Return on Investment with Social Media

GLOBAL, NOVEMBER 2010 – With followers, Facebook friends, and likes, it’s easy to overlook the business basics of social media. For businesses, it’s the worth to each click that counts. But how to calculate the ROI to social media? Jamie Turner breaks it down to us in an article for Mashable.

Social Media metrics can be divided into three categories: Quantitative Metrics, Qualitative Metrics, and the ROI Metrics. Quantitative metric is based on any data-oriented metric that include unique visits, page views, length of visits, among others. Qualitative Metrics measure the emotional component, assessing how people react and respond to your product. This is measured by third-party providers.

All roads lead back to ROI Metrics, which tracks how many people convert from prospect to client.

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Then enter the math: the CLV and the Allowable Cost Per Sale. The Customer Lifetime measures the amount of revenue a customer brings to a company over a period of time, while the Allowable Cost Per Sale is the decision on how much one would spend to acquire a customer. The Allowable Cost Per Sale is usually 10% of the CLV. These are factors that determine how much invests in attracting and keeping customers.

As always it’s all about the basics, and putting more value into one’s clicks. Harder working social media strategies are not optional. Then again, listening to Shane Gibson’s Social Media ROI podcast from 2009, the math doesn’t always add up.

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