How to generate ROI through Social Media platforms?

Hi Jayaraj,

I already answered the same in another section - question started by Melory. I helped various concerns using the simple social media - ROI strategy and I shared the same in this section. 

Like  any  business  endeavor,  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 three stages. 

LAUNCH ------------------ MANAGEMENT ----------------- OPTIMIZATION

Stage1: The Launch 

At this stage,100% of your focus is on setting up accounts on the FIVE Social Packs: Facebook, Twitter, Google+, LinkedIn and YouTube.

While there are a number of other popular social networking sites, the5 are considered to be the critically important ones. You simply can’t afford not to have presence on all5 platforms. 

The Launch stage is more of executional with the primary goal of getting started. Here are the details of this stage: 

Approach:  Executional

Objectives:   Social Media Presence

Focus:     Short-Term

Results:  Negligible

At this point, you won’t be able to expect any significant impact or derive results.

Stage2: Management

At this stage, about60% of your company’s efforts will be focused on developing the5 social media sites. About10% of the focus is directed towards the creative and brand offer and20% 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. 

Approach:  Tactical

Objectives:   Customer Engagement

Focus:     Mid-Term

Results:  Increase in Traffic

Stage3: Optimization

During the Optimization stage,25% of the focus is on gaining more leverage on all5 social media  platforms,  and  30%  will  be  distributed  to  creative  and  brand  offer development,  as well as the quantitative and qualitative metrics. The other25% of the focus will be directed to improving the conversion rate and the optimization of campaigns. The remaining20% will be used to measure success of the campaign which will be the basis of your ROI. 

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. 

For example: 

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 generate1,000 new customers every year, then you definitely have a clear winner in your hands.

I hope my answer would help you in understanding the stages of social media ROI.

Your comments are most welcome.

Thanks and Regards

Feroz Khan Saleem