Today I attended a presentation that was probably the most useful of any I attended at this year’s SXSWi, “Marrying for Money: The ROI of Relationship.” It’s the kind of topic that can clear a room and honestly, there should have been more people at this one. However Jen van der Meer of the Dachis Group took the subject head on. She has the street cred to do it too. As a former Wall Street muckity-muck who went on to work for Organic and Frog Design, Ms. van der Meer has been dealing with the question of measuring ROI for quite a while.
She presented some interesting case study examples (e.g. owning a dog) that illustrated the problem with traditional ROI. Can you really put a dollar value on a relationship? If you could, you’d never own a dog because financially, they usually don’t pay out (unless you have an income earning show dog — uh, pretty rare). True ROI is a really simple equation: money in – money out / money spent. To apply this kind of equation to social media makes no sense. What is valued most in the social space are transactions that cannot be measured with traditional ROI. Facebook fans for example have been run through the ROI lense by many researchers and given dollar values that are hard to tie back to anything real. And how can you assign that sort of value to a fan anyway? Do you really know who these people are? They could be haters who are keeping an eye on your brand or someone’s cousin who was told to “like” the page but has never bought your brand, ever. In fact, the intersection between fan and customer could be a pretty small one.
So what do we do when asked about ROI? Ms. van der Meer points to customer referral value as the key measure. The idea of “loyal” customers is becoming outdated in favor of “social” customers. These are the people who both buy your brand and tell others about it. This sounds a lot like a Net Promoter Score and in fact it is. But Ms. Van der Meer goes beyond this into looking at the relationship value as well. She gave examples of customer “presence,” “conversion,” and “advocacy” as possible measures but she also challenged the attendees to look at their own social media and decide what measures would best represent the value of a relationship based on what they were trying to achieve. So while she didn’t given an exact equation or road map for how to measure ROI in the social space, that was really the point. Measuring relationships means looking at what brands find valuable and creating metrics that reflect them.