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The importance of speaking dollars and sense…

I understand finance is intimidating to some. No one likes to appear less than knowledgeable and possibly you believe the concepts to be dull or dry. I used to think that way myself.

But once you learn to speak the language of business, you’ll quickly see how it brings everything you’re doing to life! There’s absolutely nothing to be afraid of. You can learn this!

Looking at some examples of misinformation we’re regularly being exposed to can shine a light on any darkness that clouds your soul when what you’re experiencing in your business isn’t what you’ve been conditioned to expect. For example, in Lesson One, we looked at a popular and widely distributed salesletter, from a recognizable source, that painted an incorrect picture of your profit margin.

Today we’re going to tackle another language error popping up all over the digital landscape — the misuse of the term return on investment (or ROI) as commonly applied to social media marketing.

The formula for calculating ROI is a very simple one: $ earned – $ spent / $ spent.

Nothing more. Nothing less.

Which means, it’s really only appropriate to use the term ROI when calculating the ratio of how much money you made to how much money you spent to make it.

Most people measuring social media marketing are tracking friends, followers, likes, shares, and comments — none of which are monetary and all of which are rather meaningless vanity metrics. Studies show there is no direct correlation between these measures and your sales revenue. More importantly, it isn’t appropriate to use the financial term, ROI, when talking about results which are non-monetary.

Social media marketing is actually more about creating awareness, platform and community building, and cost-effective promotion of your business than anything else. If you are highly active in social media, you can also develop excellent relationships with others — another excellent outcome of spending time there. Still, there is no direct relationship to sales revenue that’s easily measured.

What I mean is, if 1,000 people know about your Facebook page and have liked it, you’ve definitely generated some awareness for yourself but you haven’t made 1,000 sales because of it. In fact, it’s unlikely you’ll make any sales from your Facebook page or even a Facebook ad if you’ve purchased one. Besides, while you may be working very hard for every one of your likes, others you see on Facebook are simply buying them which is why their numbers are so much higher than yours. (In reality, these numbers are quite meaningless.)

If you’ve been keeping up with what’s happening on Facebook (and you should be if you’re using it in your business), you know that many of those people who liked your page never see all the messages you post there. That’s because Facebook only shows your messages to a select few of them at any given time. And that percentage is ridiculously low. If you want your posts distributed to more of your Facebook community, you must pay them for that.

Similarly, for those who’ve purchased Facebook ads, learning that many of the clickthroughs they are paying for are generated by robots and not people who might be converted into customers has been upsetting. And rightfully so. Proof there’s no free lunch. Not to mention that a Facebook page isn’t really free anyway because it costs you a lot of time to create, maintain and populate it. At most, you might be able to use it to build your list, but again, if that even happens, it happens painfully slowly and adding subscribers is not a monetary outcome. You only make money from your list later on in the marketing cycle, if you have a strategy and plan for monetizing it, and are successful at it.

So sure, it’s easy to jump in and start counting how many Facebook fans and Twitter followers you have. And you could be more advanced and measure retweets and likes for the content you share. But just be clear on one thing, you are not measuring return on investment in social media. You are measuring activities known to not drive traffic to your website or result in sales.

The danger here is it takes a great many years to build a large audience following. Seeing low numbers and no sales is going to be tremendously discouraging for most. If you believe what you’ve been reading, i.e., that you should be measuring your ROI on social media, you might easily (and wrongfully) conclude you are wasting your time.

That may or may not be true.

The truth is participating in social media isn’t going to save your business nor is it going to make it successful. Regardless of how effectively you are using this marketing channel. We’ll talk about that another time. For now, all I want you to understand is the only time ROI applies is when your outcome involves dollars earned and dollars spent.

Make sense?

More next time. Until then, remember to LOVE YOUR WORK, whatever it may be.

PS Did this post speak to you? If so, please feel free to share it with your own communities, friends and followers. Thanks for sharing the love! ♥♥♥