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Three Steps to Calculating B2B Social Media ROI

July 5, 2012  

Countless B2B marketers have balked at the difficulty of calculating social media ROI. But Andy deBrunner, in a guest post at the B2B Insights Blog, begs to differ: He offers three simple steps to a calculation.

Although deBrunner admits the formula he presents is "a bare-bones simplification of the process," he insists that "as long as you understand social media analytics and have access to the right data, you can obtain true ROI."

Before you take these three steps, you'll need to define your goals, develop measurement processes, and make sure you have the data you need. He says: "Once you have the data, the rest is a piece of cake."

Ready? Go:

  1. Determine the total lifetime value (LTV) of a sale. For example, if you sell widgets at $1,000 each and your average customer buys one widget each year for 10 years, the lifetime value of that customer is $10,000, deBrunner explains.
  2. Determine the social media costs to acquire a sale (your "investment"). Divide the total dollars you've spent on social media activities (say $100) by the number of leads those activities have generated (say 10). Then multiply that figure by the number of leads needed before one sale closes (say 10). The calculation: ($100/10)x10 = $100.
  3. Subtract the investment from the customer LTV, then divide that profit figure by the investment. "This is the equation: ($10,000-100)/100 = 99, which you multiply by 100 to get 9,900% ROI," he says.

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  • by Roger Lines Fri Jul 6, 2012 via web

    Of course the difficulty is to trust the data. For example: what is in the $100 of investment; all social channels? for how long? does it include copy/creative costs? is it the budgeted amount or the actual amount?
    You will need processes and tools. Allocadia can help with managing the investment.

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