Your social media ROI shock treatment

Today, let’s do a very simple calculation to determine how much cash your social media strategy should be generating to justify its existence. I think this might just blow your mind.

I’ll have to make some broad assumptions because every company is different, but you can insert your own numbers and do the math for your own organization.

Let’s assume you are a medium-sized company, and have one person working full-time on social media marketing. We’ll assign that person a salary of $60,000.

In a typical company, health, 401(k) and other benefit costs equal another 50% of the base salary, or in this case, an additional $30,000.

We’ll assign another 20% of base salary for overhead such as office space, shared services support and technology. That’s $12,000. We’re on a tight budget so we will forbid our new employee to do any travel, training, or company entertaining. And forget about bonuses this year. No whining, either!

So, our full-up cost for one social media professional is $102,000.

Let’s assume your company has a moderate profit margin of 15%. So, to break even and just cover the incremental costs of your new social media initiative, this professional would have to produce quantifiable new sales of $680,000. In other words, you would have to make that amount of money to have an ROI of 0.0% on a year’s worth of social media expense and effort.

That’s a lot of money for a lot of nothing, isn’t it? There are two reasons why I needed to shock you into social media de-tox.

First, I wanted to bring home the point that social media is not “free.” Even a modest effort at a small company takes a lot of time, which must be funded through the sweat of your manufacturing and sales efforts.

The second reason is this: For now, some companies may be willing to experiment with social media, but at some point the big boss is going to sharpen her pencil. If you can’t accurately and logically measure what you do, your marketing initiative will be in peril, as it should be.

The other day, I heard an “A-List” blogger tell his audience, “If your company is not expecting you to account for your efforts with financial measures, well, that’s just great — do whatever you want!”

And for a short period of time, you might get away with it. But to gain credibility as a company leader in a B2B environment, you must hold your activities accountable to the same standards as an engineer trying to get funds approved for a new production facility. You should be able to demonstrate a business case and that business case must be built on hard dollars … eventually.

In the mean time, the softer side of metrics may be the only thing available. Tomorrow we’ll start taking a look at the importance of “non-financial indicators” that can influence brand equity.

This is part 2 in a series addressing social media marketing measurement issues.

Part 2: Social media ROI shock treatment

Part 3: Irresponsible social media measurement research

Part 4: Social media impact on brand equity

Part 5: The most important question to ask in social media marketing

Part 6: A double standard for social media marketing?

Part 7: Yes, it IS about the money!

Part 8: Creating a measurement plan

Part 9: Measurement is like a bartender


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