387983098_f0f180a843_mYou do not have to surf the online world for long before running into an article, a tweet, or a Facebook update about ROI (at least if you are surfing in our corners of the online world). If you are new to the business world and/or marketing, these three little letters may seem like the most intimidating combination of letters in the world today. “It can’t be figured any longer!” some articles claim. “ROI is dead,” you see on Twitter. In fact, here is a small collection of articles that we found preaching in a “fire and brimstone” manner about ROI:

CMOs on Social Media: Where’s the ROI? via Forbes

Throw Out the Book on ROI for Inbound Marketing via Technorati

Why Social Media ROI Can’t Be Measured – And Why That’s OK, via MarketingLand

You get the idea. People seem to be having a terribly hard time figuring out ROI, to the point where some have decided it should stand for completely different words (such as Return on Influence or Return on Ignorance) or that ROI should be replaced with another acronym, ROR (Return on Relationships).

It’s not that hard

At its core, ROI is almost frighteningly simple. Indeed, Entrepreneur.com defines ROI in in two sentences: “Return on investment, or ROI, is the most common profitability ratio. There are several ways to determine ROI, but the most frequently used method is to divide net profit by total assets.”

That’s it. Really. You spend money. You want to make more money than you spend.

So what’s the problem?

When social media began dominating some companies’ marketing campaigns, CMOs and other responsible parties started to worry a little. All of the early adopters of social media platforms were preaching that social media is not about sales, it’s about relationships. “Social Media is not like traditional marketing,” you would see over and over again in 2009 and 2010. In fact, you still see that kind of statement quite often in the online world and in marketing publications. “Why continue to send press releases when you can blog and vlog and tweet?”

Because companies were trained early on that they were not supposed to sell their products or services online, calculating ROI became a very tough nut to crack. How do you track money you’re making in a campaign if, on the surface, you are not actually trying to make money?

Then, in 2011, Wine Library entrepreneur and now best-selling author Gary Vaynerchuk put an exclamation mark on the issue. In a keynote address at a conference, Vaynerchuk noted that trying to calculate social media ROI is like “trying to calculate the ROI of your mother.” He reiterated this point on his own website. Now companies were being told that trying to calculate real ROI was like trying to put a monetary value on their mothers. This guy was (and is) well-respected. It’s no wonder so many companies are balking at the ROi issue.

Relationships and ROI are not mutually exclusive

Let us take a burden off your shoulders. You can build relationships and track ROI at the same time, although admittedly tracking ROI in B2C businesses can be a little easier than tracking ROI in the B2B world, which often is based on a longer sales cycle. I often think about Lou Imbriano’s book Winning the Customer. While the book concentrates primarily on what Imbriano learned as part of the marketing team for the New England Patriots, Imbriano also recalls one of his customer service inspirations. The man who owned the neighborhood drugstore is described in the book as being extremely involved in his community. Imbrinao remembers the man always asking how this or that family member was doing. Ultimately, the man was trying to sell things in his store, but people felt more inclined to buy from him because of his relationship with them.

Believe it or not, this same kind of philosophy can be carried into the online world or into any other kind of marketing. Ultimately, people are going to want to invest in companies that offer strong customer support and that make the customers feel secure that they are buying from a solid company. As long as companies are honest about the fact that they are hoping you buy from them some day, there is no reason why relationships and selling can’t exist. In fact, if you ask any salesperson, they will say that building relationships with customers and prospects is one of their most important jobs.

There should not be a need to make ROI and relationship-building seem like they are diametrically opposed. In fact, we’d argue one needs the other in order to exist.

Tracking ROI can still be tricky. As we mentioned last week, it’s not just a matter of learning how people found your company, but now you must also track from different devices and across different browsers. Just because something may be tricky does not mean companies should ignore it or pretend it is not important, however. Tracking return on investment for your marketing efforts is essential and it is not impossible. You can even hang on to those relationships while you work it out.

Image Credit: http://www.flickr.com/photos/edublogger/387983098/ via Creative Commons