My friend Michael McClure recently asked a large list of real estate industry thinkers to talk about return on investment in social media for real estate. The videos are a great survey of the variety of thinking out there. The videos are from brokers, agents, consultants, coaches and trainers. It’s a fabulous resource and I recommend everyone check it out. He’s releasing one each day all month long.
About six months ago I wrote about return on investment (ROI) and innovation. Often, the people in an organization who are obsessed with ROI are not likely to be the ones pushing to try new technologies. That column lays out a method to turn those concerned with ROI into allies of innovation.
Hopefully some of you took on some of those ideas and started playing with new technologies. If so, you’re probably fluent enough in those new technologies to begin getting more serious about ROI for your time. If social media was part of what you were playing with, this column should help you map out the ROI.
ROI is a ratio
The fundamental thing to remember about ROI is that it’s a ratio. It’s the amount of return you get per unit of investment. If you get more return than investment, it’s good. If you get less return than investment, it’s bad. That’s pretty straightforward.
But there is a third state: when the investment is zero. As we all learned in grade school, you can’t divide by zero. If you’re in a situation where this is relevant to you then I encourage you to reread my previous column.
Investment in social media
One of the common selling points of why people should participate in social media goes something like this: "Social media is great because it’s free!" (Which is, itself, a hollow echo of the old "SEO is great because it’s free!").
The "free" aspect of social media is false. It’s false because social media takes time. And your time is precious — you can’t manufacture more of it.
It’s true that many of the tools and networks utilized in social media don’t cost you money or are very low-cost. But that doesn’t mean it’s free. You make an investment in social media in the following ways:
- Your time learning the tools;
- Your time creating content for social media (even if it is just a few words);
- Your time thinking about how to use social media;
- Your time consuming other people’s output via social media;
- Tool costs.
This isn’t free, and the time costs can be considerable depending on your discipline.
Social media return No. 1: sales
In some cases you will be able to track actual business coming in the door from social media efforts. Someone was looking for a house to buy or sell and found you via a Facebook page, your blog, your comment on someone else’s blog, your Twitter profile or something like that.
The instances of this occurring are, in my experience, rare. They aren’t unheard of (probably because every time it happens someone writes a blog post about how much ROI they get from their social media). But they are rare.
People looking to buy or find something specific do not yet commonly throw their query to social media and hope for a good response. And when they do throw their query to social media, they are commonly asking their friends and people they already know.
This "people they already know" category is where I’ve seen the most success for real estate practitioners in using social media to get sales as their return on investment. Some are using their Facebook pages to, in effect, augment or replace their "past client outreach" efforts.
Again, this isn’t to say that people aren’t making sales to new people because of something they did in social media. Just that it’s rare. And if the return you’re after is sales, focusing on past clients is probably going to yield greater results.
When it happens, this kind of return is great. It results in the flow of tangible resources into your organization.
Social media return No. 2: Ideas
One of the things that make social media fascinating to those who use it is the constant flow of thoughts, ideas and practices. Sharing this sort of thing is an extremely human thing to do. We love to chat and share thoughts.
Some of those ideas that are flitting back and forth across the social networks are genuinely valuable to your business. They may be "best practices" that you might want to try and test. They may be new concepts or ways of viewing the market or business.
The challenge here is that determining the value of ideas is far more challenging than calculating the value of a sale. But if an organization is going to participate in social media, someone needs to quantify the value of ideas.
If your organization isn’t a learning organization, meaning there is no value placed on learning new things or there is no expectation of continuous improvement, then the return of ideas won’t have much value. But everyone else should probably take a few minutes to come up with a way to value ideas.
It may be the responsibility of the social media users to come up with the first draft of what the value of ideas is to the organization. It’s unlikely the financially minded ROI obsessives will do this on their own — but they’re likely to want to get involved if you come up with a first draft.
When your social media efforts result in new ideas, this is great. It results in the flow of intangible inspiration and increased capabilities for your organization.
Social media return No. 3: Understanding
If you’re using social media to the maximum potential, you’re spending a lot of time listening. You might be actively monitoring the special hashtag people use when they have a question. You might be using a bunch of fancy analytics stuff to figure out what things people are talking about and care about.
Regardless of how you’re doing it, you’re listening. And listening, as we all learned in grade school, is the first step to understanding. Who you listen to — or, for locally focused organizations, where you listen — will have a big impact on what kind of return your listening will yield.
If you spend your time listening to the problems of other agents and being helpful, your return may result in a greater understanding of challenges in the marketplace.
If you spend your time listening to the problems and questions of people looking to buy or sell property, you may gain a greater understanding of the psychology and needs of your prospects.
Like ideas, understanding is a little mushy to be using in an ROI ratio. But if you’re doing social media at this level, you should also be prepared to figure out how your increased understanding adds value to your business.
Part of what makes figuring out the value of understanding is that understanding, on its own, is just something in your head. What ends up generating value is the action you take based on that understanding. There’s not much value in understanding that a cloudy sky means rain unless you decide to carry an umbrella, for example.
When your social media efforts result in understanding, this is great. It results in the flow of intangible insights and amplification of new and existing business opportunities.