Yes, I am cutting right to the chase here…

This is a question I get asked very often. The problem is, that there simply is no easy way to predict how implementing Social Media in your communication strategy is going to affect your bottom line.

I am using the following formula to predict what a Social Media strategy is going to cost or save you in simple money terms:

Take the cost for the advice you are getting
PLUS
The cost for implementing and maintaining the new strategy
MINUS
Potential savings from replacing existing communication, marketing and customer service means and measures.

This will give you simple costs or savings of implementing a Social Media Strategy. The formula however doesn’t take into account its effects on your
-    credibility
-    crisis management
-    response time
-    branding
-    community
-    employee participation
-    sales from Social Media initiatives
and all the other areas Social Media can apply to. Their implementation tend to have a positive influence on all of the above.

Since these factors are only measurable after implementing the strategy, and even then they aren’t always quantifiable, I don’t add them to my budgeting. But I still list them as side effects.

So, ROI on Social Media is tricky, and can only be measured in some areas. It can also only be forecast to a certain degree. But the same goes for traditional communication and marketing strategies.

Those companies who have measured the success of their existing strategies however have reported great results (see for example an article on General Motor’s Blog ROI calculations: “Bust or Boon? Calculating blog ROI.” By Michelle Megna, February 8 2007).