In a previous post, What is The ROI of Social Marketing (Part 1), I discussed why brands should not look only at financial metrics when measuring social marketing ROI. This is a follow-up post detailing what we at HRmarketer spend on social marketing and how we approach the task of measuring our social marketing ROI.
The basic formula for calculating ROI is:
When measuring ROI on social I recommend you factor in the soft benefits I discussed previously. I also believe that you must factor in the opportunity cost of NOT being on social; the longer your business waits to incorporate social into its marketing the more behind the marketplace and your competitors you’ll be. And the harder it will be for your business to adapt to the next phase and evolution of social marketing technology (this stuff isn’t going away).
Investment: Our labor investment in social marketing is about $15,000 per year. We manage social internally, and it is not a full-time job. We spend about an hour a day on average managing our social properties. The social marketing workflow software we use for our social marketing, Get it Done! Social, makes this possible, and is free because we own the software.But we’ll assume we are a paying customer at $399 per month for the full suite of tools. So our total investment is about $20,000 a year in social marketing.
Return: Last year we closed at least four deals as a direct result of social marketing (e.g., someone seeing our tweet and requesting a demo). The LTV of those deals will exceed $50,000.
Other Benefits: Social marketing improves our company’s brand awareness, website traffic and email sign-ups; together, these had to account for some of our hundreds of new customers over the last year. I just don’t know how much, so I won’t include them in an ROI estimate. But getting the equivalent exposure, site traffic and conversions that we get from our social marketing would cost me tens of thousands of dollars.
What about the value of the products I’ve discovered from being on social? We learned about Pipedrive as a direct result of social media, and that little discovery saved our company over $3,000 in recurring CRM software subscription fees. And what about the value from of the new relationships we have formed because of social? You get my point.
Conservatively, our ROI is at least 100%. And this doesn’t factor in the opportunity cost if we chose not to be on social. The value of our company’s social properties is not insignificant. It would take years to develop an equivalent network if I started from scratch today.
You may have noticed that I never spoke about social metrics in my ROI calculation. I do think it is valuable to look at social metrics month-to-month such as social activity, likes, favorites, shares, network growth, the number of people clicking on shared links to content and conversions (newsletter, webinar, content, demo registrations).
Examples of Twitter ‘Operational Metrics’: (Operational metrics only tell you if you’re doing social properly, they don’t factor into an ROI calculation).
But these are what I call operational metrics — they are important because they tell you whether or not you are doing social properly. But they are not ROI variables, so don’t try to calculate your brand’s social ROI using operational metrics. That said, if your operational metrics are not rising, you need to revisit your social marketing workflow and/or the people responsible for your social marketing.
A word of caution: if your CEO expects to see a specific ROI for your social marketing you are probably destined to fail because, at least in my opinion, it’s the wrong way to look at social marketing. Although social marketing is still in its infancy in 2016, I know this for sure: Done right, social marketing will (1) increase awareness of your brand, (2) drive more traffic to your content/website, and (3) generate sales discussions, some of which will lead to closed business.
It’s up to you to determine how valuable those are to your business.
Finally, whatever you budget for social, stick with it. According to this survey, almost half of marketers reported that they used social media for two years before they saw an impact on sales. Sorry.
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