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Should Social Media Investments Get a Free ROI Pass?

How about the social media advocates!  On some days I think they are absorbing more digital news pixels than all other technologies put together. And if that isn't enough, the Twitter, Facebook, LinkedIn, et al., proponents are now starting to demand noticeable investment bucks from the enterprise capital funding bowl. These soothsayers proclaim - You haven't seen anything yet!

What's interesting is that many "Give me the money" requestors are expecting a free pass on ROI justifications. "Social media is different!" they assert. "It's too fuzzy for value quantification. It's too new for understanding its ultimate payback. We can't wait. We need the money now, before competition eats our lunch."

free-roi-pass.jpg

How about the social media advocates!  On some days I think they are absorbing more digital news pixels than all other technologies put together. And if that isn't enough, the Twitter, Facebook, LinkedIn, et al., proponents are now starting to demand noticeable investment bucks from the enterprise capital funding bowl. These soothsayers proclaim - You haven't seen anything yet!

What's interesting is that many "Give me the money" requestors are expecting a free pass on ROI justifications. "Social media is different!" they assert. "It's too fuzzy for value quantification. It's too new for understanding its ultimate payback. We can't wait. We need the money now, before competition eats our lunch."

While heartfelt, their "no more ROI" proclamations are deja vu all over again. Roll backward a few decades and you'll recall similar, plaintive "ROI doesn't apply" exclamations for funding requests related to personal computers, and local area networks, and servers, and data analytics, and smartphones, and more. Somehow, someway, rationale cost-benefit justifications were developed for major investments in these now commonplace resources. Should it be any different for social media?

Here's the deal - like it or not - the execs holding the purse strings for fulfilling Big Buck investment requests for social media won't approve ROI-free projects, no matter how "irresistible" they may seem. These senior leaders have a fiduciary responsibility to shareholders that scarce capital must be wisely spent. To them, "wisely" means someone needs to devote enough thinking to figure why, when and how the enterprise will get more value back from their investment, than any other use of the funds.

What to do about this "ROI or not" confrontation? Here's some quick guidance:
1.) Ask for a "Free ROI" pass to well-conceived pilot and skunk works projects, if the money needed is less than five percent of the available investment fund.
2.) If your investment request is a couple of hundred thousand dollars, or more, don't fight city hall. Put together your cost-benefit analysis, and get it to the execs charged with guarding the funding spigot.
3.) When being asked for a "ROI justification", make it bullet proof by including both hard money quantifications (e.g. labor saved from eliminated wasted efforts) and soft money/intangible declarations (e.g. improving a firm's marketplace image). True business value is the sum total of both.

In future blogs I'll discuss ways to ferret out social media investment value that others might have missed. In the meantime, let me know what you think about this Free ROI issue.

NOTE: Now that you have read my perspective on social media ROI, check out what Ash Joshi has to say in his blog, Social Business Models - Where's the ROI?

Comments

Jack- Here is a comment from the blog I write concerning your topic.

Any comment?

Comment: Mr. Mitchell
Social business promises to offer an optimal buying experience for the consumer. Now enabled by the social media tools, the consumer experience and the insurance buying process is moving toward a 180 degree change in direction. The buyer will be able to gain control of the process; where it should be.
Have you observed that when a social lead is ready to buy, the opportunity is generally lost within one hour if not acted upon?
Although this is a rather nebulous ROI applying to the social business channel, is there any experience measuring that metric from the insurance space?
Thank you.
Brett M. -2012/02/09
Response: Mr. Meyers- You asked:
Q1. "Have you observed that when a social lead is ready to buy, the opportunity is generally lost within one hour if not acted upon?"
My answer: This is true, and also true of a service complaint. Immediate online responses, (depending on professional tone) and a hyperlink to a one click answer is the path to success.
Q2. Although this is a rather nebulous ROI applying to the social business channel, is there any experience measuring that metric from the insurance space?
My answer: We feel that the best measure of success is value, expressed as Free cash Flow (FCF) defined in our Value Realization Method(TM) (VRM) as the benefit (marginal income from increased sales from advanced lead conversion - cost of leads)expressed in dollar terms. The lead "value" needs to be positive and the "cost" of a lead should be viewed though the effectiveness in new business.
Social Lead activity should not get a free pass on ROI - See Jack Keen's blog on this:

really nice blog. Social media has come up so much that now a days it is worth to use social media techniques to buy or sell things for customers and business corporates. Everybody should you social media to have social networking and use these new techniques in daily life to get maximum out of them.continue writing more.

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