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Here’s why using social ROI to measure relationships is just wrong

With social referrals increasing in the last quarter of 2013 according to the AdobeDigital Index, we’ve got to the point where businesses aren’t so much asking about being on some social network or the other as much as they assume that they need to be on those platforms.

However, as with the adoption of any new medium or service, the question of Return on Investment (ROI) is soon to arise, seeing as the decision of which medium to adopt hinges on whether it will bring in any positive returns.

The problem here is that often these returns are measured solely in monetary terms, even when the reasons for taking up the medium are tied directly to some other business objective. For many online businesses these returns translate to leads generated, in order to maximize their Revenue per Visit (RPV).

For instance, a business will provide some customer support services on social media in order to cut call centre costs. The costs considered are often around infrastructure, including telephones, rent, etc, without considering the costs of hiring the right personnel. The returns expected are meant to be reflected in the financial statements. As such, more businesses play in the social space expecting to literally see money generated without considering all possible costs incurred.

Often the social function of the business lies solely with the marketing department, even when the business objective is linked directly to the sales or customer services department. The expectation to generate leads then lies completely with someone who is not equipped to do so. Obvious as it may seem, this is not the biggest problem in this scenario. The problem lies with the expectation to generate sales through social media.

In fact, according to Monetate’s Q4 ecommerce report, email outperforms social in terms of conversion rates. This was made evident by how many more sales it drove than social media during America’s Black Friday.

By nature, social media is meant to facilitate leads, not to generate them, often referred to as lead nurturing — which is the process of building a relationship with potential clients, even though they might not be looking to make an immediate purchase.

The idea is to leverage relationships that already exist rather than seeking to immediately create one, acknowledging that the need to make a purchase may not be immediate, yet availing yourself
to be top of mind when it does.

Most businesses tend to believe that the relationship they form with their customers ends when a sale is made. On the flip side, for most customers the relationship with a business is started when the sale is made.

By blurring the lines of where the relationship starts or ends it becomes easier for you to nurture the relationship from infancy and thus nurture the lead from consideration.

Much like with your friends, Facebook allows you to manage your relationships. And while new ones may be created through it, it is still a tool to manage such relationship. Similarly, Twitter allows you to monitor and influence conversations that may involve you. In your influence you may start new conversations but it is still only a tool to start the conversation.

It is in understanding what each medium allows you to do that you can understand the sort of relationship you have formed with your potentials and how to leverage it to make conversions.

And so, unless you can really tie some monetary value to a relationship, it would be very difficult to calculate ROI from social media from a monetary perspective, and wrong. As a business you need to stop being preoccupied by the rands-and-cents of the medium and be more concerned by how you make it work for you and your customers.

The marketing relationship is as different to the sales relationship as it is to the after-sales relationship. Your approach then, to social media should not hinge so much on the ROI as it should on the relationships you build. This goes beyond calculating variables as fleeting as “the value of a like or follow.”

Once you have the right people nurturing the right relationships with the right audience, then you may measure ROI the right way.

  • Nick Paul

    Tshwaraganang, you hit the nail on the head here, love seeing that mature thinking around social media is present here in SA. I think the issue/frustration comes in when businesses are able to effectively measure every other online marketing channel, this generates the expectation that the same rule can be applied to social media because it is also online. We’ve quickly forgotten that mediums like radio, TV and billboards which generate awareness, similarly to social media, are also difficult to measure direct ROI with. Obviously social has the added benefit for companies to be able to openly engage with customers as well as to be an affordable way to build relationships (lead nurturing as you so eloquently put it). I work in a digital team and have to remind myself every day not to measure social media with the same yardstick as other channels.

  • Tshwaraganang

    Hi Nick.

    Thanks you for your comment.

    I agree with you completely and share your frustrations just as much. Being able to effectively measure any online marketing effort arguably gives digital more power over other channels. However, it also tends to be the cause of the said frustrations we experience. Our measures should, as best as possibly be directly linked to a business objective, I believe. In my opinion, the problem is finding the effective measure. The tools for measuring are many, their capabilities are great, but you put it best when you say the “not to measure with the same yardstick.”

    I am glad I was able to touch on a note you feel so strongly about. But I am more glad that in the digital space, there are many more who share my sentiments.

    Thank you once more.

    Tshwaraganang Tshikedi

  • Matthew Nkala

    The digital age has unfortunately, in some spaces, made some people forget to get back to the basics.Why do we want to be on social and how does it fit in with the overall objective of the business – a question many marketing departments haven’t asked themselves but have jumped onto social because “everyone else is doing it”.
    Return on Objective is the conversation i would like to hear when it comes to social, not all efforts are about dollars and cents – positive sentiment, engagement with brand, brand consideration are some of the results that may be achieved by social media. And they are very important for brand equity – and might even be more important than sales.

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