Measure Social Media Lifetime Sales ROI

by Susan Hanshaw July 15th, 2010 

LTV calc

In 1 Simple Ingredient for All Your ROI Needs, I discussed using a key code system to track the performance of individual social media efforts. While this practice is a great step towards tracking the sales performance of the social media channel, it is not enough if you truly want to learn how your social relationships are influencing sales in the long term.

What does it mean to measure impact on long term sales?

Think about it this way. Evaluating long term impact means there is going to be a starting point, a building up of history, and then a point where you measure what has happened since the starting point.

Starting point: Date of first sale

Building of history: Transactions made over a period of time

Measurement point: Recording cumulative sales that have occurred since the date of first sale

How do you apply this analysis to social media?

The goal here is to look at the buying history of the customers you have social relationships with versus those you don't. This requires that you:

  1. Identify which customers are Facebook fans and/or Twitter followers.
  2. Append this information to your customer database or marketing database for future reference.
  3. Segment your database into groups based upon relationship.
  4. Further segment your groups into months or quarters based on first sale date.

In the example above, sales to Twitter followers is 14 points higher than average and 20 points higher than customers where there is no social relationship. To fully load this analysis to get a total ROI, you would need to load in the costs associated with social media. I'll save this discussion for a future post. Please leave a comment or email me if you have any questions in the meantime.

Susan Hanshaw

Susan Hanshaw is the Founder and CEO of Inner Architect a direct marketing firm based in the San Francisco Bay Area. Her focus is the integration of social media with direct marketing.

innerarchitect.com

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7 Responses to “Measure Social Media Lifetime Sales ROI”

  1. Ric Dragon says:

    VERY Interesting way of looking at the SM/ROI issue. Of course, the data could be screwy. For instance, if you're selling iPads, its likely that more of your customers embrace social media to bein with. If you sell Luddite Handbooks, the obverse. (extreme examples for illustration purposes).

    IF you could not only identify which customers were, say, on Facebook, but were engaged with your company page on FB, THAT would probably tell you something.

    So, the details are murky; but I think it is an interesting approach. Kudos.

  2. FB is the boss !! i waiting to see the day , when someone else beats fb !! hehe

  3. Personally I remain skeptical of social media – perhaps it's because it's new and I'm a conservative kind of girl, but I just can't seem to get to grips with it. The expenditure in both time and effort doesn't seem to justify the end results (if any), and so I stick to bread and butter SEO and PPC.

    • L.A., We've seen social media be very effective in lead generation and maintaining strong relationships with customers. Your point about the newness of the channel is definitely an issue, and one with implications that most brands haven't sunk their teeth into. The newness of social media requires that we all learn new techniques and strategies that will produce good results. Many brands have yet to make this commitment.
      .-= Susan Hanshaw recently posted: How to Measure Social Media Lifetime Sales ROI =-.

  4. Thanks for the comments. Ric, the example you provided would not mean the data is screwy, rather that investing heavily in social media is not right for the target. I totally agree with your suggestion that brands look at who is engaging. The data is there; it is simply a matter of making the effort to capture it.
    .-= Susan Hanshaw recently posted: How to Measure Social Media Lifetime Sales ROI =-.

  5. Good subject. We're using a lot of social media, facebook, twitter, youtube and are trying to measure it's impact and usefulness. This will help. Thanks.
    .-= Unfiled Tax Returns recently posted: Questions and Answers about the HIRE Act of 2010 =-.