Three acronyms to help with justifying social media: Part three

Love it or loathe it, many clients instinctively try to evaluate social media in ways similar to advertising. Whether it’s because you want to justify social media on those grounds – or because you want to persuade the client why that isn’t appropriate – you need to know the lingo. This three part mini-series introduces you to the main acronyms you might come up against.

Part 3: ROI

Parts 1 and 2 of this mini-series went through some of the issues involved in trying to use OTS (opportunities to see) and AVE (advertising value equivalent) calculations. However, that does not mean you cannot measure social media activities and attempt to approach the Holy Grail of ROI (return on investment) calculations.

ROI has its origins in financial calculations: work out how much something cost and what the return was. However, by no means all ROI calculations involved trying to put everything into comparable financial terms.

At one level you can measure overall changes. For example, did the trend in new customer sign-ups change after a social media campaign?

At another level, you can equate the gains from social media activity with those from more traditional activities. For example, if a company places a financial value on its customer prospects lists, that provides a starting point for valuing its list of Facebook fans.

Perhaps the most important approach though is to be realistic: you can’t compare apples and oranges but you can get a sense of scale – a sense of how many zeros there are on a number. Comparing email newsletter lists with Facebook fan lists isn’t comparing like with like, but it is realistic to expect to be estimate whether the value of getting an extra person on one is worth roughly the same, ten times more, hundred times more or a thousand times more an entry on the other list.

Finally, remember that one of the most important potential benefits of social will not be captured by any of this: if you are on top of customer feedback promptly you will head off supplier problems, media disasters and design mistakes before they turn into major headaches. The value of that early-warning insurance should not be under-estimated.

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