What does it Cost for You to get ROI?

As a business owner or social media strategist, your goal is simple – you need to maximise the returns on your financial investment.

Too often, however, we ignore the one fundamental rule behind ROI-measurement – dollar value!

Everything that goes into running a business or even a social media marketing campaign is – in one word – ‘Money’.

You need money to buy/hire tools, raw materials or resources that help you deliver the product or service you wish to provide.

The people you hire to post social media updates or interact with your customers are also an investment.

So, the only way of judging success or failure is by measuring and comparing outcomes – but are you doing that right?

How do you Measure your Returns?

Measurement has to be tangible and, in social media, the numbers that indicate returns include likes, shares, comments, click-throughs, etc.

Depending on the platform you choose, you might get more or fewer parameters to base your ROI on.

However, the important thing to do here is associated a financial value with it.

  • What was the cost of acquiring one like?
  • What was the cost of acquiring one share?
  • What was the cost of acquiring one comment?
  • And so on…

Traditionally, that is how marketing has always been measured.

If you own, say, a shoe store and spend some money on advertising (e.g. buy billboard space), then you calculate your ROI based on the money you spent and the results you observed.

There will be people who walked into your store and bought stuff; people who walked in, tried out things but didn’t get what they wanted (size or colour issues), and people who walked in and walked out because they didn’t see anything they even wanted to try.

If you spent a total of Rs.100 on the advertisement and got 20-customers, your cost of customer acquisition was Rs.5.

If total footfall was 100-people, then your cost per walk-in (or lead generated) is Rs. 1.

What are your Observations here?

The concept is simple – most of you might already be aware of this – that you have base figures for comparison.

  • For every 5-bucks you spend on marketing, you acquire a new customer.
  • For every 1-rupee you spend, you acquire a new prospect or lead.
  • For every 100-people who walk in through your door, you get 20-customers or a 20% conversion rate.

(If you know the size of the total market – i.e. the total number of people who are in your area and are likely to see your billboard at some point – you can also find your lead-generation %.)

What you need to do here is lower your customer acquisition cost – i.e. bring it as far below Rs.5 as you can.

There are two ways of doing this – increase your investment or lower it – either ways, you need to observe that number and ensure that you are constantly moving towards decreasing your cost of acquiring new customers.

Translating Traditional to Social Media Marketing

Now, you need to apply the same rules to Social Media Marketing.

Whether you’re running daily-updates or short/long-term campaigns, you need to connect your spending with your returns.

Again, address those questions we asked above:

  • What was the cost of acquiring one like?
  • What was the cost of acquiring one share?
  • What was the cost of acquiring one comment?
  • And so on…

Take every single metric – right from impressions all the way to click-throughs – and measure what it costs.

Set time-periods – weekly, bi-weekly, monthly, quarterly, bi-annually, annually and beyond – and compare your costs, over and over again.

If you are posting 5-times a week, calculate your cost of acquisition.

Then, if you switch to posting 7-times a week, how does your cost of acquisition change?

Measurement is the Name of the Game

“To be good at something, you need to beat everyone else, every single day. To be great at it, you need to beat your own self, every single day!”

It’s something that you may have heard many times, but practicing it is a whole different ball game.

Metrics allow you to practice it easily!

Here’s how you go about it:

  1. Step 1: Set a target (for e.g. cost of acquiring one should be Rs. X)
  2. Step 2: Find out current cost of acquiring one
  3. Step 3: Identify factors that are associated with acquiring
  4. Step 4: Tweak factors in all permutations and combinations
  5. Step 5: Observe influence of tweaks on cost of acquisition of one
  6. Step 6: Keep tweaking the factors that move your cost of acquisition of one towards your target cost

Once you’ve got your target – rinse and repeat it for every single aspect of your social media marketing plan.

That’s how you create success!

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