“If I spend £100,000 on setting up a customer community online, what will I get back?”

Sound familiar? These days, every marketing pound invested has to produce a demonstrable return, and often social media is the hardest return to prove. If you’ve set up a Facebook page and it doesn’t seem to be giving you anything back, you’re not alone. Some of the biggest brands in the world are struggling with how to make social media work.

Social media has fundamentally changed how brands interact with customers. But the mistake many companies are making is to ‘do’ social media without really understanding why. Setting up a Facebook page and a Twitter stream just to tick a box, without really understanding why, isn’t going to work for you. If you don’t understand why you’re doing it, you can bet your customers won’t, either.

The key is to have a clear goal from the outset. All too often, social media is tacked on to the marketing programme under the rather vague objective of ‘getting us more exposure’. But without proper thought as to what kind of exposure, and to whom, and to achieve what, it could all be a waste of time.

Forrester divides social media ROI into four categories: financial metrics; digital metrics; brand metrics; and risk management. What important about this is that brands use more than just financial metrics to measure their marketing activities, and social media should be treated in the same way.

The social marketing analytics report, a collaboration between industry leaders Altimeter and Web Analytics Demystified, suggests measuring key performance indicators against four social media objectives: fostering dialogue (KPIs are to measure share of voice, audience engagement and conversation reach); promoting advocacy (measure active advocates, advocate influence, and advocacy impact); facilitate support (measure resolution rate, resolution time and satisfaction score); and spurring innovation (measure topic trends, sentiment ratio and idea impact). Few of these are measurable in hard financial terms, but are closely aligned to the measurement criteria of other marketing disciplines.

But ultimately, what you measure depends on what you’re trying to achieve. Your objectives for social media activity might be around research and development – listening to what your customers want from you, or getting them involved in the R&D process. The ROI on this might be avoiding an expensive error, or seeding early sales.  Or you might be using social media as part of your customer service strategy, in which case you measure the level of engagement, response time, or freed resource for your existing customer service team. You might use social media channels to sell – as Dell has done most notably.

Or, you might use social media channels to monitor what’s being said about your brand. Conversations that used to happen in the pub now happen online as well – and the beauty of this is that, if you know where to look (and what to listen to), you can get a real feel for what customers think about you. Monitoring your reputation on social media (for example with our new Social Media Reputation service) provides vital information on how a brand is perceived by customers; whether action is needed to avoid an issue that could damage a brand; and ultimately, the impact that a campaign is having on a brand’s reputation.

The ROI on that could be the survival of the brand.

Joe Hughes is research and insight manager at social media agency, Yomego