When talking to clients about social media and its effects on increasing sales of their products and increasing traffic to their site, the most asked, common question is: “That’s great – but what will social media do for us? Show me the money!” – and their point is rightfully valid. For those who still don’t quite understand the long-term effects that social media has on their company, it is rather difficult for them to understand the true purpose for setting aside a budget directly for social media, as they don’t see the monetary effects and gains that social media has on their organization. Even for those few who do understand the purpose for utilizing social media tools,  tracking monetary gains and effectiveness of social media it is still not an easy concept to grasp.

If you found yourself questioning the immediate monetary effects social media efforts have on your company’s growth after reading the above and you too exclaimed in your head “Show me the money!” – I highly suggest you check out Olivier Blanchard‘s clever and entertaining presentation on the Basics of Social Media ROI. In short, Blanchard notes an important point to remember about social media: “Social Media is not free: it takes people, it takes technology and it takes time – all of which are limited resources.” Read on.

We already know that social media takes people (often a whole department) to manage a successful community. We also know there are a number of resources available for ways to reach out to a community using social media tools – Facebook, Twitter, YouTube – the list goes on and on. And then there’s the major factor of time. Most people think and practice the popular phrase “time is money.” Yes, time is definitely money, but it is important to remember that  most social media campaigns take some time to develop and spread virally. Managers in corporations often feel the need to “pass” on social media campaigns and jump the gun too soon because they don’t see immediate gains or increase in product sales. They think that the campaigns must obviously not be working. This way of thinking goes against every aspect of social media marketing. Embarrassingly enough – 84% of respondents in a survey taken said that they don’t currently measure the ROI of their social media programs (survey taken in August 2009 – noted in a Mashable article). How can one be so certain that social media doesn’t bring in a return on investment if they don’t even measure it?

As Blanchard notes in his presentation, there are many types of non-financial impacts that when glancing from a distance, one can’t see the immediate effects of in terms of money. Types of non-financial impacts include website visitors, impressions and blog comments, customer complaints, positive press & negative press, Facebook friends and Twitter followers, social mention and retweets, positive WOM and negative WOM, employment applications and coupons distributed. All of these impacts have a direct impact on the financial gains of the company – but they do take time to occur and is not something that can be rushed.

According to Christina Warren in her post HOW TO: Measure Social Media ROI, “finding trends and tracking them back to their point of origin is the key to measuring ROI.” It is important to know where you started before you know where you are headed in social media. One cannot state that social media tools aren’t “working” for their company if they didn’t even know whether they had a community before they started. It is important to make clearly defined goals and then track progress along the way. There are numerous helpful tools used to track quantitative results and analytics including Google Analytics, PostRank Analytics and eWebAnalytics (check out more ways to track website traffic here). It is not enough to measure solely quantitative results, as qualitative results are also important measurements of tracking success of social media efforts. Before tracking these, it is crucial to determine what it is you want to measure – is it conversations about your products? If relationships were built with your customers? If customers are happy with your product or are they providing complaints? All of this is important to track but one must first understand their organization’s social media objectives in order to know what results should be expected.

According to Aaron Uhrmacher from Mashable,”statistic-based metrics seems to be the primary way communicators feel they can secure approval and budget for these programs from their management teams” in his post How to Measure Social Media ROI for Business. Measuring solely statistics can be problematic,  as social media ROI is based on several factors that lead to an organization’s sales’ bottom line (as mentioned above). Aside from the numerous social networking sites available, there are also insights that come from an organization’s company blog, their participation in other blogging sites, their PR in the blogosphere and any other viral way of virtually mentioning the company’s brand — and all of these  come into play when measuring the effectiveness of social media. This is why it is almost dangerous to assume that immediate returns will show up from your investment in social media.

Measuring ROI is key to assessing the true impact your social media efforts have on your business and your gross margin. However, measuring it is one thing – knowing what to do with those results in another story. Look for specific trends and user behaviors before and after posting status updates, blog posts and promoting discounts and coupons for the holiday season. Every move counts and its success (or lack thereof) can be tracked with numerous sites and analytical devices. Remember the time factor also. Don’t assume your social media efforts are worthless if you’ve only spent 2 weeks promoting a new product. Large-scale marketing campaigns in social media can take up to 6 months for them to come into full-effect and start driving profit to the company’s bottom line. So take a look at your current community and track what has been done and make attainable goals of what needs to get done in order to grow. Continue to engage with your community, track progress along the way and have patience – as this process will take some time – but is definitely worth the wait.

Dorine Sinigaglia is the Account & Content Manager at Blonde 2.0.

(Flickr image courtesy of Arisey)