Today’s post answers the fundamental business question we get about using social media.
How do I know if my social media activity will be profitable?
Social media profits can be different. It almost always is far more than quick sales transactions.
I have found that once I sit down with a business and discuss what they mean by profits, quite often, the goals they have in mind haven’t translated into the simple business math that can make social media marketing, or any activity outrageously profitable.
Watch this short clip and let me know if I’ve made this point.
My objective when I make a video today is to put important concepts into a simple presentation. There may be things that are left out, but I hope the meat of the message is here.
When you know the life time value of an average customer, you are way ahead in business
Do you know the lifetime value of your customers?
If you are in business, watch the next video “3 Social Media Mistakes that Can Hurt Your Business”
Share your experiences here and let’s discuss how this might make finding the ROI on social media easier to measure and obtain.
Use the share buttons to let your network get in on the conversation. Together, we’ll build the best new methods for getting social media profits.
Hey Warren
Great video my friend, succinct, clear, hits the mark. Thank you!
Thanks Dan
Thanks for this video. But when the sales and income are spread over five years, their value is actually lower: Money received in five years time is much less valuable than money received today. So businesses spending money today in order to get income in the future need to realise that the real value of that income will be lower. Calculations such as “net present value” (NPV) provide a rough guide.
Richard,
I’m sure you will agree that a business using these calculations will be able to see things more clearly than one that doesn’t
NPV and many other factors can be added. My goal is to encourage all to look at LTV, and I would hope they study more about it.
You didn’t add the positive factors that I left out. The ramifications of having a happy customer over 5 years will lower customer service costs, improve morale (both harder to measure) and increase the number of referrals. Those referrals come in a a much lower CPA and can easily out pace any loss.
There is a risk that hyper inflation or other macro events will wipe out the business. Business is inherently risky. My view is that, not having the skill to forecast LTV is more risky.
warren, all excellent points. if one buys an exceptional product, he will be a very happy customer and come back. he will also referr many others to buy your products. unforceful but steady marketing (such as many use on twitter) is very helpful (in my opinion), and it pays off. if one has a superior product, customeres will return to your business, buying your product.
you asked us to discuss how we might find the ROI on social media easier to measure. that’s a little hard to do, i think, bc sometimes it seems intangible. but i think you hit the nail on the head in your presentation. you mapped out a plan, and calculated the actual costs in your business example. every business should have a business plan which includes social media, if they are going to use it. and they must remember, when considering ROI, the cost and time of actually participating in social media. are they going to pay someone to tweet for them? that will take money! are they going to do it themselves? time is money! and will the person(s) they choose to tweet for them represent their brand well at all times? could get a little risky.
however, when a business or entrepreneur has these matters well in control and planned out, i believe they should go for it, as the benifits well outweigh the negatives. i’m just saying that each entrepreneur or business should have a plan in place first. and they should do the best thing to obtain that plan. perhaps they could hire a consultant to do it. perhaps they should buy a book from you, warren, to learn how to make a social media plan! however they do it, they should start w a plan in hand!
Sometimes the ROI is obvious. If the Today Show calls and says “We’d like to feature your business” do we calculate the ROI?
I like this comparison, because I’ve met people who had national attention and couldn’t convert it to income. (though many other did).
Once you have a business that can take a dollar and make two, any promotion is good promotion.
Do you know the lifetime value of your customers?
In my experience this is one of the most valuable up front questions you can ask a prospect and the answer positive or negative gives you an immediate opportunity to qualify them in terms of budget, trust and commitment to the project.
Love your work thanks Warren.
Brendan
Thanks. You can pretty much count on most people not knowing LTV and plan for it… and when someone does, it’s a great conversation too 🙂
Lots of very useful information here. 🙂
how to make money on social media
Thank for sharing.