What is the ROI of Social Media?

Can you draw a straight line between investments in social media marketing and financial results? Many marketers can but many more cannot.

The demand has never been greater for marketers to validate and measure the benefits delivered by their increasing investment in social media. Marketers often frame this question as, “What is the ROI (return on investment) of social media?” but financial metrics are just one way of evaluating social media marketing programs.

Social media marketing delivers a wide range of benefits to organizations that are beneficial in the short term and long term in ways both quantitative and qualitative.

To properly value the impact of their social media marketing investments, Forrest recently has an interesting study towards ROI Social Media Marketing: More Dollars and Cents, it pointed out that: Interactive marketers must align their objectives, metrics, targets, and strategies across four perspectives – the financial perspective, the digital perspective, the brand perspective, and the risk management perspective. In the other words, they need to do an affective social media marketing balanced scorecard.

In regarding to the four perspectives, how does a social media marketing initiative help reduce the financial impact of a reputation management crisis is an interesting area.

The costs of a social PR crisis can be substantial. To generate a value for the risk management perspective, consider how your social media preparedness and assets can reduce these costs across several different social media crisis scenarios. For instance, a midsized company might consider the social implications of a batch of defective products caused by unforeseen manufacturing issues in an overseas plant — and find that involvement in social media helps insure them against an average annual possible risk of $25,000.

When combine that with all of the other positive ROI possibilities, like more sales, less customer service costs etc, it becomes clear why social media marketing should be an integral part of any company’s online efforts. By saying that, you may want to read this article as well: Integrate Email and Social Media to Maximize the Effectiveness.