This week an interesting question came up during a discussion I had with business owners wanting to learn more about integrating social media into their existing marketing strategy. As expected, the second question hit on the topic of social media ROI (return on investment), specifically it was “Can social media help my bottom line?” I quickly went into a discussion about measuring the result which is sales, and how companies must understand customer profitability in order to make smarter decisions that produce higher profits.

Of course we can use the “old way” of analyzing impact such as clicks, eye balls or traffic, but those are limited not to mention unproven at this point.  We’re still at the “testing before the test gets developed” stage before a solid method of measuring social media ROI is meaningful.  However, it’s about time that we all try to find meaningful metrics that truly justifies the investment.

Accordingly to the research report “2009 Marketing Industry Trends” from Equation Research, the top 4 ways to track social media efforts has little to do with directly tracking sales.  The survey suggested that “measurement is understandably dispersed. Yet there is an acceptance that both hard and soft measures need to come to bear in order to assess success.”  Now these guys know something and it’s a start to drive and refine testing.

Social media takes knowledge, time, energy, training and it gets frustrating when results don’t reflect the effort put into it.  In a recent article “Social Fresh, good friends, and the definitive Social Media ROI presentation”, Olivier Blanchard generously laid out a tell-all truth about social media ROI proof of concept methodology.  If you speak business (not just marketing), I encourage you to checkout his blog and the slide presentation.

Looking Ahead

Organizations should remain focus on the most profitably customers and align their brand strategy around them while targeting potential customers with similar values.  By recognizing the different variables that influence customers to buy or not to buy, companies can make better informed decisions to nurture high-profit customers.

Whether you’re a start-up or a Fortune 500 company, there is a ceiling for your economy of scale so consider building your marketing strategy around the products and services to those life-time value customers.  Then abstracting soft and hard measures in analyzing social media ROI should become more effective and meaningful.

Getting started with social media is easy, engagement becomes accessible and shouldn’t you be authentic already anyway?

Social media is about having the “right” conversation but ultimately they have to mean something.  From buzz to leads, word-of-mouth to rewards program, everything translates to revenue.   Yes, it’s about money.  There is this perception that people are connected on social network because of alternative motives and sooner or later you’ll be spammed.  Well, what do you expect? Do you really think that Google wants to give you free email? Or that Facebook truly care about helping you to stay connected with your friends?

There is really only 3 ways to make money on the internet: sell subscriptions, sell software, or sell ads.  When it comes down to it, it’s simply friends with benefits.

Develop your own social media ROI starts with knowing your customers.  In an attempt to influence your audience through direct contact, repeated communication and word-of-mouth campaigns, don’t forget about business performance. Find a combination of variables to measure, but whatever you decided to do, it’s important to let the balance sheet do the talking at the end.