The New ROI: Return on Influence

How to define, measure and find return on your social media campaigns

By: Jay Osterholm, Founder and CEO of The ODM Group

Perhaps the greatest marketing challenge of 2011 was determining social media ROI. As more and more companies devoted marketing budgets to this now necessary business strategy, executives questioned the value, and most importantly, the return of this investment.

We are now in the second month of 2012, and there is no clear industry-standard or formula to calculate the absolute ROI of social media. There are varying theories, and many social media experts have their own definitions and ways of determining ROI for clients. To some, this may seem catastrophic. I see it as a challenge, and therefore an opportunity.

A few years back, as marketers we had to transform the mindset of our executives, clients, and the public to embrace social media as not only a new communication tool, but the tool of the future. The challenge to calculate social media ROI leads us to yet another moment of transformation. A simple transformation of thought can solve this debate. For me, it is evident that the solution may not lie in the way we define social media in terms of absolute value ROI, but more the way we define ROI in terms of social media.

Earlier this week I was at the GPCC’s Economic Outlook event, where I probably handed out 10 business cards. What was the ROI of that? It technically is a marketing tactic for my company, as well as my personal brand. I received one phone call from those 10 cards. But strictly from a quantitative standpoint, I have a 10% return rate. That sounds rather grim. However, with a small transformation of thinking, I exposed 10 people to my company, my name, and our contact information. I created a personal connection with each of those 10 people. At its core, isn’t that the holy grail of marketing? So quantitatively, I am currently at a 1 out of 10. But qualitatively, I excelled.

Social media benefits are achieved directly through connections with customers, who go on to make recommendations, share product information and make purchasing decisions. A recent e-marketer study found that over 50 % of Twitter followers are more likely to purchase from a brand they follow. Moreover, according to Mashable.com, 60% of brand followers are more likely to recommend a brand to a friend after following the brand on Twitter. In my opinion, these numbers certainly prove some value for social media. Through social channels, we are making connections and influencing purchasing decisions, which once again are two main objectives of marketing.

That being said, I propose a new definition for ROI – Return on Influence rather than Return on Investment. The social connections made on these channels offer influence and exposure which should be the core factors for ROI or influence. As a business owner, I understand the need to monitor return on expenses to maintain your bottom line. However, as a marketer, I see a need for a different mindset for the new paradigm shift of social media ROI.

Analytics should connect to engagement rather than monetary investment. Popular research found that 48% of corporations are creating ROI measurements for internal programs. Of that 48%, 65% of corporations use engagement as a top metric.

Measure the number of interactions your brand has on social media channels – not just followers. While followers are important, interactions are conversations and the instances where direct contact is made with the consumer. This is where the sale conversion is likely to occur.