Social media marketing is like having a conversation. You need at least two people, both of whom are listening and talking, in order to have a true conversation. With the rising costs of traditional marketing tactics, social media is a more effective – and often, just plain effective – means for marketing organizations and products/services. Social media requires engagement, which in turn, can lead to a two-way communication loop that is almost impossible to replicate via traditional marketing routes.

Social media is about making connections with people. It is a two-way communication – you must listen and participate in order to make social media tactics work. Unlike traditional marketing, social media is more aligned with public relations. It isn’t necessarily about ROI. It’s about engaging with your target audience and building a stronger relationship.

A study by Awareness, Inc. reports that 69% of businesses allow staff to use social media at work. Seventy-five percent (75%) of employees already use some social networking site. Video (48%), social networking (46%) and blogs (45%) are the most popular social media tools in business. Research indicates that most companies invest 2-10% of their overall marketing budget towards social media or “innovation funds”; approximately 45% of B2B’s are cutting print dollars while 48.5% are increasing online spending. It’s estimated that by 2013, web 2.0 will be a $4.6 billion industry.

Since social media is relatively new to the world of business analytics, determining a dollar amount to account for your ROI can be difficult with social media. Many people are just becoming familiar with social media; they may or may not understand the purpose of an RSS feed or know how to become a fan of your Facebook page. With social media, the ROI is based more in value than monetary terms. That’s not to say that you should abandon ROI. Continue to use tools such as Google Analytics and FeedBurner to measure visitors, click throughs and other “web” metrics. These provide a basis that most managers/executives understand as well as one that you can build upon as you introduce the value of social media.

If social media is measured in terms of value, what makes it valuable? According to Lewis Green, “it is smart to also measure Value through intangible benefits such as customer experiences, customer loyalty, and word of mouth to justify any expense. ROI is an important metric, but it needs to be balanced with a rigorous analysis of all the value factors.” Social media is about making it easier for customers to get and share information. As a business, the easier it is for a customer to tell someone else about your company, the more likely they are to actually do it. It’s the difference between returning to a blog day-after-day and hoping for an update versus subscribing to the blog’s RSS feed and instantly knowing if an update has been made. Social media is about virality. The more people talking about your company, the more word-of-mouth publicity (FREE!) you can generate.

The Social Media Statistics website shows that “94% of executives report that they are using Web 2.0 technologies to boost their internal communications.” Companies are investing percentages of their overall marketing budget into social media to try innovate their campaigns…with or without an guaranteed ROI. By establishing yourself in a very specific area, you can reach that upper echelon that may or may not have received your traditional marketing promotions. For many young managers, networking online is more effective and efficient than a day playing golf or attending another business lunch. You get to know your business associates and customers on a more personal level. Over time a relationship will develop, and you’re more likely to be seen as a trusted partner than someone out to make a dollar.

Generating a buzz around your company is not always a positive experience. Say you have a “Customer Review” section under your products. What if someone had a bad experience and decides to write a nasty review? That’s okay. People are going to talk about bad experiences and products. The Internet provides a much larger stage for these complaints. By offering customers a place to vent their frustrations with your company and products, you gain more control over the situation. Deleting all negative comments leads to suspicion on the part of the customer. Leaving the comment and making the appropriate response not only engages you in a conversation with your target audience, but it also shows that audience that you’re willing to listen and make changes based on their feedback. You can’t put a price on credibility or ethics.