Social Media ROI: When Engagement Looks a Lot More Like Shacking Up

by Frank on June 24, 2010

I had a lot of great roommates in college, most of whom were engineers and all of whom were remarkably intelligent.  One of them – Josh, known for making blunt but accurate observations – once observed that girls often would move in with a guy because it was one step closer to engagement; for most guys, moving in just meant readily-available sex.  I imagine that’s frequently the case.  More often than not, it seems like it’s a decision made to avoid a decision, an attempt to avoid risk in a “lets just see where this goes” experiment.  The problem is that typically no thought is given to how the involved parties will determine successor failure in the experiment.  Ironically, there’s a ton of risk in making big decisions this way, because – assuming Josh was right – the success metrics for engagement don’t look anything like the success metrics for shacking up.

The success metrics for engagement don’t look anything like the success metrics for shacking up.

A lot of businesses treat their social media campaigns the same way, which is just flat out bad marketing.  Social media is what all the cool kids are doing.  If you go to a marketing conference – online or off – you’ll hear all sorts of stuff about how you need to be doing social media (a point I agree with, by the way).  It’s free to set up a Facebook or Twitter account, and for the person running either, it can be a lot more fun than more traditional marketing initiatives.  And it’s tough to take a look at the more than 500 million users on Facebook (and the trend towards 1 billion) and not want to tap into that.  We call it “engagement,” and talk about how we’re “entering the conversation” with our customers, and point to brands like Southwest Airlines and Zappos as examples of how brands can successfully use social media as a great marketing tool.  And let’s be clear: social media can be an incredibly powerful way to genuinely engage with your customers and potential customers.  But it’s still just another marketing initiative, not magic.

As Outspoken Media’s Lisa Barone puts it:

Social media is no different than any other marketing effort you engage in for your company and you need to treat it that way. If you don’t know how much you can spend on social media before it’s no longer profitable, than your engagement becomes a liability. You put a cost on it by determining your goals, tying those goals to behaviors and then figuring out how much it costs for you to attain them.

In Social Media, As In Every Other Form of Marketing, Success = ROA

I recently read ReWork by the geniuses at 37 Signals, and they make a great point in it: The goal for a startup is identical to that for an established company – to turn a profit.  If all the social media “engagement” you’re doing doesn’t turn a profit, then it’s clearly a failed experiment.  That said, the usual measure of ROI fails to account for the total cost of inputs when it comes to social media.  As Brett Duncan puts it,

When hearing the phrase “return on investment,” most of us automatically think in terms of dollars. We spent X dollars; we got Y dollars in return. If Y is greater than X, it’s a good investment. If Y = 3X, it’s a great investment. If Y = 0.25X, we made a mistake.

What we all have to invest, however, is more than money.

Brett makes an important point: when coming up with success metrics for social media marketing (which in theory is free to set up and do), it’s easy to say, “this costs nothing to do” so therefore there’s no risk, no cost.  “Let’s just see where this goes.”  But there’s a huge risk in this kind of business decision.  To set up, maintain, measure and coordinate social media with your other marketing campaigns takes an enormous amount of time – time you could have spent on something else more profitable than “engagement.”

Marketing is all about human relationships, which hopefully is not saying anything you don’t already know.  Just as in evaluating your dating life, then, I’d suggest making sure all involved parties have the same idea of what success looks like.  Before investing a ton of time and effort into social media marketing (or in a relationship), first determine what defines success for all interested parties.  My guess is that those discussions will save everyone a lot of heartache.

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  • Frank – I think you’ve really cornered the market on the dating/social media analogies.

    An important discipline is to realize EVERYTHING in your business (and beyond) has either a cost or profit associated with it. Every interaction could be costly or profitable. Every minute at the office is costly or profitable. Every email sent is costly or profitable.

    Here’s a place to start: figure out the average profit margin for your biz, then make it your personal goal to personally generate enough profits to pay for your salary. That means you’re breaking even. After you do that, and only after that, are you profitable to your company.

    • Frank

      That’s an awesome point, Brett – everything in business has a financial cost associated with it. I like your idea of the discipline, too – it forces us to be intentional about how we spend our time.

      If what you (or I) are spending our time on – be it social media, cold calls, or just chatting with the guy two cubicles down – doesn’t generate enough to justify your salary, you’re a net drain on the business. This is obviously especially bad if you’re self-employed.

  • Frank – I think you’ve really cornered the market on the dating/social media analogies.

    An important discipline is to realize EVERYTHING in your business (and beyond) has either a cost or profit associated with it. Every interaction could be costly or profitable. Every minute at the office is costly or profitable. Every email sent is costly or profitable.

    Here’s a place to start: figure out the average profit margin for your biz, then make it your personal goal to personally generate enough profits to pay for your salary. That means you’re breaking even. After you do that, and only after that, are you profitable to your company.

    • Frank

      That’s an awesome point, Brett – everything in business has a financial cost associated with it. I like your idea of the discipline, too – it forces us to be intentional about how we spend our time.

      If what you (or I) are spending our time on – be it social media, cold calls, or just chatting with the guy two cubicles down – doesn’t generate enough to justify your salary, you’re a net drain on the business. This is obviously especially bad if you’re self-employed.

  • Of course, you can take that idea too far, also. Sanity at the workplace is also important (and usually profitable), so the chat with the guy two cubes down could still be a good thing.

    Moderation in all things ….

    • Frank

      Brett: Agreed. The point being more of a macro “self-employed” mindset. Professional athletes always see themselves as free agents because at some point, they will be one. So the really valuable ones perform well on and off the field or court at least in part because it enhances their brand. This doesn’t mean they need to spend every waking moment in the weight room or on the court (or in our case, always at our computer working), but it does mean that you choose to do some things and not to do others because of their effect on the perceived value of your services.

  • Of course, you can take that idea too far, also. Sanity at the workplace is also important (and usually profitable), so the chat with the guy two cubes down could still be a good thing.

    Moderation in all things ….

    • Frank

      Brett: Agreed. The point being more of a macro “self-employed” mindset. Professional athletes always see themselves as free agents because at some point, they will be one. So the really valuable ones perform well on and off the field or court at least in part because it enhances their brand. This doesn’t mean they need to spend every waking moment in the weight room or on the court (or in our case, always at our computer working), but it does mean that you choose to do some things and not to do others because of their effect on the perceived value of your services.

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