Social Media – What’s in it for me?

Sure, social media sounds like a great idea. After all, everybody’s doing it – with their facespace pages, Tweetbooks and so on. But before you can even worry about how to make money out of it, you’ve got to work out how you’re going to afford to invest in it in the first place.

So why shouldn’t you just dump it in the too hard basket and forget about it? There are only two reasons that your business should be engaging in any new endeavour. It must do at least one of these to be worthy of your time and effort and should ideally do both.

1. The new initiative will result in a cost reduction.
2. The new initiative will generate more revenue.

In order to be able to determine if your investment in social media is achieving these things, you will first need to establish a baseline in your company’s financial performance. It’s very easy to be distracted by all the cool things that you can measure using various web analytics tools, but at the end of the day what makes the initiative a good investment is if it achieves at least one of the two objectives mentioned above. These are the business case for the investment.

Once you’ve established the baseline, you will be able to measure the real, financial impact of your social media initiatives. Here are some tips on measuring this performance:

1. Page impressions and blog comments, etc. are NOT genuine ROI – it has to save you money or make you money to justify the investment.
2. Page impressions and blog comments, etc. ARE the potential that your initiative represents - converting these readers and commenters to customers or partners is the action that will bring you the ROI you need.
3. Remember that you need to make it through the non-financial stage before you will see the financial rewards – in other words allow your project the time it needs in order to yield results.
4. Measure regularly – even if your project hasn’t reached the stage at which you’re seeing real ROI, that doesn’t mean you can’t tell if the potential is growing – track everything and remember to interpret the data carefully and accurately.
5. There are three types of transaction data to look for – Frequency (how often a customer transacts), Reach (how many customers transact) and Yield (how much customers are spending).
6. Your measurements have no media bias, so neither should you – it doesn’t matter what’s cool, it DOES matter what works.
7. Review the impact of your new initiatives on the company – have you achieved the objectives above?
    

Using this sort of approach might mean you have to do more work before engaging in social media, but it will mean that you’re in a better position to ensure that your engagement is a successful one.