Catching a leprechaun or unicorn is almost impossible. Everyone talks about finding Bigfoot or Nessie (AKA The Loch Ness Monster for you noobs), but no one ever comes home with a catch in the bag.
And you get almost the same reaction from people when you start talking about getting ROI from social media.
Now, I’m not about to start spewing a whole bunch of candy corn and powdered sugar your way in the form of saying something like “the ROI of social media is all about relationships and is more ephemeral and can’t be measured with numbers because it’s more existential than that.”
Social media marketing is about generating leads which lead to revenue and revenue and leads can be tracked, meaning social media efforts can be tracked.
We have more tools at our disposal this day and age than in time in history, which can unfortunately bring about the problem of paradox of choice but since this isn’t a psychology blog, I won’t delve into that.
I want to help you understand why understanding how to get ROI from social media will benefit your Social CRM.
Formula For Success
Everything that comes down to numbers usually has a formula that goes along with it. Social media ROI is no different. You’ll have to have access to your brand’s financial data, but the formula is as follows:
Total Lifetime Value (TLV) – Cost of Customer Acquisition (COCA) divided by the COCA = Social Media ROI
To explain, COCA is all the costs required to bring a customer in the door. To get COCA, add all the marketing expenses, salaries, overheads, outside agency costs, contractor costs and all advertising costs for the time period you’re looking at.
The TLV is the average amount of revenue paid to a company by a customer for the entire lifetime of the relationship. There’s no formula for finding the TLV, you just have to know the average cost of service and length of customer relationship, then just deduce.
Why am I getting all “methy” on you today?
It’s important for marketers to understand the value their strategies bring in and where to focus energies. Also, when connected to the Social CRM, it’s easier to understand the value of personal relationships and understanding those customers when you know their lifetime brand values.
By no means should your Social CRM be used to superimpose dollar signs over the faces of the customers you are bringing in, but everything from Search Engine Optimization to television advertising to trade advertising is being affected by social media and you need to have a system in place to help you understand where your leads are coming from and then understand the value of those leads.
Once in place, a thorough understanding of an ROI formula can allow to to see what percentage of qualified and lifelong leads are coming from social media and in what capacity. You’ll be able to correctly infer what strategies are working the social space by monitoring the incoming data and then next time someone asks you how to properly allocate the marketing budget, your answer will be based on hard numbers and proven results, making your process and knowledge invaluable.
Math It Up
It’s true that math kinda blows most of the time, but if you can get down the process of finding true value in the strategies you use online, your company and your brand will thank you.
A Social CRM can be an important tool in understanding how leads coming into the funnel are cultivated and an understanding of where their value comes from can put your company ahead of the pack.
P.S. If you want a GREAT infographic on how to calculate Total Lifetime Value, check out this post from Kiss Metric.
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