PR 101

It is a question I often get from potential clients. They want to move their company into social media marketing. They know it’s a space their businesses have to occupy. But there’s that nagging question: “how do I measure return on investment if I use social media.”

Well, I give you a hint. It all has to with Word of Mouth or WOM. If content is king, then WOM is queen.

Since I prefer to work with small and medium-sized companies, the question usually comes from the owner, the chief executive officer, or the chief marketing officer. It is a legitimate question. After all, I am usually presenting plans that can run into the five figures in costs. (I am not a cheap date. But, I am a highly effective one.)

Many of these companies are going to be marketing for the first time in their existence. They have moved beyond the startup phase. To keep growing, they know it’s time to start reaching out to potential customers.

The men and women who started these companies are engineers, lawyers, carpenters, or bakers. So far ROI has been something measurable. They know if they buy X amount of lumber or flour, they will produce Y amount of product. They can usually calculate their ROI after adding in their other production costs.

Marketing is different. There is a product – more customers and hence more profit. But that’s not something stamped out in a factory. These entrepreneurs are now dealing with something more ethereal – a decision by a potential customer to buy their product. These company owners would like a guarantee that what they invest will provide returns. It is a bet that makes them nervous.

It is true there is a certain amount of gambling in every company. You never really know – even after you do your primary and secondary research – whether the product is going to sell. It is only after the doors are open and hopefully the customers come in that you know your efforts were successful.

That’s the first measure of marketing – the first ROI check off. Are customers finding your business and checking it out?

Keeping those customers coming through the door is where people such as myself enter the picture. It is our job to show customers where the door is and give them reasons to through.

A caveat: I always tell potential clients; marketing doesn’t sell the product. That’s up to the company’s employees. Now, if the job is done right, the potential customer will be strongly leaning toward buying your product or service. I will everything I can to make the customer contact’s job as easy as possible. I will plow the ground and plant the seed. You just have to make it grow.

How is that done? As I said in the beginning – word of mouth or WOM. At its simplest level, word of mouth is simply Jane telling John to buy a particular product or use a certain service because she had a positive experience. What social media has done is amplify Jane’s voice so she can hundreds of people about her positive experience.

WOM is the most powerful way to market a product. According to Forrester Research, there are currently an estimated 500 billion WOM annual web impressions. Several studies have found that WOM is the most trusted form of marketing.

Research has shown that for every $1 spent on creating brand advocates there is a $10 return in positive WOM and sales. The Harvard Business Review found a ratio of 1-to-12 ROI for positive WOM. That was twice the return for any other marketing method.

That’s why social media is so effective. It generates that positive WOM and sales through third party endorsements and conversations. It does that with blogs, Twitter feeds, Facebook pages, Linkedin discussion, videos and other social media applications.

So the ROI is there. And social media is the way to generate it.