“Money is money.”
That might sound like the simplest business lesson there is — the kind of thing most people understand before they even learn to read. But as Olivier Blanchard noted at the Buzz2010 event (full disclosure: SmartBrief helped organize the event) it’s often the first business principle people ignore when they start talking about social media. Social-media gurus love to pretend that ROI stands for “return on involvement” or “return on innovation.” But it doesn’t. It’s return on investment — as in money.
Word of mouth is not money. Engagement is not money. Buzz is not money. Those things can all be gateways to money, but unless you can make the conversion, they’re all ultimately worthless. Only money is money.
Social media isn’t free. The time it takes to run a social-medial campaign diverts resources (time, talent, technology) from other activities. So it needs to pull its own weight. Blanchard argues that there are three ways this can happen. Your social media campaign must either:
- Increase how often your customers buy from you. (Frequency)
- Increase your total number of customers. (Reach)
- Increase how much each customer spends with you. (Yield)
Frequency, reach and yield — if your social-media campaign doesn’t pass the FRY test, it’s not generating ROI, Blanchard argues. Of course, calculating exactly how much your social-media campaign has improved your FRY rating can be a little tricky. Luckily, Blanchard walked the Buzz2010 audience through the process in his presentation. Check out the slides from his presentation and sign up for SmartBrief on Social Media to stay up to date on the latest developments in social media.