Today, some of the largest brands worldwide are using social networking platforms to become part of the conversation both on and offline, interacting with a massive community of users. For this reason marketing types are interested in defining the ROI
[This is for the, “If you can’t measure it …”, school of engineers as executives. – Doug]
Google on measuring ROI from Social MediaAverage lifetime value of a typical account x expected new lead close% = LEAD VALUE
Next, calculate whether your social media efforts are paying off. Here’s an easy-to-use method. Choose a consistent time period for each calculation (monthly, quarterly or annual):
- Hours invested in social media activities x average hourly rate = SOCIAL MEDIA COST
- Social media cost ÷ target contribution margin% = BREAKEVEN
- Number of social media leads x lead value = SOCIAL MEDIA GENERATED REVENUE
- Social media generated revenue ÷ breakeven = SOCIAL MEDIA PAYBACK INDICATOR
If your social media payback indicator in step 4 is greater than 1.0, you are on track to experience a positive return on your investment.
Is Facebook the frog in the pond?
Facebook: “In a digital world fueled by social media, the prospect of translating large social networking audiences into solid earnings presents more possibilities than disappointments.”
[Very Zen: “Little onion, life is filled with more possibilities than disappointments.” – Doug]
Twitter states, “We are finding the brands that most effectively embrace these new opportunities are able to drive return-on-investment levels that compete with television in brand building and with search on performance. This combination, along with the scale that is represented, is a new and exciting world for advertisers, and we are just seeing the beginning of the opportunities that will exist.”
[Or is investing in Twitter like investing in FM radio at the dawn of television. – Doug]
Social media with its scale represents another new frontier for PR, advertising and the rest of an expanding marketing mix.