ROI vs. KPI — Why Social Media Can’t Show You the Money

When the boss assigned me a blog on the ROI of social media, I accepted the task with a certain amount of hubris. Confident in my favorite data-full online tools and toys, it seemed obvious that a simple-sounding metric like return on investment would be, not only calculable for social media, but more easily tracked and updated than it has been before.

Technology, apparently, is no cure for being dead wrong.

Having read, crowdsourced, debated, and scoured, I am now convinced that, despite what you may read in Google search results, there is no meaningful way to track ROI for social platforms, unless you are lucky enough to be in straightforward e-commerce, using trackable coupon codes, landing pages, etc–and even those efforts may only quantify a fraction of your results. For service, professional, brand-based, and B2B businesses, the unsettling truth is that social media value cannot be gauged by a simple equation because, much like traditional tools for PR, marketing, customer service, and branding, its returns are not strictly monetary. Buzz, loyalty, trust–all about as numeric as a firm handshake.

But they’re as important, too. We’ve all read the stories about customer loyalty trends (down); the importance of recommendations and trust (up); and the consumer’s increasing pursuit of value, particularly as encapsulated by a real or projected relationship with a product or service provider. Absent an army of sales and service people and a political campaign-like physical network of mom-and-pop storefronts in every town from Acadia to Kodiak, few businesses can provide the expected level of communication and contact without social media technology. But successful use of the tools requires more than the ability to subtract and divide.

Must haves? Specific goals. Consistent messaging. Inspiration. Flexibility. Commitment to long-term reputational growth. And the business sense to find the social media niches and purposes that work best for your company, instead of just following the other cubicle lemmings into the latest hot properties.

Positively detrimental? The kind of blind faith espoused by the subset of social media gurus. This isn’t just my research frustration talking (not just); people who insist that the question of social media ROI is irrelevant give us reasonable proponents a bad rep because only a moron would pour resources into a business tool without asking questions about how to gauge success and determine investment. “It’s all cool, man,” isn’t just momentarily asinine–it makes the whole industry looks like a bunch of snake oil salesmen who are either stupid or dishonest. Not really a ringing endorsement for diving right on in.

What’s doubly frustrating is that such dissembling often prevents or stymies the development of the metrics that do apply to social media and should be used to help direct a company’s investment. The acronym that applies isn’t ROI but KPI, or Key Performance Indicator. Referring back up to the list of Must haves, these are an outgrowth of the specific goals that can only come from a deep understanding of what actually benefits a business. As such, they are deeply individual, which suits the multifaceted world of social media (in it for sales? PR? service? coolness?) just fine.

As often happens, the best practical brain byte on this whole topic was a tidbit from Wikipedia (how’s that for social value?):

“A KPI can follow the SMART criteria. This means the measure has a Specific purpose for the business, it is Measurable to really get a value of the KPI, the defined norms have to be Achievable, the improvement of a KPI has to be Relevant to the success of the organization, and finally it must be Time phased, which means the value or outcomes are shown for a predefined and relevant period.”

That is, the first thing you need to know is what you hope to gain, and “worldwide domination” isn’t an appropriate answer unless you’re Mark Zuckerberg. Identify the potential value of your purpose, and use a social media tool if it’s the best fit. A couple of cases in point (thanks, Mashable):

• Facing a nasty economy and fuel-efficient rivals, Ford targets social media-based customer service and user-generated content; gets half a million Twitter and Facebook followers; manages the 2011 Explorer product launch via social media; and doubles their order projections.
• Vodafone aims for a 100% customer inquiry resolution rate; crosses platforms but focuses on Twitter; and nearly hits their (impossible) goal notwithstanding inquiry volumes that can exceed 5,000 inquiries per month.

The common threads? Measurable (if not 100% financially quantifiable) goals, aligned with key company priorities that result in reputation enhancement leading to sales and/or customer retention. Far too many steps removed for ROI. But not too many steps for trackable indicators of success–or failure.

As happens with so many hot new technologies, social media has been stuck in a messiah phase–it’s social media; how could you go wrong? Well, unfortunately, a Twitter account is not a guarantee of exponential revenue growth, and it is possible that not every “like” is your next big client. This whole brouhaha over ROI–from total dismissal to results based on assumptions and ceiling wax–is, I hope, the beginning of the end of the social media Gold Rush. It’s time for clearer heads and more analytical minds to prevail, using metrics that matter, apply, and point the way forward.

Kate Schackai is the Social Media Director at Crawford PR and the author of White Hat PR, where she crusades to bring best practices to the online wild west.