The new ROI(s)

Return On Investment.  It’s one of the most frequent impediments Social Media Marketers run into.  While it’s true that the metrics for social media are in their infancy, it’s also true that the investment involved in most social media is very small compared to other hard-to-measure activities such as advertising, public relations, and research and development.  For a good discussion of this see Paul Gillin’s book Secret’s of Social Media Marketing. Not surprising then that social media marketers have chosen to deflate this particular sacred cow by redefining it—Marcel Duchamp would be proud! Gillin suggests ROI might stand for “Risk Of Inaction,” while PR Measurement Maven KD Paine has stated that ROI should stand for “Relationships Over Impressions.” Her redefinition moves us from the language of advertising—primarily a one way medium—to the conversational tone of social networking. While impressions continue to be a standard measure in the advertising world from GQ to Google Adwords, there is a great deal of evidence that people are less “impressionable” than they once were.   And large advertisers are being trounced daily by low-budget upstarts who evangelize their audiences into a viral marketing machine.  That’s right let the audience do the work.  But ask nicely after building trust and it won’t even feel like work.

This leads me to my own tweak on the ROI theme as it pertains to life in the social networking world.  I’d make a slight adjustment to KD’s definition and say ROI should stand for “Relationships Over Instant-Gratification.”  I know the hyphenation is really trying to fit an oval peg into a round acronym, but bear with me. It is the pressure for ROI as it’s originally defined that can lead marketers to missteps once they have launched their social media presence—that is trying to convert too early. Hitting up your new Facebook fans with a generic sales e-mail the minute they sign up is a sure way to damp enthusiasm and make people think twice about inviting friends to sign up. You’ve asked for too much too early. The viral nature of information sharing in social networks is based on casual relationships (so called “weak ties”) where there is very little social risk in making a recommendation to a friend. By jumping to the conversion stage you immediately increase the level of risk in the relationship. In a recent Hubspot webinar one of the principals used the dating metaphor—”you don’t ask someone to marry you on the first date.” Likewise asking for other sorts of instant gratification on the first date, successful or not, is unlikely to lead to a long-term relationship.

It is worth the wait (in marketing as in other things), even strictly from a numbers standpoint the long-term value of a customer well cultivated is higher and the investment required lower (hence better ROI!) than constantly prospecting for one-shot sales. Seth Godin provides a good discussion of this from the nascent days of social networking in his book Permission Marketing.

Godin also talks about creating a curriculum to guide the conversation with customers. Yes you need to give over some of the control and take your timing cues from the customer, but doesn’t mean you shouldn’t have a goal.

With time and experience, more meaningful metrics will emerge, some may become “industry standards” but as localization and micro-markets increasingly become the drivers of business, it’s really the metrics specific to your business that will matter. Of course, if you’re not playing then you have nothing to measure, so I return to Gillin and say that the biggest ROI to fear is “Risk of Inaction.”