Posthumous portrait of Christopher Columbus by Ridolfo Ghirlandaio.

When Christopher Columbus made his maiden voyage in search of a western route to the East Indies there were many similarities between that venture and the pioneers of social media in organizations today.  It’s an unprecedented request; potentially requiring significant funding & resources; a business case with research and data must be developed; and the project must deliver an attractive and measurable ROI!

It took Columbus more then two years to persuade Queen Isabella’s committee.  Central to his case was his estimation of the circumference of the earth and the argument that he could get to the east faster by going west.  There was also the promise of a huge ROI making Spain competitive in the Indies spice trade.

Once approved, Columbus set sail with the blessings of senior management.  Unfortunately Columbus drastically underestimated the earth’s circumference and assumed there was only ocean between Spain and the Indies.  He landed in the Bahamas. He also misinterpreted this data believing he had landed on the East Asian Mainland.  Nevertheless this voyage is remembered for many crucial discoveries and his subsequent travels benefited from improved metrics.

In the world of Web 2.0 the evolution of social media is well beyond any “Pre-Columbian Era”.  We stand on the shoulders of explorers that have gone ahead of us paving the way with ever more user-friendly and commercialized solutions.  The state of social media simply awaits inspired ideas, informed intuition, and strategic vision applied to unique industry needs to be the catalyst for further exploration and innovation.  In the future, today’s tools may seem as antiquated as a Model-T but unlike the advent of commercial auto industry, the roads are already paved for social media.

Yet senior managers I’ve spoken to still seem hesitant.  The economic conditions we currently face are a factor, yet in these economically challenging times the cost effective nature of social media makes more sense than ever!

• There are FREE open source community applications like Vanilla or blogging applications like WordPress.  Even WordPress has widgets that allow you to build a very serviceable community forum at little or no cost.  Applications like Joomla and Durpal offer FREE open source e-commerce with integrated social media components delivering the holy grail of community, content and commerce.

• Leaders like Pluck, Awareness Network offer highly refined solutions that include blogging, wikis, forums, widgets.  Solutions include media integrations such as video, photos, podcasts as well as API’s that allow integration with Twitter, Facebook, SharePoint and more.

• Industry giants like Google are working on the development and adoption of industry standards like Open Social that should increase networking across the social media landscape.

For some companies delivering content and a community seem very natural but when Fiskar launched their Fiskateers site a few years ago the social media connection wasn’t so obvious, who would want to write or read about scissors?  Nevertheless they found a hook in Scrapbooking and a mission in driving the growth of their specialty retail sales and delivered 3X sales growth.

Social networking and forums create a tremendous opportunities for raising corporate visibility and consumer engagement. Leveraging the full power of the Internet will cost effectively expose your organization to a dramatically larger audience.  By taking a holistic approach that engages your customer where they’re active online and facilitating networking, content and community, you open a dialogue that will fundamentally change your business.

Ultimately senior management want a clear ROI.  “We’ve got limited resources, will social media deliver?  Can you prove it?”  Don’t throw all your eggs in one basket but there are too many examples of success and measurable ROI to ignore the opportunity.

KraftFirstTaste.com Unique Visitors courtesy Compete.com

Kraft’s new KraftFirstTaste.com community has already attracted 1.2 million visitors in Q4 of ‘08

Scotts Miracle Grow experienced an 18% YOY growth in traffic from their February ’08 relaunch converting their forums to a community.

Doing the math, Scotts added 450,000 new visits to the site. (Calculation: 450K / 5 visits per visitor x 3% conversion rate x $50 average order = $135K in incremental retail sales – implementation costs = ROI).  A multivariate linear regression model can show the connection between key variables like visitors and sales.  It’s a safe bet that Scotts will break even in less then a year!

These CPG companies face the most difficult measurement challenges because they aren’t selling anything on their sites.  However they are effectively positioning their products contextually within the community dialogue and offering links within their own site to product info to move the customer down the sales funnel.  Nevertheless the most compelling ROI models will close the loop between investment and real sales.

KraftFirstTaste.com has closed that loop.  Not only do they gather valuable attitudinal and Net Promoter type data (a prize in itself) at sign up, the community seamlessly integrates custom coupons for in store redemption.  Coupon redemption is the tie back to a indisputable ROI.

When an e-commerce site adds content and community it is critical to build a contextual advertising strategy and measure clicks and conversion.  By using contextual text and/or banner advertising in community content and sidebars (properly tagging the links), you’ll be able to use your analytics package to track what percentage of community visitors have moved down your sales funnel to became customers.  Transactions close the loop between the community traffic and sales, yielding a measurable ROI.

It’s a good practice to compare the ROI of media channels to understand their relative performance. But a recent Webinar by Hubspot, Mike Volpe shared a spreadsheet modeling a dramatic contrast between investments in PPC vs. SEO optimized Social Media.   To satisfy my own curiosity I creating a variation to see if diminishing returns or conversion rates changed his results.  Consistent with the Hubspot model, long-term investment in content is clearly more cost effective.  PPC investments only provides a one-time benefit but the shelf life of content can easily be a year or more.  (Beware – Plan to optimize your social media content for SEO.  Without SEO optimized you will easily lose 50% of the traffic you could be generating.)

One final thought, there is one lesson from Columbus that is lost on those who are risk averse.  Regardless of how “buttoned-up” your execution is, you WILL undoubtedly have extremely valuable and unanticipated discoveries that will profoundly enhance your customer relationships, create competitive advantages, and change your world.  Deliver the ROI, but keep your eyes open for the game-changers.  Columbus did!