We are getting towards the end of the semester and I have still managed to continue reading for my classes. My social media class is still reading Measure What Matters by Katie Delahaye Paine. This week we discussed seven steps to perfect measurement.
Step seven was, "Turn data into action: analyze data, draw actionable conclusions and make recommendations." One of the most important questions to answer when trying to measure the effectiveness of social media is, what is the return on investment (ROI)? As a business major I was like, "Yes!" "Some familiar territory." Katie Paine breaks ROI down so most people can understand. "R" stands for the return you expect and "I" stands for the investment you have made. There is more to determining a companies ROI than crunching numbers and costs.
In the book, Katie Paine explains five ways to determine the return.
1. Sales or Revenue: The most obvious definition of the term ROI. If you increased sales or made money, you have a positive return on investment.
2. Cost savings: Many companies are moving towards a social media strategy for recruitment, marketing or customer services. This process can drastically cut down on costs.
3. Paid versus Earned Search Rankings: Companies can either spend significant funds on services to ensure that a companies name or brand shows up high in the search results, or they can earn high rankings through hard work. A company that has an active social media campaign can cut out paid search ads and still receive high rankings in search.
4. Cost Avoidance: All companies have the potential for crisis. Good relationships can help mitigate the extent or duration of a crisis.
example from Katie Paine: Compare the money spent on legal fees for a crisis that was mitigated with the help of an active social media presence to one handled without the benefit of social media.
5. Social Capital: If a social media campaign is generating favorable comments, engaging employees or customers in the business of the organization, and presenting information quickly and accurately, then it is contributing to the social capital of an organization.
I really enjoyed this section of the chapter because I understand ROI and the the importance it serves for a business. You have to understand what worked and what didn't work in order to improve and function more efficiently.
Until next time,
Katie
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