Social Media Marketing All-in-One For Dummies. Michelle Krasniak

new activity or a special promotion (such as early Christmas sales or the introduction of a new product or service) and too low during quarters when spending is down but you reap benefits from an earlier investment in social media.

      

Calculate your CAC over six months to a year to smooth out unique events. Alternatively, compute rolling averages (taking an average over several months at a time, adjusting the start date each month — January through March, February through April, March through May, and so on) to create a better picture of what’s going on.

In Figure 2-1, Rapport Online ranks the return on investment, defined as cost-effectiveness in generating leads, for a variety of online-marketing tactics. The lowest ROI appears at the bottom of the cube, and the highest appears at the top.

      Courtesy of Rapport Online Inc., ROI

      FIGURE 2-1: Social media would fit near the top of the ROI scale for Internet-marketing tactics.

Social media marketing runs the gamut of rapport-building options because it involves some or all of these techniques. On this scale, most social media services would probably fall between customer referral and SEO or between SEO and PR/link building, depending on the type and aggressiveness of your effort in a particular marketing channel. Traditional offline media, by contrast, would have a lower ROI than banner advertising.

      

As with performance metrics, business metrics such as CAC and ROI aren’t perfect. If you track everything consistently, however, you can at least compare results by marketing channel, which can help you make informed business decisions.

      If you garner leads online but close your sales and collect payments offline, you can frame CAC as the cost of lead acquisition, recognizing that you may need to add costs for staff, collateral, demos, travel, and other items to convert a lead.

      To put things in perspective, remember that the traditional business school model for offline marketing teaches that the CAC is roughly equivalent to the profit on the amount a customer spends during the first year.

      Because you generally see most of your profits from future sales to that customer, you must also understand the lifetime customer value (how much and how often a customer will buy), not just the revenue from an initial sale. The better the customers, the more it’s worth spending to acquire them. Harvard Business School offers an online calculator for determining lifetime customer value at http://hbswk.hbs.edu/archive/1436.html.

      

Be sure that the cost of customer acquisition (CAC) doesn’t exceed the lifetime customer value.

      

Try to keep the total cost of marketing by any method at 6 percent to 11 percent of your revenues; you can spend less after you have an established business with word-of-mouth referrals and loyal repeat customers. Remember, customer acquisition is only part of your total marketing budget; allow for customer retention and branding expenses as well.

      Small businesses (fewer than 100 employees), new companies, and new products usually need to spend toward the high end of the scale on marketing initially — perhaps even more than 11 percent. By comparison, mature, well-branded product lines and companies with a large revenue stream can spend a lower percentage on marketing.

      Obviously, anything that can reduce marketing costs offers a benefit. See whether your calculation bears out that cost level for your investment in social media.

      One is silver and the other gold

      You might remember the words to that old Girl Scout song: “Make new friends but keep the old; one is silver and the other gold.” To retain customers, apply that philosophy to your policy of customer satisfaction. That may mean anything from sending holiday greetings to establishing a loyalty program with discounts for repeat buyers, from entering repeat customers into a special sweepstakes to offering a coupon on their next purchase when they sign up for a newsletter.

      A marketing truism states that it costs anywhere from 3 to 30 times more to acquire a new customer than to retain an existing one. (For details, see www.linkedin.com/pulse/what-cost-customer-acquisition-vs-retention-ian-kingwill.) Although costs vary with each type of business, it’s common sense to listen to customers’ concerns, complaints, product ideas, and desires.

      Thus, while you lavish time and attention on social marketing to fill the top of your funnel with new prospects, don’t forget its value for improving relationships with current customers and nurturing their involvement with your brand.

Establishing Key Performance Indicators for Sales

If you track ROI, at some point you must track revenue and profits as business metrics. Otherwise, there’s no ROI to compute. Unlike the previous emphasis on social media for customer engagement, recent statistics show a rapid increase in social commerce (direct sales from social media), as shown in Figure 2-2. According to data from Statista, social commerce sales in the United States is expected to quadruple in the next five years, from $22 billion in 2019 to $84 billion in 2024.

      If you sell online, your storefront should provide ways for you to slice and dice sales to obtain crucial data. However, if your sales come from services, from a brick-and-mortar store, or from large contractual purchases, you probably need to obtain revenue statistics from financial or other external records to plug into your ROI calculation.

      

If you manage a bricks-and-clicks operation, you may want to integrate your online and offline operations by selecting e-commerce software from the vendor who provides the point-of-sales (POS) package for your cash registers. That software may already be integrated with your inventory control and accounting packages.

      Source: www.statista.com/statistics/277045/us-social-commerce-revenue-forecast/#:~:text=In%202019%2C%20social%20commerce%20sales,U.S.%20retail%20e%2Dcommerce%20sales.

      FIGURE 2-2: Social commerce revenues will grow rapidly over the next five years (in billions).

Just as with performance metrics, you should be able to acquire certain key performance indicators (KPI) for sales by using storefront statistics. Confirm that you can access this data before purchasing your e-commerce package:

       You should be able to determine how often customers buy (number of transactions per month), how many new customers you acquire (reach), and how much they spend per transaction (yield).

       Look for sales reports by average dollar amount as well as by number of sales. Plugging average numbers into an ROI calculation is easier, and the results are close enough as long as the inputs are consistent.

       You should be able to find order totals for any specified timeframe so that you can track sales tied to promotions, marketing activities, and sale announcements.

       Look