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Is The Social Media ROI Worth It?

Many people would like to know if Social media ROI is worth it? This is not an easy question to answer as everyone’s social media strategy and results are always very different.

However before you make a serious commitment to Twitter, Facebook, Pintrest or another network, you should consider whether or not the social media ROI is worth your time. All I can do is show you the information I have below and let you decide if your social media ROI is worth it or not?

Social Media ROI: Time Versus Lifetime Value

The major expense in social media for small businesses is time. You only have 24 hours a day—less if you subtract necessities such as sleeping and eating. Should you be spending 30 minutes or an hour of you valuable time every day on social media? I know many people include this into their blogging routine which can make the day stretch out even further.

The major value in social media is new customers. Whenever you think about customers, you should think about lifetime customer value—the total profit your business earns from a customer over the lifetime of your relationship with them. Most customers don’t buy from you just once—they buy multiple times, so make sure you don’t just count sales.

The trick to computing your social media ROI (Return On Investment) is computing a value for your time, computing an average lifetime customer value, and then determining how many customers social media attracts to your business.

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How To Value Your Time On Social Media

The simplest way to compute the value of your time on social media is to imagine paying yourself an hourly wage and then multiply the number of hours you spend on social media each week by that hourly wage. For example, if you pay yourself $20 an hour and you spend 5 hours a week on social media 50 weeks a year, your annual social media expense is $5,000.

That’s a lot of money.

But if you pay yourself full wages, you might get a bad social media ROI calculation. It’s important to value your time accurately, and time spent doing something you enjoy should not necessarily be paid at your full wages. If you enjoy engaging in social media and you’d do it for someone else at reduced wages, then you should also charge yourself those same reduced wages. For the purposes of an example, let’s say your social media time is worth $10 a hour, 5 hours a week, 50 weeks a year, for a total cost of $2,500 a year.

Your Lifetime Customer Value

It’s up to you to compute your lifetime customer value. Take the total income you’ve earned from all of your customers and divide it by the number of customers. That will give you a rough estimate.

If you run a website business, a customer is anyone who clicks on an ad, buys a product from you or a site you’re affiliated with, or signs up to your mailing list. That means customers aren’t the same as visitors to your site—customers are the people who make you money.

Calculating Your Social Media Referrals

The final figure to compute your social media ROI is the number of new customers your social media presence attracts. To estimate new customers, run a test:

Make an offer to your followers and fans similar to previous offers you’ve made and track how many new customers you get—just new customers. Don’t count repeat customers.

Putting It All Together

For example’s sake, lets assume the following:

1. Your time spent on social media is worth $2,500 a year.

2. Your average lifetime customer value on your affiliate advertising-based site is $5

3. You make one offer to your followers and fans every month which attracts 50 new customers—that’s 600 new customers a year.

Here’s the math: (600 x $5) – $2,500 = $500 profit.

Your social media marketing earns $3,000 a year but costs $2,500, so $500 is your social media ROI.

Increase Your Social Media ROI

To increase your social media return on investment,the best way is to either save time for increase the value you receive from your time spent on the social media sites. Most people would find it easier to save time.

The most simple way to save time when using social media is to firstly use social media management software. This is when you use software to schedule tweets and posts, monitor your connections, and much much more. You wonder why these types of software are so popular? Now we can now see why.

The next way to save time on social media is education. Learning how to use social media efficiently, without posting useless junk that does nothing, is a huge priority for people using social media for promotion. After all, the promotions you do all take the same amount of time, but some are highly effective while others are not. This method will also increase the value of your promotions as you learn to become an expert at this process.

Free Can Cost

The problem here is that people often presume that promoting through social media is free when in fact it actually costs huge amounts of time. People neglect this fact and when calculating the ROI for social media, they often do not add time in as a cost. It is like buying hosting from a cheap website hosting company. You think you are saving money when it is actually costing you more money in time and stress.

If you calculated the time you spent on Twitter, Facebook, Pintrest or another network, would your Social Media ROI be worth it?

Comments on this Article: 5

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  1. Raja Sinha says:

    IMO if businesses haven’t understand public relations, communications or the tenure of a full marketing agenda in terms of ROI, they should spend time learning those first.. then the bigger picture clarifies what kind of ROI they can expect and when..

  2. Some nice numbers there to think about in your article. I would love to see some stats on how much time “social media” marketers and employees waste reading updates while doing their word. As much as social media can be an effective means of advertising, it usually isn’t done right and sucks up more time and money than it is worth.

    • Mitz says:

      Yes you are right there Zac. It really does suck up time and I bet people get stuck browsing at other irrelevant stuff when they are meant to be working. I know I do not like going near Facebook too much as I start to flick through all the updates people post. An hour goes by and then I realize what I am actually there for. :)

  3. This is a compelling article. As the Marketing Director at Amplifinity, I do most of our social media “marketing.” I think you’ve left out a few considerations. Note that I don’t have a suggestion as to how they may fit into your calculations, but I offer them for your consideration.

    1) The number of hours it takes to monitor, nurture and move a prospect from engagement to acquisition. This doesn’t happen organically in my experience. It’s more than just putting out an offer. There’s follow-up, more promotion, and running numbers at each point.

    2) Spend on customer acquisition through more traditional channels (is there a savings when acquired via social “asks”?).

    3) Up-front time put into creating the promotion, working out the fulfillment details, and tracking engagement, shares and overall strategy from conception to completion.

    Thoughts?

  4. Jacques says:

    My clients are busy professionals. They have no time to subscribe and then just idly browse through all that information (blogs, Twits, Facebook comments, Pinterest…). When they need information, they search for it. Period.
    We were forced to conclude the ONLY purpose of social media is NOT the actual people that consume its content, but rather to obtain a higher Google ranking for the real clients that do the pointed research when they actually need our products and services.
    What a major waste of resources this all is!

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