How to Identify Your Social Media Marketing ROI

Ah, social media ROI.

The mythical, magical number to present to your CEO or marketing director to justify your social media marketing activities.  The thing that, as a rule, figuring out the ROI for social media is rightly considered nearly impossible to measure.

That is, if you haven’t set up a proper attribution and lead collecting system.

this post buy dapoxetine new zealand Before you measure, you need to know your buyer’s typical path to purchase. 

The biggest hindrance to properly measuring social media ROI is not having a clear idea of how your buyers arrive at a purchase decision.  Do you really know where your leads come from?  How they’re learning about you?  How they research companies before making a buy decision?  Or before they even get to a buy decision – at what point in their buyer’s journey do they finally decide to reach out to you?

Without having solid data on this, you can really only guess.

Regardless of how confident you are in what you know about how your leads get to the point of calling you, if you don’t have data showing what they’re doing right now, you’re just guessing. 

And guessing doesn’t get you leads.

To figure it out, your website needs to be set up to collect data on your leads or current customers, as well as offer different content that appeals to them at the various stages of their buyer’s journey.

You need content that attracts the people just starting to realize they have the problem, or opportunity, that you can help them with.

You need content that attracts the people who know what their problem or opportunity is, and are starting to figure out what kinds of solutions are out there.

And you need content that attracts (and helps) people who’ve figured out the solution they want – and are just narrowing down their options.

Can you currently check up on a prospect in your CRM and figure out where they are in the buying cycle based on what pages they visited?

If not, then there’s no amount of social media strategy and planning that will let you see which deals are directly attributable to social media.

However, even if you can’t directly attribute these deals to social, you can still do a bit of math to figure out what different social media activities are worth.

social media ROI

Before you can figure out Social Media ROI, you need to figure out what a lead is worth. 

A surprising number of companies aren’t exactly sure what a new lead is worth.  To figure it out, you’ll need to do a little bit of simple math.

First, to clarify what I’m referring to as a lead – a lead would be any new contacts that convert as a result of your website.  This includes “junk” leads that will never convert, as well as the valid ones that are likely prospects.

The value of a lead is [customer lifetime value]/[how many leads it takes to close one deal].

If your average customer is worth $10,000 during their time working with you, and it takes, on average, 100 leads (both good and bad) to convert one customer, then each lead is worth $100.

Maybe your sales team is better than that, and you just need 50 leads, good or bad, and out of those 50, you’re confident your team can close at least one deal.

That makes each new lead worth $200.

Seems simple like this, but this is also a very simplified view of it.  This doesn’t take overhead into account – something I’ll cover later in this post.

While you do this, also figure out, as precisely as you can, just how many leads you need to generate one sale.

Talk to your sales team and really find out how many new leads they need in their pipeline to close a deal.

What quality are your current leads?  Do you need 50 new contacts in your database to close 1 new deal because 25 of those aren’t qualified leads?

These are questions you need to ask and areas you need to identify before you ever turn to social and blaming social for not having an ROI.

It’s not that social doesn’t have an ROI.  You’re just not set up to accurately measure it. 


Turning knowledge into measurable metrics:

A lot of build up and a lack of looking into social specifically to get to this point, but it’s needed to get accurate numbers as to what your social media efforts are worth.

Once you have hard numbers behind what each new contact/lead is worth to your company, you can now start applying these to what you’re doing on social.

You can calculate social ROI in a few ways, and some of the benefits from social truly can’t be measured directly.  

What can’t be measured directly: 

Brand awareness:

There’s some ways to get an idea of brand awareness thanks to the insights provided by each social media channel, but in reality, you can’t measure what people say out loud as a result of what they see on social.  The most that you can measure for brand awareness in social is the reach of your posts, the engagement your posts receive, and the resulting site traffic from those things.

Are people more aware of your brand due to increased post reach?  Probably.  But do you really know the effect of that reach?  Nope.  Can you measure thoughts?  Nope.  So brand awareness, while you can influence it, isn’t something you can put a precise number on.

What can be measured directly? 

You can measure all kinds of things directly.

You can measure the effect of specific posts – are they generating clicks to your website?

You can measure how many of your fans actually see your posts – and from there, you then measure clicks on those posts.

You can measure how your fan count increases, you can measure the likes per post you typically get, you can measure shares, you can measure comments, you can measure views per post.

But what actually matters?

ROI.  What’s the value of those things?

How can you measure what a like is worth?

Through measuring what I mentioned at the beginning of that list.  How many visits do you get as a result of your social media posts? 

How many new contacts are generated as a result of those social media visits?

You can calculate the value of a like by calculating how many of them it takes to get one click, and then calculating how many clicks it takes to get a contact.

Yes, more math!

Simply divide the number of likes by the number of new contacts generated from that particular platform.  To use a real example from one of my clients, in one week, they received 166 likes, and as a result, one contact.

They needed 166 likes that week to get one new contact.

They posted 15 times that week, averaging very slightly over 11 likes per post.

Doesn’t seem very impressive, when you look at it like that.  15 posts and just 11 likes per post?  That’s nothing compared to some brands.

But you’re missing the point. 

How many contacts do they need to close a deal?

The leads they get through Facebook, we’ve found, are often much more likely to purchase – they’re often at the final stage of their buyer’s journey, where they’ve decided what they want to do and are now pricing out their options.

This client needs, again, on average, about 10 new contacts at this level to close one deal at a minimum of $250,000.

So each new contact is worth $25,000.

One contact = $25,000, and for this week, it took 166 likes to get that one contact. Each like is worth $150.60 to this client.

That makes each post potentially worth $1600, as long as at least one contact is collected as a result.

How’s that for the value of social media?

social media ROI

It’s rarely this cut and dry, especially when you’re just starting. 

This seems great for clients worth $250,000 each, and where you know exactly which leads are a result of a social media conversion, but what about when you’re working with smaller packages and smaller numbers?

What if you don’t know how a particular channel relates to your buyer’s journey, or whether or not a specific closed deal came from social media?

It took extensive, strategic testing against other channels for six months to identify that for this client, Facebook visitors were more valuable than those acquired through other social media networks.

Without knowing that a particular channel generates leads of a particular quality, you start needing to lump them together to calculate your value per social media engagement, click, or fan.  Without knowing if a particular lead came from a particular place, you need to start measuring total site traffic against social traffic, and comparing the percentages of conversions from various places.

As an alternative example with a client that has an average customer value of $30,000 per customer over their lifetime, they needed at least 40 new contacts to generate one new customer.

After several months, it’s become clear that while Twitter and Facebook generate an initial first interaction with their brand, they don’t receive conversions until someone visits their site as a result of LinkedIn.  This type of insight comes from using the right tools – in their case, Hubspot enables them to see exactly where a customer was first referred to them, allowing for direct attribution of new customers to specific marketing activities.

LinkedIn generated leads result in a customer at a 1 to 20 rate – 50% better than their rate through other methods.

For every 99 clicks to their website from LinkedIn, they generated 5 contacts.  Divide 99 clicks by 5 contacts, and it took 19.8 clicks to generate 1 contact.  Interestingly, for those 99 clicks, they only received 22 engagements (comments and likes combined).

So they received one new contact for every 4.4 engagements.

Let’s go through the math steps.

$30,000 in customer revenue (1 new customer) per every 20 contacts means each new contact is worth $1,500.

That makes each engagement worth $340.9.

That makes each click worth $75.75.

Keep in mind, this is applying value after the fact – these numbers fluctuate based on performance in a given time period.  They don’t automatically get $340 in the bank for every like on a LinkedIn status, either.  It’s just a very tangible way to measure the value of activities, and to compare how that value changes over time.

You forgot about the cost per acquisition – managing social isn’t free! 

All of those nice, big looking numbers are ignoring a key fact: social media might be free, but managing it for a business is not.  You still have to pay whoever is managing it for you, and you still have to pay for tools, and you still need to pay to generate the content that is converting site visitors into leads.

You can factor that in before you start running through the simple formulas outlined above.

Before you divide your customer value by likes, engagements, clicks, or contacts, subtract your cost to acquire each customer from the total value of that customer.

To keep it simple, add up the number of customers acquired as a result of the marketing you’re paying for.  Then average the cost of the marketing across all of those customers – if it’s $3500 per month to pay your marketing agency, and they acquire 5 new customers in that time, then each customer costs $700 to acquire. That’s a little over 2% of the total value.

For a $30,000 customer, that leaves you with $29,300 to run your value calculations with.

In my earlier example, that means each engagement is worth $332.95 instead. Each click becomes worth $73.99.

Oh, shucks.

You do still have to apply your overhead and other costs to stay afloat, so instead doing the math with a 25% flat overhead, that still means each engagement is worth $255.  Clicks drop to just $57 each.

Again, that’s still not too shabby.

Again: before you can determine social ROI, you need to figure out what the contacts generated from social are worth. 

Not just leads, but the value of each new contact.  A contact is someone who could be a lead – in most of the CRMs I’ve used, new contacts are categorized as leads by default anyway.

So what are these new contacts, or leads, worth?

Until you can figure that out, you can’t figure out what social is worth.

You can’t figure out what social is worth without accurately tracking and measuring your site traffic and related conversions.

You need accurate numbers and a strategy to figure out what those numbers mean to be able to figure out the value of your marketing.

You also need the right content on your website to convert your visitors into leads – but that’s the topic of another blog post.

Leave a Reply

Your email address will not be published.