Social Media ROI: Are you a Service or a Sandwich?

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I love my monthly Internet Social Marketing think tank. This month, we’re tackling ROI (okay, probably more like pushing it around…). There may be nothing more important for businesses to measure, right? The organizers this month asked me for a list of recommended applications for social media ROI measurement. It’s cool and timely, because I’m working on an ebook compiling the tools and differences among promotion, measurement and monitoring services.

So here are a few quick answers: Google Analytics, Social Mention, Search Monitor, Facebook Lexicon.

Unfortunately, the question’s wrong. As my new favorite blogger, Jason Falls, points out, we’re applying old metrics to new tools or measuring what’s convenient and known rather than what matters.

This article, as most Mashable stuff does, contains some great info. The preso itself makes some good points but goes astray at a critical juncture.

I am unconvinced that the nascent, dynamic medium is realistically trackable as presented here. I believe the true opportunity of the medium is not, especially at this stage of the industry, in customer acquisition but rather in customer retention.

Your social media audience is a closed, opt-in network. For cheap, transactional items like coffee or a sandwich you can acquire customers with occasional giveaways, and over time you can change purchasing habits to your favor, just as with the traditional coupon model. But what about professional services, B2B‘s, products and services with higher barriers to entry? The ROI equation becomes more complicated, the cycle for measurement much longer, the criteria more intricate. For these, the ROI equation is not, “How many more customers did we get?” but rather, “How many customers have we saved?” Not, “Are we spending less to acquire customers?” but, “Are our current customers rewarding our efforts with wallet share?”

Though qualitative, I think social media can be harnessed for brand and product development. Well used, an ROI equation might include, “What do we know about our customers, our product, the perception of us in the market, what changes or improvements have we made stemming from our social media efforts?” But don’t take my word for it; take Frank Eliason’s.

Ann Handley of MarketingProfs asks this question about social media ROI: “What’s the ‘I’?” Have we answered that question? As a business owner, I’m less interested in the number of re-tweets, mentions, etc. Show me sales, revenue. Social media–unless you’re a sandwich, a movie ticket, a chotchkie–just isn’t there yet. This isn’t direct mail or an 800 #, where you put it out there and see who responds. This is engagement, relationship building. It provides a look at the very real, stark contrast between “Marketing” and “Advertising.”

Now…re-tweets, “shares” and backlinks are the greatest if it represents your customers becoming an effective sales force. If you’re willing to invest in the creation of product champions, to let your customers tell you how to make your product more meaningful to them, how your service must adapt in order to provide greater value, social media presents a tremendous opportunity. There’s your opportunity for market share gain…though indirect.

A discussion of applications is cart before horse. I love the topic for the group and I’m sure we’ll come out of this with a bunch of links and apps but the search for ROI is too important, complicated and currently nebulous to decide that the statistics such services render are meaningful just because they’re available.

Without a clear understanding of the medium and meaningful goals, all the re-tweets and click-throughs in the world mean nothing.