What is the value and ROI of Social Media in your company?

Many brands are still plagued by this question.

The immediacy and visibility offered by social media marketing has convinced most business owners that it’s worth their time and effort, but calculating its effectiveness is another story. Best practices for measurement are still evolving, and even though brands are committing an increasing percentage of their budgets to social channels, many are still skeptical about its value and return on investment (ROI). What’s a marketer to do?

In the past, most marketing involved one-to-one communication. Traveling salespeople knew their audience well, and went door-to-door to deliver custom personal messages about their products to willing buyers. Think of Avon, which employed women dubbed “Avon Ladies” to sell cosmetics and skin care products beginning in 1886.

This evolved into attracting an audience via a one-to-many approach, with brands using tools like survey responses, subscription data, and Nielsen scores before delivering advertising via traditional media. In this scenario, marketers are fairly certain about who they are talking to and use trackable elements such as coupon codes and phone numbers to quantify results. Both of these paradigms make ROI fairly easy to compute: Just divide returns by the initial investment and calculate a percentage: $100,000 net profit ÷ $400,000 invested = 25% ROI.

Easy, right?

Enter social media. Brand marketers are using many approaches in an effort to be part of the conversation, and are leveraging multiple social channels to do so. These programs are far more complex than the one-to-one and one-to-many paradigms. It’s very easy to just start measuring your ROI by counting how many Twitter followers and Facebook friends you have. Or you could be a bit more advanced and measure retweets and likes. Although these are important components to track, a goal-based approach to ROI will help you better understand your results — your method of measurement must dovetail with the campaign goals you defined before embarking on a social media marketing program.

Click here for an overview of 10 Social Media ROI examples.