Social Media Marketing: ROI Vs. ROO

[By Tony Popowski]

Professionals in the business world (rightfully) tend to be results-oriented people. Working in the marketing field, I'm always interested in obtaining quantifiable results for a marketing campaign or initiative. Especially from a financial perspective, I like to see what's working and what's not. The best way to do this is to measure a program's return on investment, more commonly known by its acronym ROI. Finding out a campaign's ROI is extremely important - it helps you plan for future marketing projects.

ROI = (Gain from investment - Cost of investment) / Cost of investment

However, there is a component of the inbound marketing strategy that should shift its gears away from looking for a definite ROI: social media marketing. Business owners want "hard numbers" to prove that social media isn't a waste of time, so they want to know what their ROI is for LinkedIn, Facebook and Twitter. I think this occurred because many professionals doubted social media's legitimacy at first.

As a person who cares a lot about ROI, I think this is understandable. However, ROI is the wrong performance measure to focus on when we talk about social media. Instead of ROI, we should take look at ROO, or your return on objective.

For example, LinkedIn is designed in a great way to help you connect with new leads. Particularly, you can do this through your connections' connections, the groups section and advanced search function. Therefore, your objective for LinkedIn is to find x new companies per month as leads. If you find more than x new companies every month, LinkedIn has successfully accomplished your objective. Therefore, LinkedIn is has a great ROO.

Some people may counter with, "Well, if none of the leads from LinkedIn end up converting into clients, didn't you waste your time? Isn't your ROI on LinkedIn zero dollars, thus rendering social media useless?"

While this isn't totally the wrong line of thinking, I would disagree with this notion. There are a lot of factors that come into play throughout the entire sales cycle. In today's digital and information filled economy, people don't make immediate decisions. You have to nurture leads throughout the sales cycle.

After you've obtained x leads on LinkedIn, you should theoretically have a lead nurturing campaign in place that adheres to inbound marketing principles. However, let's say you don't - you just let your leads from LinkedIn sit there. You don't follow up with informative newsletters with a consistent email marketing program. When your leads visit your website, you shout out outbound messages instead of providing valuable content with downloadable information. Because your leads weren't followed up with properly, they don't convert into sales. This isn't "LinkedIn's fault"; this is an overall marketing strategy fault.

Overall, social media is an integral part of any marketing program. However, it's important to remember that social media is a tool, not a magic wand. Instead of focusing on the ROI of your social networking usage, establish an objective for each of your sites and measure your success in relation to your objective.