consultancy that is focused on the business of social media. The definition of ROI is money in vs money out; there are no questions about it. Non-financial returns should not be referred to as ROI but as Impact from social media efforts. Sometimes impact is enough for a company and sometimes they want ROI. It depends on what the goals of the company are; but at the end of the day if you can't measure it; then you shouldn't be investing in it.

  • http://www.oberhauser.at Ortwin Oberhauser

    There are 8 Social Media Communities in the alexa.com Top 20 for Germany so I think there is no need anymore to discuss about the standing from Social Media in online marketing.

    I am inhouse SEO for a austrian media house and I often get asked in SEO Workshops: “Are you sure that there will be a ROI?” and
    “Why do you like Social Media so much?”

    My answer is: YES, YES, YES I am sure there will be a ROI!!!

    Next question mostly is: Why?

    My answer is: Because I don't need a lamp to see the sun!

    I think who isn't able to see the potential in social media now, should do some business which ist not related to internet, because social media will not go away like some people think, the other way round, what we see now is for sure just the black and white television.

    Many Thanks to the “we are social team” for these interesting posts, you are amazing!

    Stay tuned
    Ortwin Oberhauser
    feel free to follow me on Twitter:
    @Oberhauser http://twitter.com/oberhauser

  • http://www.qubemedia.net/blog/2009/10/13/show-me-the-money/ Social Media Agency UK: Qube Media: Blog : Show me the money

    [...] was reading a blog by Sandrine Plasseraud from we are social last week about Clients needing to be able to prove ROI in order to buy in to a [...]

  • http://www.noteca.com/ Ferran

    What's the ROI of client support? Or guarantees? There's ROI but it's difficult to know.

  • thedebonair

    I am creating a social media campaign for a furniture company – we are going to put the employees center stage as design experts. I was trying to figure out how to explain the ROI to this company, when I realized there is much you can't quantify and one thing you can!
    If a company usually invests in print ads, then they spend thousands of dollars with no clear ROI, nor any direct reach to ALL their customers (they also reach a lot of “other” people). They know how many sales they made, but not which sale came from what ad.
    Social media presence and interaction (i.e.Facebook, Twitter, YouTube…) has a large up front cost (but smaller than print ads) and minimal maintenance costs. Yet, you now have the ability to reach ALL people interested in your products whenever you like. You could announce weekly sales if you like, or daily discount codes. The viral nature of social media will be ever-creating more potential customers whom you could interact with almost nothing. And as time goes on, and the company has made back its initial investment, marketing is virtually free to people who want to know about you!

  • Ley

    I like your post& and the link However we can measure social media buy as stated not its effectiveness.. therefore we go back to the same point.. social media= ROI? or…

  • Ley

    I like your post& and the link However we can measure social media buy as stated not its effectiveness.. therefore we go back to the same point.. social media= ROI? or…

  • http://www.alexandfred.se/index.php/alexandfred/spaning-v-42/ Alex&Fred » Spaning v.42

    [...] Social media: you need to pay to play [...]