Like any business endeavour, you naturally want to have a fair idea on the return of your investment in social media and not simply jump right in just because it’s the popular thing. The ROI cycle of social media can be separated into 3 stages.
Stage 1: The Launch
At this stage, 100% of your focus is on setting up accounts on the 5 Social Packs: Join our community on Facebook, Twitter, Google+, LinkedIn and YouTube. While there are a number of other popular social networking sites, the 5 are considered to be the critically important ones. You simply can’t afford to have presence on all 5 platforms.
The Launch stage is more of execution with the primary goal of getting started. Here are the details of this stage:
Approach: Executional Objectives: Social Media Presence Focus: Short-Term
At this point, you won’t be able to expect any significant impact or derive results.
Stage 2: Management
At this stage, about 60% of your company’s efforts will be focused on developing the 5 social media sites. About 10% of the focus is directed towards the creative and brand offer and 20% on setting up quantitative metrics like inbound links, traffic, Facebook “likes”, etc. The remaining 10% will be focused on qualitative metrics such as survey results, pools and studying brand sentiment.
Objectives: Customer Engagement Focus: Mid-Term
Results: Increase in Traffic
Stage 3: Optimization
During the Optimization stage, 25% of the focus is on gaining more leverage on all 5 social media platforms, and 30% will be distributed to creative and brand offer development, as well as the quantitative and qualitative metrics. The other 25% of the focus will be directed to improving the conversion rate and the optimization of campaigns. The remaining 20% will be used to measure success of the campaign which will be the basis of your ROI.
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Approach: Strategic Objectives: Social Media ROI Focus: Long-Term
Results: Increase in Revenue
Despite what many social experts claim that ROI of social media cannot be measured, there is actually a way to measure it. This process will require a better understanding of your customer lifetime value (CLV) or the average revenue generated by a customer during their entire engagement period with your products and services. This figure will be used to compare the results that have been generated on your campaign in social media.
If a typical customer spends about $10 every month on a particular product and has been a loyal patron of a certain brand for about 3 years, this equates to the average customer lifetime value of $360.00.
Most companies are willing to spend about 10% of their CLV for the acquisition of new customers. This means, they are willing to spend $36 to acquire a new customer who is expected to spend $360 all throughout her engagement with the brand.
So if your social media efforts will cost you $36, 000 for one full year, and your campaign will be able to generate 1, 000 new customers every year, then you definitely have a clear winner in your hands.