Social Media Engagements: Measuring the ROE vs. ROI

Oftentimes when we work with customers on social media engagements one of the questions we're asked is, “What’s the ROI on this engagement?” That's a challenging question to answer -- while we are certain vendors and solution providers alike will get more interaction with partners and prospective customers by investing in a social media engagement, often it is difficult to put a dollar amount on the worth of an interacti

Oftentimes when we work with customers on social media engagements one of the questions we’re asked is, “What’s the ROI on this engagement?” That’s a challenging question to answer — while we are certain vendors and solution providers alike will get more interaction with partners and prospective customers by investing in a social media engagement, often it is difficult to put a dollar amount on the worth of an interaction.

Because it can be difficult to quantify interactions, I’ve found it more helpful to think in terms of return on engagement (ROE) rather than return on investment (ROI). Are you engaging the right people? If so, measure how your engagement has improved. This is more effective than putting an actual dollar amount on each activity. Here’s why:

How can you measure ROI on current activities? Today more than ever, it takes more than just one interaction to get a real lead. You may tweet something and then someone follows you, goes to your website and downloads an eBook, giving you their e-mail. You then e-mail them your newsletter for two months before they pick up the phone and call you. So which of these activities do you tie the lead to? The original tweet? The eBook? The newsletters?
ROI doesn’t help you build your network. You have an immediate circle of prospects or customers, people you could pick up the phone and call today who would be happy to take your call. Then you have a group of people in your immediate network; they’re connected to you on LinkedIn or Twitter. They’re on your call list, they’re connected to your colleagues. But what if we told you they comprise only 3 percent of your prospective network, and more than 70 percent of the people on your list today are NOT viable prospects? The first thing you must do is strengthen the list of people you’re communicating with on a regular basis and improve your engagement with them. Social media allows you to do that better than any other resource. You just need to be in the right place at the right time.
ROI is a false metric. If you only measure activities with dollars behind them, you’ll be selling yourself short. The things you’re doing with social media today are going to help you build your pipe in six, 12, 18 months and beyond. Should you discount those just because they aren’t in your funnel today? Probably not.

Brian Solis, principal at Altimeter Group, a research-based advisory firm, has an interesting view on ROI vs. ROE as well. What do you think? Is it worth changing the way you think about ROI and getting a ton more business?

Contributing blogger Heather K. Margolis, the Channel Maven, has led channel programs for major IT companies.