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How To Measure Social Media Word of Mouth

Converting Prospects to Customers

Not long ago clients used to ask, “what’s the value of social media?” It’s pretty clear to most marketers that direct customer engagement is one of the major benefits of social campaigns. In order to get to true numbers to quantify social marketing, a bit of math is involved, and a great website.

Your website is the key to converting prospects to customers.

Tracking prospects to customers is a conversion that will help you justify funding for social media campaigns.

What is the value of your social media investment? How much should you spend on it? For that, I’ll turn this post over to Jamie Turner, chief content officer of the 60 Second Marketer, the online magazine for BKV Digital and Direct Response. He is also the co-author of “How to Make Money with Social Media.”

I like how Jamie distills social media down to its most basic elements to deliver metrics we can all use, and ultimately, help you secure a healthy social media budget. The following example is lengthy, but I think you’ll find that it’s worth the read.

He outlines 3 categories to measure social media:

Quantitative Examples

Unique visits, page view, followers, demographics, frequency, bounce rate, length of visit.

Qualitative Examples

Positive and negative comments, referrals.

ROI Conversion Example

The most important formula in social media is your Customer Lifetime Value (CLV). In a very basic sense, Customer Lifetime Value is the amount of revenue a customer will bring to your company over the course of their lifetime with your brand.

So, for example, if you’re a lawn care company and you know that a typical customer spends $80 per month with you and that the average customer stays with your company for 3 years, then your Customer Lifetime Value would be $80 x 12 months x 3 years = $2,880.

Once you know your CLV, you can decide how much you’d like to invest to acquire a customer. This is called your Allowable Cost Per Sale. Many people use 10% of their CLV as a starting point for their Allowable Cost Per Sale. In the example above, your CLV is $2,880 and 10% of your CLV is $288, so your Allowable Cost Per Sale is that number: $288.

To keep things straightforward, let’s assume that the lawn care company relies exclusively on direct mail to acquire new customers. Since a typical response rate for a direct mail piece in the lawn care industry is 0.5%, and since it costs about $1.44 to create and send a direct mail piece, you know that you have to send out 200 direct mail pieces to acquire a new customer.

Here’s how the math works out:

  • Number of pieces sent: 200
  • Cost for printing and postage: $1.44
  • Total cost to send 200 pieces: $288
  • Response rate: 0.5%
  • Customers acquired: 200 pieces mailed x 0.5% response rate = 1 new customer

See how that works? For every $288 spent, the lawn care company gets 1 new customer.

Let’s take it a step further. If you’re a large, national lawn care company, you might spend $2.8 million on your annual direct mail campaign. By using the math above, you know that every year, you’ll gain about 10,000 new customers from your $2.8 million direct mail campaign. (Remember, you’ll also lose thousands of customers each year from ordinary churn, so let’s not all go out and start lawn care companies based on the math above.)

Now, let’s assume that your CFO (or your CEO or CMO) wants to test the validity of a social media campaign. In order to do the test, you might slice off 10% of your $2.8 million direct mail budget and use that for a social media campaign. If you know that your $2.8 million direct mail campaign generates 10,000 new customers, then you also know that 10% of that (or $280,000) should generate about 1,000 new customers via direct mail.

That’s the pivotal number: 1,000 customers. After all, now that you know the math around your direct mail campaign, you’ll understand that your social media campaign has to match that in order to be considered a success.

In other words, you have $288,000 to set up, launch and run a social media campaign that needs to generate 1,000 new customers per year.

What You’ll Need

You’ll need a Facebook Page –- no problem. You’ll want a Twitter page –- again, no problem. And you may want to create a series of videos for a YouTube channel –- a bit of work, but also not a big problem.

You’ll want a mobile application, since prospects and customers are beginning to expect them. And you’ll want to develop a monthly e-newsletter with lawn care tips to stay in front of prospects and new customers. (Yes, I consider e-mail marketing a social media tool.)

The most important part of the campaign, however, is a series of landing pages on your website designed to capture prospects and help convert them into paying customers. The landing pages will be designed specifically around the social media campaign, and they’ll need to have Google Analytics, Eloqua or Adobe Online Marketing Suite installed so that they can track traffic and conversions.

The key point is that all of your social media programs –- Facebook, Twitter, YouTube, etc. –- should drive people to the landing page on your website where you can convert them from tire kickers (prospects) to paying customers.

Looking at the program outlined above, it’s easy to see how quickly your $288,000 social media budget can get used up by Facebook, Twitter, YouTube, mobile applications, e-newsletters and landing pages on websites. All that said, it’s very realistic to assume that a campaign of that magnitude would generate 1,000 new customers each year. Better still, it may generate 1,100 new customers or even 1,200 new customers.

Remember, all you have to do is to generate 1,001 new customers in order to march into your CFO’s office and show them that social media can provide a positive return-on-investment.

Word of Mouth Can Drive Sales

I thought this was an important topic to cover for all of our analytical marketing friends. We can lead the proverbial horse to water through our communications, publicity and word of mouth campaigns and events. But getting her to drink takes additional strategy once she gets to the stream.


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