How much money can you pour into social media with no ROI?

The recent online discussion between Brett King (author of Bank 2.0) and myself (Financial controller background) kind of shows that the ROI battle in social media is far from over. We left the field with completely opposing opinion.

Like Brett also I was of the opinion that calculating an ROI of social media maybe a bad idea. That was little over three years ago. The thinking was that we don't discuss an ROI of bookkeeping or an ROI of having a CEO – these are basically necessities to run a business. But I have to admit: Part of it was that I was lacking of a sound model to actually calculate a financial ROI.

What changed my thinking?

I was involved in a very large engagement that was way beyond the tweeting and fan page building. It also was way past the point where a few people in the marketing department is doing "the social media thing". We were at a major intersection with the following strategic idea:

"We can't make a difference in our 6,000 people organization if 5 people do social media and 5.995 people continue doing business as usual."

There is no way in heaven to do this without an ROI calculation

In order to make a real difference we needed to empower the teams in all market facing units to become more approachable, engage with clients socially, support users who volunteer to support customers, which reduce support cost, enable product management to leverage social media for product requirements gathering and less expensive and more effective product launches. The consulting services alone grew to 7 digit figures and the human resource cost in re-organization, training and hiring grew even further. For the company that size it wasn't an outrages project – but there was no way in heaven to do this without an ROI calculation.

Why corporations won't excel in social media without ROI

A CFO of any decent organization will want to understand the return of an investment that is as significant as a real social media engagement. Again, if a hand full of people tweet and build a fan page to create a social facade, no ROI is needed. Why? Simply because there is neither any significant financial impact on the cost side nor on the result side.

In contrast, bringing a whole organization to the next level of doing businesses in a hyper competitive global economy, a fan page won't make a difference – but 1,200 sales people who socially engage with all customers like only executives did in the golf and country club in the past – is nothing you do overnight. Building processes to get customer requirements and needs through design communities into the product management group is no longer a dream, but needs planning and thinking as well as training and external support. To orchestrate several outsourced support centers and bring the support back in-house because the pressure of negative feedback is higher then the desire to reduce support cost isn't an easy task in the first place. But to integrate already existing customer support communities and join forces to a holistic intra market support concept is a top of its class social media project. Doing this with no ROI calculation, not knowing whether and what is financially doable is an unthinkable project whether the company is public or not. Over the past three years we developed and perfected an ROI calculation model that not only helped to justify a major investment but also helped to distil some important KPIs of a social business engagement.

I believe that Brett's last statement to me "ROI is only delaying the process of social media engagement" is not accurate and actually counter productive. All it may do is let people experiment with no clear vision what social media can do for them. But at that stage it is just that anyway: experimentation. I trust that those who look at social media beyond the experimentation phase will need a robust financial ROI before they continue with a trial and error mode.

The question remains how much money can you pour into social media with no ROI?



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