Thursday, 27 December 2012

Return on Investment for Your Social Media Efforts

As a photographer, the time you can commit to social media may be limited. Most photographers I know wish they had extra hours in their day to catch up on editing photos, updating their web page, or any number of things that suck up precious time each day.

People ask me all the time, "So why should you devote time toward social media if you can’t measure the effect it has on your business?"

In this post I hope to help you measure the value of your time and interactions so that you can make better decisions about how to market your photography business.

Time will help establish a benchmark for measuring the return on investment of your social media efforts. How much time do you spend on social media and what do you value that time at? If we assume you devote an average of 5 hours a week on social media (20 hours a month, 240 hours a year) and your hourly rate is $50/hr; your social media marketing efforts may be costing you at least $12,000 a year, $1,000 a month, $250 a week. This “free” form of advertising is not free when you look at it like this.

So let’s start trying to measure social media return on Investment (ROI).

What is one way you can measure social media?
Part of why it’s hard to measure the value of social media is that there is no universal unit of measurement. If I may be so bold, the only way to measure the value of social media is to value your input of time, research, and hard costs for each social media platform and compare this to your possible return from other forms of traditional marketing.

Value of time invested + Investment in education/research + Cost of paid advertising and social media tools = the monetary cost of your social media marketing

Facebook offers some of the most insightful analytics tools of all of the social media platforms. The challenge is to understand what each insight actually tells you. Two insights that I have found helpful are “unique users by frequency” (clarifies within a specific time period how often each unique users engaged with your page) and the “friends of friends” (gives you total possible reach of your page). These are stats that any good media channel should be able to give you about their readership or viewership. Compare what your social media investment is to the coverage you could receive from other channels for a comparable.

Another valuable insight you can gather from all social platforms is the cost of social referral. By using Google Analytics you can see the amount of unique visitors you receive through each link you put up. Add together the amount of time, research, and advertising you invested in a specific landing page and divide this by the amount of unique visitors you received for each link to put a value on your cost per referral. At least you will now know how much is it really costing you to get people to view your unique content on your website?

Another way to determine ROI
I was introduced to another way to determine Social Media ROI. It’s called the “Social Media Money Formula”. The formula looks like this:

(R – Cg) * (F * Cr * Or * Pr) – (h * T) = Profit

R = Revenue per sale
Cg = Cost of goods sold
F = Number of friends/followers (Social Media reach)
Cr = click rate on Social Media links (% of followers that click)
Or = (Opt-in rate) or % of clicks that opt-in
Pr = Purchase rate (% of opt-ins that buy)
H = Hourly rate for your SM efforts
T = Amount of time you spend on social media

The translation is (Revenue minus cost of goods) * (Number of friends times click through rate times opt in rate times purchase rate) less (your hourly rate that your time is worth times your total time spent on social media) equals your net profit.
Or for you business types this would be your, “Earnings before Depreciation, Taxes and Amortization”, “EBIDTA”

I hope that begins to give you a better idea of how to make sense of what your Social Media results are telling you. Unless you quantify your investment of time, research, advertising options and available funding, you won’t be able to accurately determine the true ROI on your social media efforts.

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