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Social Media & The Concept Of ROI

Posted by on Jan 15, 2012
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I belong to a consultant’s group where monthly we have a presentation on something that most consultant’s probably need to know for their business.

A few months ago I was the presenter, and I gave a shortened presentation of the one I did back in 2010 on social media, which was a 5 hour presentation. I had to strip it down to 50 minutes, which wasn’t all that hard since I concentrated only on certain things for these folks, most of whom are older than me.

It’s that “older than me” part that makes it interesting because I always get the same question from the same guy: “Have you gotten any business from it?” When I say I have the next question is “what’s your ROI?”

That, for the uninitiated, stands for “return on investment”, and for many businesses it’s a critical question that has to be addressed. For instance, if you spent $25,000 on a print campaign that involved paying someone to create flyers, going to the printers, mailing everything out, and it resulted in an overall loss or a profit of less than $5,000, you’d probably have to say that your ROI was pretty bad.

When it comes to social media, evaluating ROI is much different. If you’re going to base everything on costs, they could end up being minimal or costly; it’s up to you. For instance, you could start a campaign of Twitter posts and if you do it yourself there is no cost, assuming you’ve already got everything else in place if you’re sending traffic somewhere. The same goes for Facebook, LinkedIn, Google+, or anywhere else, even if you own a brick and mortar business.

Or is it cost free? See, with social media, even if you do it all yourself there’s an inherent cost; it’s just how you decide to evaluate it. The cost is in time and what your time is worth.

Let’s look at this in two ways. One, do you count the time if it’s outside of 40 hours, which is the American standard for working hours? Some might, since many of us (yeah, even me) work more than 40 hours if we own our own businesses. Some might not if they stick with traditional times and consider anything else as free time.

For someone like me, based on which business I’m doing at the time, I get paid anywhere between $50 and $250 an hour; yeah, I’m like that. Anyway, this means that if I’m putting in a 10-hour day and 2 hours of that happens to be writing my blog posts, which you might not think about like this but at least 4 of them I consider as business related in some fashion, then it’s costing anywhere from $12.50 to $62.50 each time I write a blog post (I average 10 to 15 minutes per post most of the time). If we look at one of my business blogs, where I try to write a post every 3 days, that averages out to around 120 posts a year, and if I use the lower figure it means it costs me about $1,500 a year of an investment towards writing that blog; that’s not counting responding to comments (I don’t have a lot yet so y’all need to go check it out).

Since posting a link to these social media platforms takes almost no time whatsoever, this pretty much means that I need to generate at least $1,500 a year from that business to break even. Of course I just started that blog in August, but already I’ve made that much, though it wasn’t from blogging, but it doesn’t matter. The thing is that as a marketing campaign, one isn’t always sure where they’re getting their business from, but even if it was related to the blog I could still say that, based on time, I’ve about tripled my initial investment.

Here comes the next stage though. What if you want to pay someone else to handle certain social media aspects of your business? For instance, say you hired someone like me to write your blog posts for you. I’m not saying this is necessarily my fee, but say it costs you $400 a month for a certain number of blog posts, and those posts automatically go out to Twitter, LinkedIn and Facebook (although I know Facebook just shut down one program and I’m not sure if there are others still working right now)? The approximate cost to your business is $4,800 a year; do you have the kind of business to overcome that amount of outlay? Is there the possibility that your business will generate that kind of money online, or will it come from offline sources?

That’s just it; you don’t know. Do you consider it offline if someone found you on Google and called you up, as opposed to contacting you via email? I don’t, and we all know that more content on one’s site helps them gain more prominence on the search engines. If you’re someone like a Marcus Sheridan, whose business is swimming pools, how many sales would he have to make because someone called him because they found him on Google to have made back all of his money if he paid someone to write his posts (which he doesn’t)? For that matter what’s his ROI now from blogging and obtaining business? I’m thinking it’s probably pretty good.

Every person has to evaluate for themselves whether they think they’re getting out of social media what they’re putting into it. However, you can’t make an evaluation if you don’t try. So, what are you waiting for?
 

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17 Comments »

Tracking social media ROI is as difficult as ROI for printed media. In addition to free promotion there are paid ways like Facebook Ads or Google Adwords for videos, but actually it can be fairly easy if you use dedicated coupon code or create special link which is shared only on social networks.

Mitch Mitchell Reply:

Carl, those things will track traffic, but they still don’t track ROI all that well. For instance, someone clicks on your ad and doesn’t buy that day but saves the link and buys 2 days later; no way to track that. And of course it’s hard tracking man hours more specifically than how I laid it out here. Still, people can get close with a down and dirty figure here and there.

Carl Reply:

It isn’t easy, that’s why I’ve mentioned special tracking links and dedicated coupon codes. Example, similar to affiliate link which is shared only on Facebook for example or special discount code which is shared only on Twitter for example “Twit30off”. Other than paid ads, investment on social media is 0%, even there isn’t much conversion ROI is very high in any case.

January 15th, 2012 | 8:45 PM

If you use social media platforms with targetted calls to action, like a Faecbook Fan Page with a mail optin box then you can measure it. Time spent, money spent on an advert will make it easy to work out results.

Otherwise if you are just being social you are trying to make yourself look interesting enough for people to want to listen to you – Agreed that aspect is the hard bit.
Peter Davies recently posted…Setting Your New Years ResolutionMy Profile

Mitch Mitchell Reply:

Just asking Peter, but even then aren’t you only seeing if people respond, not actual sales campaigns and the like? I’m thinking that maybe if you offer only one thing in each place then any sales you make possibly you can measure it, but otherwise it’s kind of a crapshoot.

Peter Davies Reply:

It depends what your aim is – you have to look at the whole process. On a general note I believe that anyone who builds a campaign if they pay for it without using it to build a list first is in most cases going to get severely burnt.

People rarely buy from a first ad – banners dont convert well anyway and from what I understand people have to see an ad 7 times before they buy.

So the email marketing helps with the trust relationship thing then with an email list measurements come from % of opens and out of that % of clicks on follow up emails – you should see a sort of pattern develop, most IM marketers know roughly what % of opens they can expect at what times of the week.

With this info you should be able to come up with a ROI figure from email marketing campaigns. Many health CPA products convert at around 10% of CTR providing they are targetted, so this should give you something to work with.

(1 email to a 1000 list, 200 opens, 100 CTR and 10 conversions is something a half decent marketer should be able to achieve in sought after niches)

In some niches these volumetrics are mich higher but this convinces me well enough why I don’t do PPC cos unless your processes are mega slick then you stand to get burnt – as I just dont see anything close to this in a click based paid campaign)

Even FB PPC is now getting expensive even for sending prospects to FB pages, its a tricky game which I am not willing to play until I get a pile of spare $$$ to experiment with.
Peter Davies recently posted…Setting Your New Years ResolutionMy Profile

Mitch Mitchell Reply:

Thanks for the extra info Peter. Your explanation of email conversions explains why there’s so much spam, as well as legitimate marketing. PPC is definitely always an iffy proposition, though it can drive traffic if one has enough money to get it done how they’d like. Still, driving traffic isn’t true ROI, which is why I went the way I did. With campaigns on places like Facebook or Twitter, I believe it’s much harder to know what one’s ROI is; actually, I believe the same with blogs and, to a degree, websites.

January 16th, 2012 | 2:09 AM

Good point. I’ve had to shift my efforts as of late for the ROI you mention here. It’s important to remember and to reevaluate every few months.
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Mitch Mitchell Reply:

Southpaw, I don’t even try to track anything. Then again, one has to be making some kind of sales I figure. lol

January 16th, 2012 | 1:02 PM

Very well said. I agree that we need to re-evaluate ourselves especially in our writing and blogging career. Speaking about the ROI I honestly confuse because I am new to blogging and I am still in the process to learn. By the way I got your points here and it is very useful to me. Thanks!
Carmen Swade recently posted…Timber DoorsMy Profile

Mitch Mitchell Reply:

Glad to help out some Carmen. ROI is for more than just blogging; it’s a major thing when looking at sales, no matter where it is.

January 17th, 2012 | 7:42 PM

Luckily for me I don’t worry about ROI because if I did I would have given blogging up long ago because there is no way in the world that all the time I’m putting into maintaining my blog is paying off.

It’s a good thing that I love blogging so much hey Mitch? ;)
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Mitch Mitchell Reply:

True Sire. But who knows, maybe if that were the career path you took it would be something you’d want to know more about. Right now, I just like seeing the traffic, but one day…

Sire Reply:

Maybe but then I should have started it long ago. I’m too old now for a career change ;)

Still, I’m not fussed because as far as hobbies go blogging is the first one that actually makes me money rather than the other way around.
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Mitch Mitchell Reply:

Uhhh Sire, you’ve already undergone a career change, so what’s one more? lol

Sire Reply:

That’s not really a career change Mitch, it’s just a job. ;)
Sire recently posted…The Difference Between A Good Blog And A Bad BlogMy Profile

Mitch Mitchell Reply:

Potato, Potaato… lol

January 22nd, 2012 | 4:38 AM