Does Social Media ROI Matter?

[Note for the acronym challenged: ROI = return on investment.]

Last week I attended a small business seminar hosted by the Tuolumne County Chamber of Commerce, Sonora Chamber of Commerce, and the Tuolumne County Economic Development Authority, on the subject of online and offline marketing. The offline portion, presented by Bruce Tepper, of SCORE was good, basic advice on marketing and PR for small businesses. Lots of head nodding in the audience accompanied his talk. The online segment, presented by Michelle Shelton, of Luminosity Tech Training and Consulting, raised a lot more questions than it answered.

I should point out that Tuolumne County is not (how shall I put this?) a hotbed of technology. The concepts behind many online strategies, including social media, are new to most business owners. The questions in the room indicate to me that there is a huge educational effort that needs to take place if social media is going to become widespread and effectively used in Tuolumne County.

My friend and colleague Bob Gelman, of BGA Media is more skeptical than I am about the value proposition of social media in general and for small business in particular. He writes in his blog:

After all this, in all my experience, I’m afraid that the Social Media Emperor has no clothes!  That’s because I’ve seen no reason to believe that it will actually be worth the effort that it takes to do this stuff properly.

You would expect me to be an evangelist of this work. I’ve not only worked in this field since 1992, I’ve built several social networks (with my team).  But no, I’m not an evangelist, I’m a skeptic. Having seen the bubble of Internet vapor burst in early 2001, I feel strongly this may be happening again, only this time, the losers could be struggling small businesses who invest their time and energy unwisely.

What a small business needs from its efforts, be they online or off, is ROI. If you have 12 hours in a day to run your business, you probably do not have time to setup Facebook fan pages, write blog articles, tweet on Twitter, and still sell. manufacture, ship, and keep the books as most small businesses do.  So before you tell me to go Yelp, or contribute to the public works Wiki, or check my comments and trackbacks, you’d better be prepared to tell me what it will be worth to me in additional sales and more importantly: profit!

Being the Kumbaya Blogger that I am, I believe that the point of social media is to improve your connection with your market. I suspect that trying to measure the ROI of this is difficult at best and is more than likely an exercise in futility. Everyone acknowledges that word of mouth is an excellent way to build business, yet I don’t know how you would measure its ROI. Social media is word of mouth on steroids.

A few basic concepts that I would like to introduce to our business community:

• Social media should be used for listening, as well as talking.
• Social media is a great tool for offering help and service. Not so good for selling stuff.
• Social media should be part of an overall marketing strategy, which includes goals.
• Many existing forms of advertising are dying. Social media may be what replaces some of them.
• Markets are conversations.

We need to lay some groundwork before jumping in to the mechanics of setting up a Facebook fan page or a Twitter client. That’s what I’d like to see brought to the businesses of Tuolumne County. The folks who run these businesses already know the value of connecting with their customers. Many of them don’t have the disadvantage of being under layers of bureaucracy or having to get approval from a home office before trying something new.

Yes, social media takes time and effort; something that small business owners have in short supply. But it’s also nearly free to try it out. Rural communities like ours need to learn about conducting business online and they need to do it now! It’s really just a matter of applying business concepts that they already know (treat your customers right, give them more service than they expect, talk to them like intelligent human beings) to a new form of communication. The act of learning how to use these new tools will have no measurable ROI but I believe that it will pay long term dividends.

ROI doodle by Russell Davies