When is the last time you measured the return on investment of that $300 business card sized ad in the local rag mag? Does anyone measure the return on investment of the $8,000 web site you just developed? What is the ROI on a Tweet?

• Let me float this out there: If you’re not where the people are, you’ll sell fewer products. Period.
• If you’re a local restaurant and the local people follow a local weekly news magazine for all their local food news…you better bet your butt you should be in that magazine.
• If you notice that your customer base is friending you on Facebook, I guarantee that if you interact with them there, you’ll sell more product.
• If people in your community are holding odd things called tweet-ups and are walking around with their eyes glued to smart phones…send out some choice tweets and those birdies will flock to you.

I recently read this tweet, “So far, there’s been little proof that social networking sells wine.” To be honest, I think this is bull shit (forgive my mouth, Mother). Social networking is the main thing that sells wine! The only variable is WHERE and HOW you choose to be social. Some wineries and businesses network by joining local groups. Others are social by e-mailing their client list. Some choose to network at charity events while others get social on Twitter and Facebook. Wine is social and social networking is good business. He who has the most conversations sells the most products!

In a recent post called “Return on Investment and Social Media Marketing,” Tom Wark says, “There are other ways to spend one’s time and money that deliver a GREATER return on that investment. It is not a matter of jumping into the electronic pool and seeing profits mount, even if you make a big splash.” Again, I disagree. I think there is no greater potential to a return on investment than personal and real conversation and engagement with people through relationship marketing like Twitter and Facebook. If I could pick up the phone and engage with hundreds of my fans / followers / likers simultaneously…imaging the power. If I could reach out and share my product or business development with thousands of people daily through email…imagine the power. If I could connect with people while they shop, dine, lounge and live their lives…imagine the power. Social networking (relationship marketing) is the cost of entry to good business just like the web site was 10 years ago. He who does it well has an intrinsic advantage over their competitor.

Let’s Talk ROI

Return on investment can be essentially measured in two ways: increased revenue or decreased expenses. Any investment of your money for your business should ask these basic questions:

• What is the desired outcome
• What metric will I measure
• How will I measure it

If all you are interested in is brand awareness…how will you measure it? Can you track mentions in the online space through Google? Will advertising in publication X result in the same results as advertizing in publications Y and Z at a reduced cost? What is the value of 5000 Facebook fans? Interacting online may require time (and yes teacher, time = money), but zero conversations results in zero revenue. There are “other ways to spend ones time that deliver a greater return on investment” for the SHORT term but long term success is built on long term relationships and there fewer ways to develop relationships than with today’s social tools.

Plans and Requirements

Lately I’ve been building a lot of Business Requirement Documents (BRD’s) and Communication Plans at work. At the beginning of each of these documents are sections for Critical to Quality Specifications (CTQ’s) and Success Measures. With CTQ’s we’re required to outline the current baseline, projected target and how we are going to measure it. Do you know the current baseline of your advertising results? How much business does that weekly newspaper ad generate? Don’t know? Ditch it. Whatever the program, make sure you know what your success measure is, how you’re going to measure it and what result is considered successful. Do you want to measure social media? Establish a baseline of sales or mentions or interaction (with your web site). Pick the metric you are going to measure (sales, visitor count, web page views). Develop a campaign to drive the results. This should be true with any marketing expense your business has. Is your yellow pages ad worth it? Does your regional magazine ad call people to action? Develop your marketing campaigns with purpose (including social media) and you’ll see tangible results.

Social networking (currently through Twitter, Facebook and Four Square) is the business model of the near term future. The quickest way to reduce cost is to build a network of brand ambassadors who will help spread the word about the business. This efforts results in a social currency that can be redeemed for direct sales.

You want a specific example of ROI on social platforms? Friday I was travelling to Yakima, WA and I tweeted “Where Am I Now?” from a local winery. A neighboring winery said, “Looks like you’re at one of our Red Mountain neighbors, you should stop by.” Shocked that they were so close, I made a brief detour, visited their winery and BOUGHT a $50 red wine blend for later that night. The value of that tweet $50. Repeat this scenario several times over as your follower / fan base grows.

Social media isn’t going anywhere (even if it changes popular platforms). We have entered the “new world” where everyone is hyper-connected to each other. Quality Social connections on Facebook and Twitter are infinitely more valuable than some of your basic collateral (magazine ads, print ads, web banners). Wark concludes his post with, “It’s critical to put in place a marketing plan that utilizes the most efficient tools that are most likely to deliver the greatest return on investment.” I agree here only to say that over time the greatest return on investment will be your social currency in places like Facebook, Twitter, You tube, and wherever your customers are.