I spent quite a bit of time this evening reading articles and posts highlighting the challenges associated to measuring social media Return on Investment (ROI). Simon also mentioned in his Social Media for Business post the challenges associated to social media metrics, specifically engagement metrics. Measuring dollars is more important than ever so if we want to see companies accelerate their social media adoption we need to show a direct correlation to the bottom line. I speculate this is why the ROI topic is getting big buzz as of late.
Leads, sales, and new revenue get most of the headlines when discussing ROI. However, cost reductions need to be considered as well when figuring/estimating ROI. Social media introduces new possibilities to traditional business practices such as customer care/service, research and development (R&D) and internal communications. These may not be as “sexy” as marketing and sales but anyone of them can be the Achilles heel to even the strongest of companies.
Customer Care/Service: listening & engaging = retention ($$)
Customer care/service is a huge cost area for companies. Social media provides a cheaper and faster way to address customer concerns vs. having to call an 800 number. With the various sentiment monitoring tools available (check out local KC companies Spiral 16 and Social Radar) a company can proactively help customers. Not only does this help decrease call volumes but a company can get good PR and positive brand recognition for reaching out. If a company isn’t quite ready to make an investment let me suggest Google Alerts. You can’t beat the ROI on this handy tool as it’s FREE and super easy to set-up.
You may not be able to get rid of an entire call center but even a 10% reduction in costs can be significant. Don’t forget about customer retention “save” possibilities too…keeping existing revenue is just as important as generating new revenue, especially if your company is being pressured to maintain their customer base. The cost associated to getting a new customer is high so keep that in mind when considering retention dollar benefits.
Using social media in this manner may also introduce an opportunity to reduce labor costs. Many companies are organized by function so you may have one employee who is a sales person, a second employee that handles the customer service call and a third employee who serves as a retention specialist. Social media may allow a company to employ one resource who can support sales, care and retention all at the same time. Again, this is a much lower cost than the 3 individual resources that they more than likely are paying today in the individual business units.
Research and Development: gain access to the WORLD
Research and Development (R&D) is another cost area that can be supplemented using social media. Market research, product research, strategy considerations, and user groups are just some examples of information that can be gathered through social media. A smart company knows that R&D is important to long term health and growth but during tough economic times R&D becomes vulnerable to cuts. Utilizing social media as a knowledge gathering tool provides a cost effective method to supporting R&D which can save or possibly even grow this very important part of the business.
Internal Communications: knowledge sharing = accelerated growth
One more cost area to consider is internal communications. Big companies typically have an entire organization focused on nothing but employee oriented communications. By leveraging social media and online communities specifically, they can lower their costs in this area. Security and keeping proprietary information safe is often a concern when considering online communities. Doing your homework and developing an effective but simple social media policy can typically address any security concerns.
At the end of the day remember to under promise and over deliver, especially when discussing money matters. Be honest about worst/best case scenarios and forthright that there is still a lot to be learned in this area. If you would like more information about the tools or methods discussed in this post please give us a call or send us an email. Would love your comments on other costs to consider when evaluating social media ROI.