SM-Exjobb.se

ROI is frequently used to measure managerial effectiveness within companies (Armstrong & Kotler, 2006, p. MM3).

ROI could be applied on social media and in example measure how the sales of a given product have changed since the company become active in social media. Though, social media is more about the human interactivity and not something that is defined or measured by numbers (Nüüd, 2009).

“The problem with trying to determine ROI for social media is you are trying to put numeric quantities around human interactions and conversations, which are not quantifiable.” (Falls, 2008)

Nüüd (2009) defines a new term for measuring social media usage: return of engagement (ROE). It will not measure the economic numbers, as ROI, but the customers engagement for the company on the web. In example the amount of comments, questions and everything else that increase the dialog. Dosh Dosh (2008) sums up four goals and benefits for social media usage:

Increased brand awareness. When interacting with others in social media channels the company build awareness for its brand and increase their visibility. Also, networking will drive traffic back to the website.

Improved reputation. When a company are active at many social media networks and services the opportunity to respond to feedback and answering questions increases. If they do this right, the reputation will improve.

Personal development. A big part of networking is observation, following the right people and the companies knowledge levels will improve. It can give an insight in how the market, and trends, looks from a customers point of view.

Relationships with benefits. This goal have some similarities with an improved reputation. Social media builds beneficial relationships, such as links and recommendations. Though, it is important to offer something back, like an effort to interact with the customers.

So, ROE can be used to measure the company’s social profit, the dialog that in the end will increase the company’s economic profit, the ROI. ROE can be likened to a step towards ROI and can be used to predict the company’s future (Nüüd, 2009).

References

Armstrong, G., & Kotler, P. (2006). Marketing (8th ed.) New Jersey: Prentice Hall

Dosh Dosh. (2008). Social Media Networking and ROI: How to Maximize Value and Minimize Cost. Fetch 2009-11-03, from http://www.doshdosh.com/social-media-networking-and-roi/

Falls. J. (2008). What Is The ROI For Social Media? Social Media Explorer. Fetched 2009-11-04, from http://www.socialmediaexplorer.com/2008/10/28/what-is-the-roi-for-social-media/

Nüüd, D. (2009). Return of Engagement – ROI:s högra hand. Mindpark. Fetch 2009-11-03, from http://mindpark.se/return-of-engagement-rois-hogra-hand/