Maybe I should just republish this post every day for the next ten years (or however long it takes for content bloggers, social media “gurus” and marketing authors/speakers to get this).
With a little repetition – and surely with enough time – even the dumbest and most obtuse of them will eventually get it.
Maybe.
As annoying and curious as it was, back in 2009, when so many so-called “experts” and “gurus” couldn’t figure out how to explain, much less determine the ROI of anything relating to social media, it is inexcusable today, less than a month from 2012. We’ve talked about this topic how many times? I and others have presented on the topic in how many countries? On how many continents? For how many years now? How many times has this simple business 101 topic been explained and explained and explained? Even if somehow, some social media “experts” have managed to miss the presentations, the conversations, the podcasts, the interviews, the decks on slideshare and the blog posts, there’s a book now that spends 300 pages on the topic. At the very least, they should have heard a rumor that the “question” had been answered. Right? Bueller? Bueller? Anyone?
What else can we do? Take out full page ads in the New York Times? Take over Mashable for a month? Buy a banner ad on Klout’s home page? What will it take for the asshats pretending to be experts to stop talking about ROI as if it were some arcane mythical metric?
Seriously, you have to be either completely disconnected from the channels you claim to be an expert participant in, or purposely avoiding this stuff to still get it wrong. Is social media ROI to be the the clitoris of the “guru” world then? Will some so-called “experts” really live out their lives without ever finding it? If so, isn’t that a sign that perhaps they need to go try their hands at being experts in another field?
It makes you wonder about these people’s qualifications, doesn’t it? What makes them experts again? A few hundred blog posts and some keynote presentations? A “personal brand?” A lot of followers? Is that all it takes now?
Here’s a simple litmus test for you: Experts know their shit. A self-professed expert who doesn’t know his shit is just a windbag. If you don’t want to be categorized as the latter, immerse yourself in the field you aim to be an expert in. Commit to it for years and years and years. Writing a few blog posts about something doesn’t make you an expert in it, no matter how hard you want to believe it does.
Utterly ignorant nonsense: The battle-cry of new religion of digital windbags?
First, this gem from @CopyBlogger‘s CFO, Mr. Sean Jackson. (A few of my favorite quotes from that post):
“Marketing ROI has become so important that no one questions its validity, but the truth is, marketing will never produce an ROI. […] The problem for marketing professionals is that marketing activity is not an investment. An investment is an asset that you purchase and place on your Balance Sheet. Like an office building or a computer system. It’s something you could sell later if you didn’t need it any more. Marketing is an expense, and goes on the Profit & Loss statement.”
WHAT?! Are you kidding me?!
And yet in the same interview, Mr. Jackson continues with this:
“Sales generate revenue. Marketing generates profits.”
WHAT?! Sure, it sounds pretty, but how does that work, exactly? How do you calculate profits if… Oh, never mind…
“Marketing, including social media marketing, is about efficiency. Marketing is a process of decreasing the time, money, and resources required to communicate with customers and make it easy for them to buy products and services. The more efficient your marketing is, the more profit you make. That’s what you want to optimize for. By defining marketing as a function of profits, you create a new perception within your organization about the value of marketing.”
Since Sean is a CFO, I have to assume that he knows how to calculate profit on a balance sheet. … The very balance sheet as the one on which Marketing is nothing but “an expense”?
Look, if marketing can’t produce ROI, then it can’t generate a profit. A profit is a function of ROI. Profit is the very manifestation of the expectation of ROI: You invest in something, use it, and hope it generates enough revenue to cover your investment and other operational costs, and… wait for it… turn a profit.
This is Business 101 stuff. Seriously, it is. Little kids running lemonade stands know this.
If you are going to claim that marketing is about profits, then you have to concede that marketing plays a part in cutting costs or generating revenue. Once you realize that, ROI becomes obviously relevant to marketing spend. Marketing does generate ROI, and it doesn’t take a genius to figure that out. And yet, shit like this gets published. (Yes, shit.)
Example #2: David Meerman Scott’s piece entitled “Social Media ROI Hypocrisy.”
The post’s elegant tag-line:
“New research – published here for the first time – proves that executives who demand that Social Media ROI be calculated are hypocrites.”
Nice. Here’s more:
“It’s ridiculous that executives require marketers to calculate ROI (Return on Investment) on one form of real-time communications: Social media like Twitter, Facebook, or YouTube. Yet they happily pay for other real-time communications devices for employees like Blackberrys, iPhones, and iPads without a proven ROI.”
And my favorite:
“My recommendation to you when faced with executives who demand that you prove social media ROI is to point out the hypocrisy by asking them to show you the ROI of their Blackberry.”
Here’s my recommendation to you: Don’t answer an executive who asks you about ROI with “what’s the ROI of your blackberry?”
Why? Because it’s rude, unprofessional, and it only serves to prove two things: 1. You’re an asshole, and 2. you have no idea what you’re talking about.
Here’s a better way: If an executive bothered to ask you a question that matters to his or her business, answer it. If you can’t, recommend someone who can. It’s the least you can do. The idea being to help the client, not show him how much of a smug smartass you are.
Speaking of questions: Either answer them or go home.
I have heard it suggested that many corporate executives use the ROI “question” as an excuse to object to social media spend. Let’s talk about that for a minute.
Corporate execs have very busy schedules. Believe it or not, they don’t waste their time listening to your sales pitches knowing, before they walk into the room, that they are going to turn you down. Do you really think they sit around all day hoping someone will come in to talk to them about social media just so they can use their favorite “ROI objection” trick on them? They have companies to run. Either produce a way to help them do that or stop wasting their time.
Here’s a double dose of reality for you: When corporate executives ask you about ROI with respect to social media, they are motivated by 2 things:
1. They want to know how social media spend will benefit them so they can justify the expense. Understanding the potential value of an investment is pretty basic business practice, and a sound one. What did you expect? A blank check and a 5-year consulting contract just because you spoke at Blogworld and your Klout score is awesome? What world do you live in?
2. They want to know if you know your shit or if you are just another windbag blogger “guru” with no business management acumen. They get pitched by two dozen bullshit social media experts per week. This is their test. Either pass it or fuck off.
Four final thoughts:
1. When business executives take the time to meet with you, reward their time investment by not being an asshole. (i.e. Not asking them about the ROI of their blackberry is a good start.) Answer their questions. That’s why you’re there in the first place.
2. If you don’t know how to answer an executive’s ROI questions, guess what: You aren’t qualified to advise them on the matter. Sorry. Admit it and carry on.
3. Whether or not you believe that ROI is a relevant topic of discussion when it comes to integrating social dynamics and platforms into a business doesn’t matter. You are mistaking a philosophical discussion with a practical one. Explain the principles first. Answer their questions. Help them get through that first phase (justification). Once the ROI question has been laid out and everyone gets it, THEN discuss with them the positive intangibles of building a more social company (see #6 below). They are testing your knowledge, not your religion. Stop evangelizing and start getting down to brass tacks.
4. If the same executives aren’t measuring the ROI of other things (like advertising campaigns, product development, websites, or even marketing in general,) show them how. It’s a hell of a lot more valuable than calling them hypocrites for not having done it until now. Be a positive agent of change, not just another smug asshole trying to weasel his way onto their payroll.
Doing something a lot teaches you how things work and don’t work. So do more. Talk less. You want to advise companies on how ROI fits into the social media world? Learn how to connect spend to outcomes (results). Once you grasp that the way a baker grasps the baking of bread, then you’ll be qualified to advise companies and other professionals on the matter. Not before. This isn’t theory. It isn’t about opinions. It’s practical everyday business knowledge. You either have it or you don’t.
Moving on…
The rest of this post won’t make you an expert, but it will at least give you the basics.
If you are still having trouble explaining or understanding the intricacies of social media R.O.I., chances are that…
1. You are asking the wrong question.
Do you want to know what one of the worst questions dealing with the digital world is right now? This:
What is the ROI of Social Media?
It isn’t that the idea behind the question is wrong. It comes from the right place. It aims to answer 2 basic business questions: Why should I invest in this, (or rather, why should I invest in this rather than the other thing?), and what kind of financial benefit can I expect from it?
The problem is that the question can’t be answered as asked: Social media in and of itself has no cookie-cutter ROI. The social space is an amalgam of channels, platforms and activities that can produce a broad range of returns (and often none at all). When you ask “what is the social media or ROI,” do you mean to have Facebook’s profit margins figure in the answer? Twitter’s? Youtube’s? Every affiliate marketing blog’s ROI thrown in as well?
The question is too broad. Too general. It is like asking what the ROI of email is. Or the ROI of digital marketing. What is the ROI of social media? I don’t know… what is the ROI of television?
If you are still stuck on this, you have probably been asking the wrong question.
2. To get the right answer, ask the right question.
The question, then, is not what is the ROI of social media, but rather what is the ROI of [insert activity here] in social media?
To ask the question properly, you have to also define the timeframe. Here’s an example:
What was the ROI of [insert activity here] in social media for Q3 2011?
That is a legitimate ROI question that relates to social media. Here are a few more:
What was the ROI of shifting 20% of our customer service resources from a traditional call center to twitter this past year?
What was the ROI of shifting 40% of our digital budget from traditional web to social media in 2011?
What was the ROI of our social media-driven raspberry gum awareness campaign in Q1?
These are proper ROI questions.
3. The unfortunate effect of asking the question incorrectly.
What is the ROI of social media? asks nothing and everything at once. It begs a response in the interrogative: Just how do you mean? In instances where either educational gaps or a lack of discipline prevail, the vagueness of the question leads to an interpretation of the term R.O.I., which has already led many a social media “expert” down a shady path of improvisation.
This is how ROI went from being a simple financial calculation of investment vs. gain from investment to becoming any number of made-up equations mixing unrelated metrics into a mess of nonsense like this:
Social media ROI = [(tweets – followers) ÷ (comments x average monthly posts)] ÷ (Facebook shares x facebook likes) ÷ (mentions x channels used) x engagement
Huh?!
Equations like this are everywhere. Companies large and small have paid good money for the privilege of glimpsing them. Unfortunately, they are complete and utter bullshit. They measure nothing. Their aim is to confuse and extract legal tender from unsuspecting clients, nothing more. Don’t fall for it.
4. Pay attention and all the social media R.O.I. BS you have heard until now will evaporate in the next 90 seconds.
In case you missed it earlier, don’t think of ROI as being medium-specific. Think of it as activity-specific.
Are you using social media to increase sales of your latest product? Then measure the ROI of that. How much are you spending on that activity? What KPIs apply to the outcomes being driven by that activity? What is the ratio of cost to gain for that activity? This, you can measure. Stop here. Take it all in. Grab a pencil and a sheet of paper and work it out.
Once you grasp this, try something bigger. If you want to measure the ROI of specific activities across all media, do that. If you would rather focus only on your social media activity, go for it. It doesn’t really matter where you measure your cost to gain equation. Email, TV, print, mobile, social… it’s all the same. ROI is media-agnostic. Once you realize that your measurement should focus on the relationship between the activity and the outcome(s), the medium becomes a detail. ROI is ROI, regardless of the channel or the technology or the platform.
That’s the basic principle. To scale that model and determine the ROI of the sum of an organization’s social media activities, take your ROI calculations for each desired outcome, each campaign driving these outcomes, and each particular type of activity within their scope, then add them all up. Can measuring all of that be complex? You bet. Does it require a lot of work? Yes. It’s up to you to figure out if it is worth the time and resources.
If you have limited resources, you may decide to calculate the ROI of certain activities and not others. You’re the boss. But if you want to get a glimpse of what the process looks like, that’s it in its most basic form.
5. R.O.I. isn’t an afterthought.
Guess what: Acquiring Twitter followers and Facebook likes won’t drive a whole lot of anything unless you have a plan. In other words, if your social media activity doesn’t deliberately drive ROI, it probably won’t accidentally result in any.
This is pretty key. Don’t just measure a bunch of crap after the fact to see if any metrics jumped during the last measurement period. Think about what you will want to measure ahead of time, what metrics you will be looking to influence. Think more along the lines of business-relevant metrics than social media metrics like “likes” and “follows,” which don’t really tell you a whole lot.
6. R.O.I. isn’t always relevant.
Repeat after me: Not all social media activity needs to drive ROI.
Technical support, accounts receivable, digital reputation management, digital crisis management, R&D, customer service… These types of functions are not always tied directly to financial KPIs. Don’t force them into that box.
This is an important point because it reveals something about the nature of the operational integration of social media within organizations: Social media isn’t simply a “community management” function or a “content” play. Its value to an organization isn’t measured primarily in the obvious and overplayed likes, followers, retweets and clickthroughs, or even in impressions or estimated media value. Social media’s value to an organization, whether translated into financial terms (ROI) or not, is determined by its ability to influence specific outcomes. This could be anything from the acquisition of new transacting customers to an increase in positive recommendations, from an increase in buy rate for product x to a positive shift in sentiment for product y, or from a boost in customer satisfaction after a contact with a CSR to the attenuation of a PR crisis.
In other words, for an organization, the value of social media depends on two factors:
1. The manner in which social media can be used to pursue a specific business objective.
2. The degree to which specific social media activity helped drive that objective.
In instances where financial investment and financial gain are relevant KPIs, this can turn into ROI. In instances where financial gain is not a relevant outcome, ROI might not matter one bit.
Having said that, you still need to understand these mechanisms in order to make good business decisions, so learn them.
* * *
By the way, Social Media ROI – the book – doesn’t just talk about measurement and KPIs. It provides a simple framework with which businesses of all sizes can develop, build and manage social media programs in partnership with digital agencies or all on their own. Check it out at www.smroi.net, or look for it at fine bookstores everywhere.
Click here to read a free chapter.
I saw the post yesterday on CopyBlogger and I had a sneaking suspicion you were going to write a followup of some kind. ROI is an important question to ask, and any client who asks to see the ROI on anything deserves an honest answer from their agency/consultant/guru/expert.
Absolutely.
Class as ever Mr B. Keep soldiering on. The masses will catch on. I’m sure 2012 will bring a radical shift change in thinking. Hope to see you soon.
Your belgian beer drinking friend.
Chris
2012 will be more of the same from that particular breed of windbags. They aren’t interested in learning anything. They’re only interested in building their “personal brands,” generating more revenue with their blogs, and/or charging more money for their keynotes.
I hope to see you soon as well. 🙂
It is clear that very little progress has been made like you mentioned from 2009 to now. I guess the fact that like you mentioned many of the individuals that are trying to run efforts have very little business acumen as you mentioned is mainly at fault. There are those that know better and since they don’t want to be monitored or evaluated on performance when they advise others they make up these crazy formulas which really have no way of determining the real success of meeting business goals tied to any social online effort!
It’s a shambles.
For real…… I thought Mr. Jackson’s piece was offered as satire.
I wish it had been.
Awesome post, I just think that the other bloggers you mention are just close minded and probably just looking for excuses for terrible social media performance.
It’s a cop-out, yes. The main two types of hacks I run into tend to follow either of these ideologies:
– The clueless consultant: “If I don’t understand how to do this, then it must be irrelevant.”
– The unethical consultant: “It’s a lot easier to discredit a topic than admit I don’t understand it.”
Hi Olivier. This is certainly one of the best summaries of the whole Social Media ROI discussion I’ve read so far. I just started writing my master’s thesis about this topic in the context of tourism in Tyrol, Austria. I was struggling getting a clear view and outlining the ROI question as the opinions on the web diverge wildly! Thumbs up for this post and your book – it helps me a lot!
I hope you get very high marks then. 🙂
In reference to the quotes you provided, I’m very familiar with them and have heard similar ones repeatedly during my marketing years, which confused me even more to a point that it affected my overall performance negatively. So, I prefer ignoring them. I immediately walked away from marketing and moved on to an engineering customer support role to help people. Since I got a hold of your book, I read the ROI measurement passage thoroughly to finally understand its meaning and significance in a business. As a food blogger, if I can understand the explanation of ROI measurement in your book, there’s no excuse for experienced marketers to not grasp its true meaning. Like you mentioned, ROI is not rocket science, it’s common sense. In all honestly, your book has given me the desire to go back into marketing. If marketers still don’t understand it, they 1) have huge egos 2) they’re in the business just for the money 3) they’re not reading reliable material. Strong opinions and rants expressed on blog posts definitely attract readers and trigger emotions and reactions, but might not entice some of the targeted audiences to actually ‘listen’ unless they’re open-minded.
An engineer with a marketer’s soul? Not enough of those left. You’re easily worth your weight in gold.
Arguing at cross purposes again? Those, such as Sean and David, who critique the ROI question are hearing from execs saying “What is the ROI of social media?” who really mean “What will be the future ROI of this social media activity?” this is indeed a hard and often distracting question because predicting anything is hard.
It isn’t about predicting. It’s about tying activity to objectives, funding those activities with specific KPIs on the back end to measure their effectiveness, and explaining to execs how you will make sure that they aren’t throwing their money down the drain. It’s about drawing them a map, and building a steering wheel and a dashboard so they can drive their social media activities with purpose and precision. Anyone who tries to predict ROI is a hack.
Love this post! The CopyBlogger critique is especially good and accurate as hell. I’m almost embarrassed for them.
Although I agree that David Meerman Scott’s retort is asinine, I’ve heard him speak about this topic before … and at the core, I think his point is the same as yours when you write “Not all social media activity needs to drive ROI”.
Keep up the good fight Olivier!
He has the skills, as a professional communicator, to convey that “not all social media activity needs to drive ROI.” Instead, he chooses to call business executives hypocrites for asking the question. He and I aren’t saying the same thing at all. 😉
Olivier, I would like to correct a point in your post.
“Since Sean is a CFO, I have to assume that he knows how to calculate profit on a balance sheet.”
Actually, profit is calculated on a P & L Statement and not the Balance Sheet – an example of why most marketing people should not be using the word ROI since they are not versed in the nuance of financial statements.
As to your broad points, I have addressed many of them in the comments of the original post at http://www.copyblogger.com/social-media-marketing-roi/
However, I will address one other point you make.
You are correct, marketing can produce a return but it is not ROI – it is called Profit.
Marketing is almost always an expense on the P & L and not added to the Balance Sheet ( I will leave the discussion of Intangible Asset classes for another day).
Because it is an expense the question arises – does this expense increase sales and/or decrease revenue?
The quickest way to find this out is to look at the profit of the organization, but not the only way. KPIs and other metrics can show improvements on activity.
However, at the end of the day, it is the profit from either increasing sales and/or decreasing expenses that is the real value of return on marketing activity.
I know you appreciate this since you do acknowledge this in your post.
My point is that by using the wrong term (Investment) it skews the conversation about the role of marketing.
And since you are a marketing consultant, I am sure you can appreciate that how concepts are positioned matters.
ROI is often used by people who fundamentally do not understand the role of marketing. Hence the majority of the article was about ideas for cultural change and not dissecting the nuance of ROI.
Companies with a culture of marketing talk in terms of improving engagement, customer experience, market reach, sales life cycles, etc and rarely debate the efficacy of the cost of using Twitter.
Words matter and through education and discussion, we can properly discover our common agreement without the implication of words that do not bear on the results to be achieved.
1. Are you actually going to argue that when a company or department invests $x into a social media program (head count, computers, bandwidth, chairs, desks, post-it notes, smart phones, software licenses, training, websites, content, etc.) is not actually an… investment? Is this an accounting inside joke of some kind?
2. If the marketing (or social media) expense is intended to increase profitability (and we both agree that it does), then it must come from two types of outcomes: cost reduction (which can also turn up as a cost-neutral increase in efficiency), and an increase in revenue. It can get more complicated, but for the sake of this ridiculous conversation, let’s stick to that for now.
Whenever a company funds an activity whose purpose is to drive profit, it is an investment. A marketing budget is an investment. A social media program’s budget is an investment. Why? Because the company is investing in an activity aimed at driving a financial outcome: The increase of profitability through a) a cost reduction and/or b) an increase in revenue. The ROI equation helps you determine whether the return on that investment was positive or negative.
As an accountant, you should know this: You cannot determine the profitability of an activity without factoring in its cost. Profitability is a factor of cost vs. gain. As in the cost of a marketing budget vs. the gain from that marketing activity. How is the ROI discussion not relevant to the role marketing plays in the company’s profitability?
3. When a CEO asks you about the ROI of marketing, he is asking you to help a) narrow down the role that marketing plays in the sales process, and b) determine whether or not marketing’s budget is warranted. As an accountant, if you can’t answer that question, don’t answer it. Focus on the P&L instead.
Speaking of the P&L, neither the P&L nor the balance sheet is where marketing’s impact on the company’s profitability is currently conveyed. Thanks for the semantic lesson all the same. At some point, accountants might want to rethink the makeup of financial statements. They too need to evolve. See my next point.
4. Perhaps B2B companies in the 1980’s could assign 100% of their sales revenue to the Sales Department. That would make accountants around the world very happy. It’s a neat model. A clean model. It looks great on paper. But for B2C companies in 2011, not so much. Purchasing decisions are born out of a complex media mix that usually doesn’t include a Sales dept. at all. Marketing is now responsible for more sales than the Sales dept (if the company even has a sales dept). One Twitter account can generate millions of dollars in net new revenue from impulse purchases. (Ask Dell about that.) If that account was created by Marketing and is operated by Marketing (paid for through Marketing’s budget), then guess what: 1. That net new revenue is attributable to the Marketing dept, not the Sales dept. 2. The cost of that activity (the company’s investment in it) can be cast against the gain from it. Enter the ROI equation in regards to Marketing or Social. Enter ROI, period.
5. I want to address your advice regarding “An example of why most marketing people should not be using the word ROI since they are not versed in the nuance of financial statements” for a second. Many of us “marketing people” are well versed in financial statements, actually. Many of us have managed business units. Many of us have been responsible for a P&L.
Here’s a better piece of advice that comes in two parts:
– “Marketing people” should all make the effort to become well versed in the nuance of financial statements and ROI calculation, actually. The more they know and understand about both, the more effective they will be at their jobs, and the more they will be able to justify further investment into their activities and departments in the form of budgets.
– More accountants should become well versed in the nuance of influencing consumer behaviors, interlacing Marketing, PR, Customer Service and Sales, and operational management. Those who already do are always a thrill to work with and are enormously helpful to the organizations they serve when change management cycles come around. Everyone would gain a little something from that.
… Or we could continue to operate in our comfortable little silos, like you suggest.
Thanks for the lesson, Sean.
Some insights that may provide context.
1) I am a CFO, not an accountant – accountants add and subtract; CFO’s divided 🙂
2) Copyblogger is not a consulting firm but a technology company. Hence our perspective is based on the ideas we use to sell our own products online.
I think the crux of your article relates to the issues dealing with clients, something we do not have since we are a product company (customers).
You are correct on the issues faced by consultants in translating the benefits of online marketing to those organizations that are struggling to understand the implications of this ever evolving space.
The reason for my post was to share my view of what “cultures of marketing” can achieve since I have an insiders perspective and thankfully can sit behind the scenes and watch our pros work.
The big issue you share, which I encountered when I gave a speech on this topic to YPO, is the Fear, Uncertainty and Doubt many companies face with the transformation of traditional marketing tactics to the online space.
Inevitably, because of FUD, they try to place online activities within context of traditional concepts they already know – even when their concepts are not always correct in context.
In time, clients will start to understand and appreciate that the “investment” is really just a cost of being in business today. For example, consultants “rarely” talk about “convergence” of online and offline like they did in the 90s. Why, because the world converged!
I fundamentally agree with your response – more organizations should be able to understand the entire context of the business so that ideas, benefits and results do not get lost.
And it is from smart and passionate people who blog about these issues that companies will, over time, converge into a better understanding of online marketing’s role within an organization – no less important than the company email, computers, office and especially its people.
Oliver, thank you again for your perspective and your passionate debate.
Thanks for the response to the response, Sean. Much appreciated.
Publish this post once, publish it a hundred times – I’ll read it word-for-word each time. Simple, clear, POWERFUL stuff, Olivier. And it all starts by thinking about how to apply digital social channels to current business operations.
+ increase revenues
+ reduce costs
+ mitigate risk
The activity-based focus is key to it all. “What’s the ROI of social media?” I think I would respond with a Sales 101 alternative advance question: “Depends on where and how it’s used, Mr. CEO. Are you considering social media to increase sales or reduce costs?”
Boom.
You know what’s coming next, don’t you: The small army of “ROI is bullshit” fanboys posting insults here, for the most part anonymously. This ought to be good.
This article should come with the following disclaimer:
For those that wish to skip the vitriolic, hyperbolic, ego-driven blather from someone you’ve never heard of… actual content begins four screens down.
That was helpful. Thanks for that, “Warbux.”
You probably don’t need to repost the whole thing over and over, but I would gladly help pay for a rotating, animated pop-up that just says this:
“Don’t think of ROI as being medium-specific. Think of it as activity-specific.”
If we can just get that part widely understood, we’d be much, much better off.
No kidding.
Blackberry’s do have an ROI (any business tool does really). If you’re hard to contact then clients go somewhere else and that costs (or gains) you business… It’s just that we know we’re wasting valuable time if we sit around pondering the cost of having or not having a Blackberry (or a smartphone). For most businesses the cost of having or not having is easily discerned is as a vast difference (not for everyone though) and so they don’t waste time on it. 10-15 years ago, convincing your boss that a cell phone was valuable might have brought an ROI question with it though. Just my 2 cents.
Yeah. There’s value, there’s cost (even opportunity cost) and there’s ROI. Sometimes, value and opportunity cost are more relevant than ROI, but if you really want to get down to brass tacks, you could calculate the ROI of a single blackberry within an organization. I don’t see the point, but you could.
My point was more the person giving a decision maker a hard time with “what’s the ROI of your BlackBerry” is missing the point that it’s not too hard to calculate that if they wanted to. But that new territory takes some time and has to be proven. If you’re not willing to prove yourself on something measurable like ROI, then it’s as you say, you’re doing it wrong.
An outstanding article, thank you. I have been frustrated about the industry’s apparent insouciance about the need to show a return that is measurable, specific – and which keeps my clients safe in the knowledge that our techniques are having a better return than whatever marketing budget they took a couple of grand a month from to plough instead into social media. I can’t tell you how sick I am of hearing social media ‘experts’ waffle ad nauseum about ‘driving engagement’ and ‘soft metrics’ and basically refusing to entertain the notion that companies and organisations paying a shedload of wonga to them might want to see some bang for their buck. This strikes me as dangerous in its commercial naivete, would you really want to outsource your social media management (or hire someone in-house) who doesn’t understand the basic premise of business – profit?
I do, however, take seanajackson’s point that how we conceptualise ‘return’ is important and he may well have a point that we as marketers need to be careful about not confusing ‘ROI’ with ‘profit’. Whatever, I’m not particularly excited by the semantics – not because sean is not correct; but because – perhaps unfortunately – Social Media ROI has already found itself embedded in the industry’s lexicon. While sean makes a valid point that how we conceptualise these issues is important, we also sometimes have to use language that our clients understand. Otherwise, there’s a credibility gap, however unfair that is. What I think you can both agree on is that ‘return’ or ‘profit’ or ‘upside’ is something ALL clients need, and we can’t ignore this very basic function of the transaction.
Thank you both – immensely thought-provoking and inspiring stuff.
I dig the way you write, Vik. Wonga? 😀 Awesome.
We agree. Look, most of the time, when an exec asks about ROI, they are really asking about value. The real question is “what will I get for my investment?” Some of it can be answered in terms of ROI, and some of it has to be addressed as living outside of ROI (non-financial outcomes). It helps to understand the place of both and to further be able to speak about them clearly.
The question, if anything, is an invitation to explain to executives what the potential value of social media could be for their company, especially in terms of how they might use it to serve particular business objectives. In the abstract, “being more human and likable” will be enough for some executives. For others, a more detailed discussion needs to take place. That discussion will involve product sales, reputation management, real time customer service, market intelligence, etc.
Either way, the “what’s the ROI” question has to be treated as a welcome opening to that dialog and NOT a hurdle or an impasse. I love that question because it is ALWAYS a starting point. It’s when you know you’re about to start identifying the business’ needs, and provide them with opportunities.
What a lot of consultants and salespeople don’t understand is that social media is a blank canvas. The value it brings to an organization in those early stages is always in the interrogative. Until a company understands what it wants to get out of an investment in “social media,” it won’t be able to understand its value, let alone calculate the ROI of some of its activities. It has to figure out what it wants. Then you help its executives see how the social space can help them get what they want. From there, you can start crafting a plan and figure out what it will cost to make it happen. If the outcome they want to see is relevant to ROI, then address that properly. If the outcome falls into the realm of non-financial benefits, then address that properly as well.
Anyway… Preaching to the choir. Cheers. 🙂
This is another case in point of the real value being in the comments. Aside from the obvious wrongness of his arguments, fair play to Sean for being prepared to defend, clarify and stay in the debate. It helps the reader form a view and understand through the to and fro exactly why he is so wrong. I’m disappointed Meerman-Scott hasn’t shown up though. I’ve read a lot of his stuff (including his famous book) and there are some interesting ideas. He needs to front up to this and help us understand why he said what he said.
Sean and Brian were pissed at first (understandably) but they were ultimately good sports about it. It didn’t take them very long to get there either, which is remarkable (in a good way). Most people I have criticized on this blog for publishing really bad information haven’t reacted as well as those two. So I give them both BIG props for that. (Brian reached out to me on Twitter instead of here, but same result: Pissed at first, but friendly and cool once he calmed down.)
Meerman-Scott also reached out to me on Twitter earlier this week (before I wrote the post) and fed me an interesting argument in guise of an explanation, which basically amounted to “I have taught hundreds of executives, advised companies for ten years, written 600 blog posts and written 8 books!” (Something close to that.) I guess that was supposed to mean he knows his shit and the rest of us (myself included) don’t, or something.
For some guys, the “I’m an expert because I say I am, dammit!” argument is about all there is.
Oh, and he offered to hook me up with a free e-book. (Not sure that wasn’t an auto-generated tweet though.)
Sadly for him, I don’t really give a shit about his resume as it stands. I know quite a few people who also speak, write books and “teach” executives. Sometimes, they know what they are talking about. Sometimes they don’t. I myself have spent close to 20 years in Marketing, Sales and Business Management. I too have “taught” hundreds of executives. I have written well over 600 blog posts. (Okay, I’ve only written 1 book, but that’s because I spend most of my time actually working.) So what?
My resume doesn’t suck, but I am NOT qualified to speak about certain topics. SEO, for starters, is not something I would ever consider myself an expert in. I understand it, but I am not an authority. Same with PR, advertising, documentary film-making or merchandizing. I know what my limitations are. If I ever came out and started speaking about topics I don’t really grasp and ended up saying really dumb things in the process, I would expect to be dropped under the bus by people who DO know these topics. It’s how it works. My advice to Meerman-Scott is in the post.
I would venture a guess as to why he presents his argument in the way he does: He might be frustrated that so many executives “the world over” keep asking him a question he isn’t qualify to answer. I’m sure it’s embarrassing the first time, let alone the 50th. Unfortunately, instead of learning how to answer it properly, he seems to have chosen a different path: Discrediting not only the question but also those who ask it. There’s far less work in attacking the problem that way, and it helps preserve egos from inconvenient questions. Too bad everyone loses in the process: Him, his reputation, and worst of all the executives who hoped he would be able (and willing) to help them.
Or maybe he is as brilliant as he thinks he is, and the rest of us are just idiots. You just never know.
Cheers. 😉
If marketing does not have an ROI then my professors in B-school lied to me. And then the CEOs and MKT VPs I know and have worked with are all drinking the same kool-aid making them think of such nonsense.
The reality is ROI exists for all kinds of corporate and personal expenses of both money and time.
Maybe you can just make this post its own website and just publish it every day.
In your free time maybe you can write the screenplay for a movie: “Yes, Virginia there is a Social Media ROI”!
I appreciate you writing it as you see it. If I ever have the chance to meet you IRL I promise not to kiss you. My husband and I have romantic conversations like this. So, well, you had me at ‘asshats’.
😀 I’ll get started on the screenplay.
Home. Run. Olivier, this is an absolute work of beauty. Keep fighting the good fight, brother.
Thanks, Scott.
This is one reason why I think working in a marketing firm whilst participating in the online world is a really good thing. It’s also good to have people around you who have no idea what we’re talking about on Twitter so that when you run something by them, they can look at you with that complete look of “my God, is that really what you are talking about?” face.
The fact is, if I responded to a client who was asking about the ROI of social media marketing in any of the ways so often bandied around in the online world, I’m pretty sure I would be kicked out of the office, if not literally than figuratively. ROI has nothing to do with your blackberry or your mom, for that matter.
It is amazing how many “social media marketers” do not grasp things like ROI and branding. I’ve run into many people who think brand is synonymous with logo. It’s not to be judgmental, but like…if you’re out here doing marketing type stuff, you should probably know what you’re talking about.
Great post.
Every week, I get requests like “do you design logos?” Um, no, I’m not a graphic designer. My approach to brand development and management goes a tad deeper than that. 😀 The number of people who still think that “brand” work deals with logos, trade dress and messaging is astounding.
I was wondering if you ever considered changing the structure of your site? Its very well written; I love what youve got to say. But maybe you could a little more in the way of content so people could connect with it better. Youve got an awful lot of text for only having 1 or two images. Maybe you could space it out better?
I feel your pain my friend! I’ve been doing analytics for 15 years, my first job after College had Discover Financial Services as a client so I cut my eye teeth on terabytes of data, FICA/FICO score, SAS Models and behavioral analytics.
But now, the Social Media Gurus with no background in analysis or mathematics rule the internet?? I send my clients weekly analytical reports showing their improvements so I know what I do works but again, some Guru steps in and says, you can’t measure Social Media (well, you can’t but there are lots of us out there that can). As some of your comments above suggest, maybe our time will come next year? Hang in there my friend and know you have the respect of your peers :o)
I’m hoping the rule of the clueless social media guru is finally at an end, but… I’m not holding my breath just yet.