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ROI: Old & New

Meaningful Data
Data is everywhere. We can measure just about anything; however, all measurement is not necessarily meaningful.

As Albert Einstein once stated, “Everything that can be counted does not count and everything that counts cannot be counted.” This statement of an insanely intelligent man is so very true. Now, how do we focus on what truly counts, admit our shortcomings, and adjust accordingly? Also, how do we capture a portion of the intangibles that we all know add value to the business yet do not readily lend themselves to being counted?

ROI Basics
Return on Investment (ROI) – is a performance measure used to evaluate the efficiency of an investment or to compare the efficiency of a number of investments. Financial metrics of prudent institutions capture both quantitative and qualitative factors so that meaningful performance results are reported to leadership, the Board, and Shareholders.

SEE: What's the ROI of SEO Exactly?

Key Drivers
The strength of any metric lies in the accurate identification of key driver (s). This takes time and sound methodology; the study of random data generated by several variables to hopefully identify significant correlation of dependent data to independent variable(s).

Scenario Analysis
Before deploying any investment strategy, an organization would observe, at minimum, a low, mid, and high return scenario that includes an assessment of plausible returns on both quantitative and qualitative factors for various strategic options. Furthermore, this organization would monitor the chosen strategy over the course of the chosen time-frame, to determine the actual return versus projected return, so that management, leadership, and the board etc. can decide whether or not to deploy the same strategy in subsequent years.

It is a process: variances reviewed, methodology validated, and results back-tested if complex modeling is utilized.

SEE: Web Analytics: What Am I Measuring and Why?

The New ROI and Social Media
I have come across several articles that refer to a new ROI and Return on Influence as the key social media performance measure. ROI is essentially: the gain from an investment – the cost of an investment /the cost of the investment. I have not seen an argument that supposes that we are not attempting to measure the return to the investor for an expenditure made (time or money). Therefore, I do not see a separate “body of work” or a new ROI in the measurement of the impact(s) of social media. I only see the implementation of metrics that enable management and leadership to measure, monitor, and control their investment in social media – performance measures. I see the “old” as one and the same with the “new”; however, there are new qualitative descriptors specific to the measurement of the return on investment for social media.

If you are an engaged organization utilizing social media, you are implementing these measures, reading a book to find out how, or hiring an expert to help you establish appropriate metrics; of course.

SEE: Return on Influence: The Social Media ROI

About the Author

Maisha Smart, MBA founded Finance and Marketing to help small businesses excel, by bridging the gap between finance and marketing processes. Some of her favorite activities include fine arts, a good debate, and social engagement.

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