Lets define ROI first as the simple return on the money or time invested in an activity. There are 2 kinds of returns – financial and non financial.

When they ask for financial returns they use certain metrics to track it, including:

Payback Period. The amount of time required for the benefits to pay back the cost of the project.

Net Present Value (NPV). The value of future benefits restated in terms of today’s money.

Internal Rate of Return (IRR). The benefits restated as an interest rate.

Non financial benefits include “intangibles”, “soft”, or “unquantifiable” benefits.

Leveraging social media to provide better customer service, get product feedback, etc. is great, but the financial impact of those is not easily measurable.

Why do we say that? Lets take just one example of using social media for customer service. Since social media for marketing is a big mess anyway.

1. Having customers help each other: For any large enterprise, less than 2% of customers actually use twitter, get Satisfaction or multiple other tools for customer service. The ideal scenario for a customer service organization is if customers help each other without the organization even being involved.

There are some implications for that unfortunately, especially if customers provide the wrong information or incorrect solutions. So if your customer service organization is going to monitor social media for support this is yet another channel which incurs costs for the organization.

2. Allowing customers to manage a Wiki for support. There are many situations when you realize your customers who use your product on a daily basis know more about it than your company does. Ideally they can form an extension of your “documentation” to leverage the wiki. Similar to the argument above though, the time and resources required do not go away because you have a wiki. A new channel for communicating now is opened, which brings with it, costs with no clear financial ROI.

3. Using social media to reduce escalations. Everytime an issue gets escalated the cost of the issue goes up dramatically. If you can provide a solution using social media to reduce escalations by proactively pushing out information to customers on potential issues, instead of reacting to the issues as they come though, your cost of customer service goes down. The problem with proactive outreach is one of reducing signal to noise ratio. What’s good for one customer scenario is not useful for most. If it were, then it would be documented anyway.

Does this mean you should not leverage social media for customer service? Absolutely not. Dont expect to show a financial ROI towards it that is justifiable to senior management, is the point we are making.

Image credit http://www.solutionmatrix.com/return-on-investment.html