When we talk about ROI (return of investment), the following formula is considered to be a standard method to calculate this metric as an evaluation on the profitability of a business activity. And ROI can symbolize either a rise/fall on the market sale, or an increase/decrease on the financial expenditure.
At the moment, this formula is also widely utilized in calculating ROI on implementing social media like Facebook, Twitter, Google+, Youtube and so on. However, “gain from investment” and “cost of investment” are measured in a variety of aspects due to the tangible and intangible benefits provided by social media. Furthermore, calculation of ROI is always fitting for purpose. In other words, ROI calculation is a evaluation process which is aiming for a specific task, or a group of specific tasks. For example, Microsoft XBOX service center has been attempting Twitter as the media channel for customer service monitoring and management instead of traditional service call (referenced from calculating ROI from social media – problems, pitfalls and breaking all the things…). The way how it works out the ROI of social media implementation on customer service is just simply measuring money saved in call centre costs by the following formula:
I agree with bloger Hannah Smith, who posts calculating ROI from social media – problems, pitfalls and breaking all the things…, that social media implementation actually don’t contribute to the business revenue growth directly. When calculating the ROI of social media implementation, it is easier to use traditional metrics like financial expenditures on marketing, sales and after-service which directly have impact on the business revenue. These metrics are tangible values generated by social media.
In the case of Microsoft XBOX service center, it only covers the tangible benefits which Twitter generates. Nevertheless, there are intangible factors which should be considered. For instances, migrating call service to Twitter service can improve efficiency of communication and trouble-shooting between technicians and customers, as they can post problems and solutions on the social media platform at any time with attached documents or pictures for better explanation. This measure also helps to build up database with service maintenance records which allow customers to solve a wide range of problems on their own efforts.
There is also another example about how microsoft calculate ROI of social media in a higher level view:
Microsoft calculates the ROI using the regular formula which I provide at the beginning, and the metrics are included as shown in the following picture:
As we can see in the picture above, all the metrics are tangible and measurable values which are able to be collected from the hosted social media platforms. And cost of each individual category (exposure / engagement / action / advocacy) is evaluated via the following calculation:
Therefore, calculation about ROI of social media implementation in Microsoft is done by referencing the tangible values mainly. However, there are intangible values like social media migration impacts on traditional services, and uncertainty of customers’ intention to interact with its social media channels. In terms of the uncertainty of customers’ intention, a typical example is that customers can liked and even leave comments in both Microsoft and Apple channels, they argue about system advantages and vulnerabilities on both platforms, but in most circumstances, people who are using Microsoft system still take up a large portion of the market.