Saw an interesting blog post from Axel Schultze today on Social Media ROI. ROI is of course an important conversation to have when working for an agency or as a consultant. How else, particularly in these difficult times can you prove your worth.
The formula that Axel comes up with is
Contribution Margin in currency generated from externally referred customers over cost in currency for human interaction and other cost to manage and engage in the ecosystem= Social Media ROI.
Now I started thinking about this. For some businesses this may work. I can see for instance how it might work for a client in a B2C environment where people can purchase on-line. You can see where people are referred from and input the amount of any resulting order into the equation.
But what about when you are working in a B2B environment and where you may also sell through distributors. Your goal with social media may be to raise awareness or to establish yourself as experts in the field. How do you measure contribution margin then?
I don’t think there is a single answer. It depends on the goals of your social media strategy and the type of business you are in.
For the full blog post go to socialmediatoday.com
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#1 by Axel Schultze on March 1, 2009 - 7:17 am
John – thanks for posting about (just found it in search). Just so you know we developed that formula in particular for the B2B environment. It works in B2C too but that wasn’t the trigger. As stated there is much more to know about our methods of understanding social ecosystem, social customer maps, etc. But it’ll work there. And you opened up a nice can of worms – distribution channels. It actually works there too – BUT – it requires that the partners are social media empowered by the vendor and that is a different set of challenges.
#2 by John Weet on March 1, 2009 - 11:05 pm
Axel – Thanks for your comment. What I don’t understand is how, when you have client that has a very broad portfolio of products, many of which have to be engineered as they are not off-the-shelf items how you measure it then.
If social media is used to raise awareness, to promote you as experts in the field, or to inform. And then the buying decision is made by calling in your local sales rep or disributor how do you capture that as being a direct result of some social media activity. Especially when you sakes rep or distributor already knows most of his potential customers anyway.
I know this subject is a difficult one and I am sure the discussion could go on and on. I am just interested in all and any information I come across on the subject. Your post helped on that front.