We hear this question often: Can you show me the return on investment (ROI) of social media? With so many articles on the internet espousing the need for companies to invest in social media marketing, you’d think the answer would be “yes, and here’s how you do it.” As a matter of fact, if you do a search for “the ROI of social media”, you get many hits:
- How to define an actionable social media ROI for your business – SproutSocial
- How to Prove and Improve Social Media ROI (Includes a Free Calculator) – Hootsuite
- A Simple Way to Calculate Social Media Return on Investment – Social Media Examiner
- Is it worth it? Finding the ROI of Social Media – Whole Whale
- Social Media: Measuring the ROI – Forbes
The problem is that all these articles calculate ROI in terms of soft dollars rather than cold, hard cash. Invariably, the writers propose a formula that starts with “Define the purpose of social media for your brand”. They broaden the traditional ROI formula to equate dollars with value and propose that value includes raising brand awareness, community building, and connecting more closely with customers. They have yet to clearly tie the expense of social media marketing directly to sales dollars and revenue.
The articles consistently suggest that, in order to calculate your social media ROI, you first need to break down the why of your social media presence. Define your goals as something other than making money (i.e. bringing awareness back to a website, downloading a whitepaper, views of a video, etc.) and then measure progress towards those goals in terms of clicks. The underlying assumption is that these clicks will eventually lead to sales.
The problem with all this is that the question we receive comes from a very specific audience who cannot afford to measure success in clicks.
How do we answer those who are defining value as making $x dollars in revenue? Small-to-medium businesses (SMBs) who sell services (as opposed to products) to other businesses (B2B) run lean and mean. With only a handful of people on their marketing team, they need to know that whatever time is spent on social media will result in sales. Unlike larger companies, who may be able to absorb the costs through overhead by leaning on the higher margin sales of other products or services, these companies simply can’t afford to waste time and resources on things that might not bring a positive return on investment.
You’ll note that the first three hits above came from SocialSprout, Hootsuite, and Social Media Examiner – all leaders in social media marketing. It may seem self-serving that they would want to address this issue of ROI. But this caveat, a direct quote on the Hootsuite site, indicates that even those who’s business is so tied to social media can’t answer the question that is being posed.
If social media marketing is now so prevalent, why is there still this question?
Consider the small-to-medium businesses who sell in B2B markets; those who are mostly focused on selling services. It could be an architectural firm trying to sell services to builders. Perhaps it’s a marketing firm trying to sell their expertise to clients. There are private investigators selling services to insurance companies and still others who sell financial solutions to small business owners. And then there are those who sell security or cleaning services to offices or design/print shops trying to sell to boutiques. Bookkeeping agencies, payroll, employment services, legal support… the list goes on.
Selling B2B is a complex process. Several reasons make social media a more difficult play here:
- First and foremost – the seller is often strapped for resources.
- Selling cycles are long and difficult to navigate since multiple people need to be influenced.
- People involved in the purchasing process may be at different stages of the Buyer’s Journey and have different questions that need to be answered.
- Corporate purchasing tends to be highly risk-averse; those selling a solution often need to be on a pre-approved vendor’s list or have some other pre-existing relationship.
- Companies looking to buy services would rather go to someone they know or who is recommended to them. There is a natural distrust of social media, where results can sometimes appear to be ‘too good to be true’.
Business purchase decisions also tend to be based on bottom-line revenue impact. Return on investment (ROI), as pointed out by Kylee Lessard’s LinkedIn blog What is B2B Marketing: Definition, Strategy, and Trends, is a primary focus for corporate decision makers who worry about the stockholders they report to. This affects not only decisions made by the purchaser, but also influences investments made by those selling to them.
ne of the complex aspects of B2B sales, as compared to B2C (business-to-consumer), is how a B2B marketer’s audience tends to be made up of a group of decision-makers representing various stakeholders. Reaching individuals involved in all aspects of the business purchase decision can be challenging. B2B marketers must target their audience with pinpoint accuracy. That is why many of them rely heavily on existing relationships and referrals. Meeting with contacts at tradeshows or lunch provides the human connection required to build trust. Marketing through other methods, such as social media and even traditional advertising, won’t always hit the mark – although this may be changing as modern data management tools offer opportunities to identify and influence targeted audiences with relevant, personalized information.
Given the unique attributes of SMB B2B marketers, it’s understandable that they would be asking this. But it isn’t just our audience asking the question. SocialMediaToday published an infographic in June 2018 that illustrates how 44% of CMOs say they haven’t been able to measure the impact of social media on their business and only 17% say they can accurately quantify the revenue impact of social media.
Image Source: SocialMedia Today
Even though a correlation can be made between social media campaigns and soft benefits, companies of all sorts keep coming back to this: “Show me the money and associate it directly to social media investments.” For those with tightly strapped budgets, it seems unlikely that they will invest heavily in social media until the point can be made that you really can’t do without it.
A more mature social media platform may eventually fit the bill. Consider the evolution of ecommerce. Today, grandmothers who previously would never have touched a computer now log into Amazon (albeit grudgingly) to buy books and presents. After all, where else can they go? Bookstores are few and far between and Toys R Us is out of business.
In my next blog, Has Social Media Failed SMB B2B Businesses? Part 2 – Potential Solutions, I’ll explore current ways SMB B2B companies are using social media and what they consider success. I’ll also touch on what we see as a potential opportunity for social media platforms to make themselves indispensable to B2B customers.
If you’d like to explore how Porter Consulting can improve your market presence and pipeline using social media and other marketing tools, send us an email at firstname.lastname@example.org.
Dale Rensing has been helping customers envision the benefits of technology, from local area networks to cloud technologies and IoT for over 25 years. You can find more blogs and content from Dale at www.porterconsulting.net. Porter Consulting is a marketing services consulting company who can you help you grow revenue.