A participant in this discussion made the following comment at the end of the conference when asked what they learned that day, “I learned a lot about ROI.  I learned that no one knows what ROI is for communities so I get to make up whatever i want.”

As humorous as it was at the time, that comment defines an ever-present struggle of proving the worth of enterprise social networks.  An online community is a living, dynamic strategy that can produce many valuable returns on your investment, not all of which will have direct financial impact.  It’s difficult to quantify (simply) the returns on a strategy with so many moving parts.  While a community initiative might end up being a marketing spend, the returns are cross-departmental, which makes measurement difficult when companies are silo-like in structure.

A few key takeaways emerged from our ROI discussion that I wanted to share:

Define the R -  It’s a good idea to define your goals and the appropriate strategy to achieve them before trying to justify the investment.  There are a lot of shiny new social networking tools and resources that are well suited for achieving business objectives but believe it or not, not all of them are going to work for your business.  Are you shooting for short term financial returns or more long term, value based returns?  Do you intend to build your CRM system, lower support costs, raise brand awareness, increase brand loyalty, glean marketing insights, increase sales, generate word of mouth, all of the above? If you dive in without clearly defining your purpose, you run the risk of botching the execution and potentially causing damage to your brand.

Quantify the R - After you know what you want and what you’re going to do, figure out how you’re going to measure it.  Peter Kim wrote a much talked about post back in December boldly stating that ROI is strictly a financial ratio and if social media marketing can’t be measured by ROI, then there’s no place for social media marketing; a sentiment often echoed by C-level executives.  Others believe the traditional metric of ROI is less applicable because of the complex nature of social media and the return is no longer as clear cut as a direct bottom line impact.  Methodologies such as Net Promoter, ASCI, Engagement Loyalty, ROBI ROCI and ROP, among others, are growing in popularity for measuring returns on social network marketing strategies.

Wait for It…- Online communities take time to produce results.  You’re probably not going to see them on Day 1, and you may not see them on Day 31, but if you have the correct measurement methodologies in place you can be confident that sooner or later that needle will start to move; how well you’ve executed your strategy will determine which way.

I would enjoy hearing your thoughts on the ROI debate, and how you measure the returns on your community investments.

Some suggested reading for understanding ROI in Social Media:
Do We Need To Shift The ROI Conversation: Crash Course on ROCI and ROBI
Don’t Say ROI Unless You Mean It
What Is The ROI For Social Media?
Social Media Study: Most Effective Tactics Are the Most Difficult to Measure Quantitatively Online Community ROI Models and Reporting Research Study
Engage or Die! ROI vs ROP in Social Media