Demystifying Payback of Social Media and Other Marketing Efforts

You’ve heard about the social media explosion. Hopefully by now, you’re an active participant. Facebook, LinkedIn and especially Twitter are social media vehicles of choice for many people and companies. Is someone creating a social media strategy for your company? How much thought is being given to payback?

Like any other type of marketing and PR activity, monetization of social media is the key. Mere activity and buzz creation is not.

As I mentioned in my June 19, 2009 blog, social media today looks a lot like websites did in 1996. Then, everyone knew they needed a presence, but wrestled with payback. Social media payback requires a method of monitoring results. Consider:

• Google analytics or a comparable web-tracking device to monitor all referring pages.
• Separate landing pages on your website for your social media pages. For example, www.yourwebsite/twitter, works for tracking and targeted messaging purposes.
• Train all employees with first-time contact responsibilities to ask and track how new customers and prospects heard of you. Most companies already gather this information at least somewhat. If you don’t, or your efforts are anecdotal or undisciplined, take immediate corrective action.
• When dealing with regular customers, occasionally ask where they’ve recently seen your brand.

Over the months and years, it’s a pretty safe bet you’ll hear more business success stories involving social media. Think of how many leads come through your website these days. Can you imagine a significant company without one? A few might exist, but I don’t know any.

If your business has a long sales cycle gestation period, consider tracking leads instead of sales. If you haven’t already calculated the value of a lead, you should. Although there are different ways of accomplishing this, the easiest way is as follows:

Average lifetime value of a typical account x expected new lead close% = LEAD VALUE

Next, calculate whether your social media efforts are paying off. Here’s an easy-to-use method. Choose a consistent time period for each calculation (monthly, quarterly or annual):

1. Hours invested in social media activities x average hourly rate = SOCIAL MEDIA COST
2. Social media cost ÷ target contribution margin% = BREAKEVEN
3. Number of social media leads x lead value = SOCIAL MEDIA GENERATED REVENUE
4. Social media generated revenue ÷ breakeven = SOCIAL MEDIA PAYBACK INDICATOR

If your social media payback indicator in step 4 is greater than 1.0, you are on track to experience a positive return on your investment. There are many ways to refine these calculations and tailor them to your specific needs, but at least this is a starting point.

You may still believe payback calculation is akin to the dark arts. After dealing with this admittedly imperfect science for most of my career, I can sympathize. Rest assured these calculations need to be done, not only for social media, but for any marketing activity.

Social media is here to stay. More personal communications are being sent via social media than email, which is mindboggling. Technological developments are on the horizon. Google has announced a new quasi-social media platform project called Wave, http://wave.google.com/, which promises some interesting features. This and other intriguing tools have the potential to change the game.

Bottom line: More and more business is going to transact via Twitter, LinkedIn, Facebook and other applications yet to be developed. This train is too important to miss.