Calculating B2B Social Media ROI In Three Easy Steps

ROI Return on Investment Slot Machine WheelsBusinesses all across the world are waking up to the importance of social media as a business tool. And the effect can be seen in all the social media websites like Google, Facebook, Pinterest and Twitter with their increased registration rate.

Here are some figures:

Facebook alone has more than 900 million active users.
Twitter has over 500 million.
Google plus has almost 250 million users.
Pinterest user base is also increasing at a rapid rate.

Does Social Media initiate returns in business: Yes! It’s known that every business should earn certain amount of return, otherwise it concludes without making any sense. And Social networking sites in every possible way help business achieve “that”. And “that” is nothing, but ROI.

What is ROI? ROI basically is a performance measure used to evaluate the efficiency of an investment or to compare efficiency of different investments. Let not a definition scare you! Calculating ROI is not a rocket science as long as you have B2B business lead generation in place, understand social media analytics and have access to right data:

1. Determine the total lifetime value of a sale: Let’s say, you sell widgets at $1000 each and your customer buys one widget each for 10 years:

Lifetime value of that customer is $10000.

2. Determine the social media costs to acquire a sale (your investment):

Cost per Lead = Money spent on social media activities / number of leads generated

Then multiply that by the number of leads needed before a sale closes (10 sounds good for this). In this example, it would cost $100 to close a sale.

Here’s the calculation ($100/10)*10 = $100. This is your per-sale “investment”.

  1. Subtract the investment from the total lifetime value (this is essentially a profit calculation), then divide that by the investment. So in this case, the company made $9,000 off of a $100 investment.

This is the equation ($10,000-100)/100 = 99 which you multiply by 100 to get 9,900% ROI.

And voila! You are done with your calculation. The only prerequisite is to have good knowledge on social media analytics just to be sure that you are tracking the right information and you are ready. So now if you are ready, then go for the kill. Cheers!

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