Social Media ROI for Dummies

Andrew Rudin

Does ROI Really Tell the Story?

Harish: thanks for sharing this. Oliver Blanchard provides a great explanation of the financial definition of ROI, and the slideshow was entertaining, but I struggle with term [i]ROI[/i] in the sales world and wonder if the term hasn't become overused, obscuring the clarity of the accounting meaning in the process.

[i]ROI[/i] warps decisions because it doesn't consider the two major variables of time and risk. (The ROI equation in the presentation doesn't include them). But are C-Suite executives making capital investment decisions on ROI alone? What about non-capital investment decisions? Could they? [i]Should[/i] they? These aren't simply hypothetical questions. Salespeople need to know because an ROI-based business case could--and does--provide an incomplete picture for decision makers.

Because of the often-long time to benefit for many IT, operations, marketing, CRM and social media initiatives, time and risk must be brought into the calculus. Even "return" and "investment" have widely varying interpretations among CFO's.

For social media, the overarching question on any CFO's mind is (or should be) "how will this initiative impact future value?" To our collective frustration, many fall into the trap of considering projects strictly on the merits of the current period impact. I will write more about this in a blog I'll post next week.