Chapter 70
Deductive Social Media Return on Investment

To assess if the social media efforts are yielding a positive return.

The methodology is a sequence of succeeding measures, as illustrated by the example below.

Marketing creates a social media campaign to emphasize a new promotion for its company’s product. The projected per unit profit is $35, and the cost of the social media campaign is $1,500. Twitter is used to send out ten tweets designed to inspire the target audience to visit the company’s website.

Step 1: Determine the unduplicated audience reach of the ten tweets. In this example, we will assume 250,000 people are the target.

Step 2: Estimate the percentage of the target audience that will actually see the tweet. In this instance, marketing knows from previous experience that 12% of the target audience will actually see the tweet: 250,000 × .12 = 30,000.

Step 3: Estimate the percentage of those who saw the tweet that will find it compelling. Our marketer estimates this to be 10%: 30,000 × .10 = 3,000.

Step 4: Estimate the percentage of those who find it compelling that will visit the site. In this example, marketing estimates 5% will visit the site: 3,000 × .20 = 600.

Step 5: Estimate the percentage of those who visit the site that purchase. Marketing knows that the conversion rate is 15%: 600 × .20 = 120.

We can now calculate the return on investment (ROI) for this social media campaign as follows:

$35 profit × 120 purchasers = $4,200 – $1,500 = $2,700

Deductive Social Media ROI is useful in planning social media campaigns. Marketers will use data from previous campaigns to estimate the potential returns for a new social media effort. As this example illustrates, the ROI is based on the quality of the estimates made. 180% is certainly a positive ROI, but marketers must ensure their estimates are based on reasonable assumptions, which most likely result from past experiences and/or industry data.

Data will be found from social media advertising kits, as well as marketing’s own research about customers and sales performance reports.

iDon Bartholomew, “Social Media Measurement 2011: Five Things to Forget and Five Things to Learn,” MetricsMan. Retrieved September 23, 2011 from http://metricsman.wordpress.com/2010/12/30/social-media-measurement-2011-five-things-to-forget-and-five-things-to-learn/