How To Prescribe A Return On Investment In Facebook

Yes, you can measure return on investment in Facebook and from there optimize your news feed output.

How can you apply a systematic framework — PowerPoint is not a framework — that is as rigorous and defensible as the income statement your company provides Wall Street?

Well, if you’re a big brand selling shampoo or soft drinks, your metrics will be quite different than a retail chain selling pizzas.

The messaging for a plus sized women’s clothing brand will differ from a local fitness center; one creates acceptance while the other creates dissatisfaction.

The number of fans needed to make an impact for a global non-profit versus a local optometrist varies widely; the latter needs only a few visits a month.

Do you have that list of goals in mind for your business, which you apply to all of your marketing channels?

Okay, let’s get started with your self-diagnosis, which should take you about two-and-a-half hours to complete.  You can speed things up by working on this with colleagues.

1. Build Your Overall Marketing Effectiveness Framework

This is not an information technology exercise or one that should require programming, unless you are handy with Excel and also enjoy dabbling with application programming interfaces.

List your metrics as columns — fans, interactions, and revenue, for example — and then list your marketing channels as rows.

Odds are you have part of the work already done for you in your web analytics.

But have you also included your earned media (what you get from Facebook, blogs, and social channels that you can’t put a tracking code on)?

And are you including your advertising campaigns, which are both online and offline?

Odds are that you have a number of holes in your spreadsheet.  That’s okay—just estimate for now.  You just want a starting point.

2. How Much Are Casual Visitors And Customers Worth?

If you are a business-to-business brand, this is a challenge, since values can vary widely. If you’re a consumer brand, it’s easy.

Take the sum of owned, earned, and paid media to get a total impression figure, multiply by a reasonable cost per impression ($5, for example) and divide into your number of users across all channels.

You’ll probably get a number between $2 and $10 for a casual visitor — meaning first time or not engaged.

And for your customer, you’ll get a figure that is close to the casual figure divided by your average unique visit to conversion rate.

For example, if you run a retail chain and know via surveys that 33 percent of your Facebook fans are real-world customers and that a customer is worth $100 in revenue, then a Facebook fan is worth $33.

This does include overlap with other marketing channels, so you then have to factor that down by the degree of overlap.

Use your average number of touches per customer prior to conversion. In Google Analytics, this is called “visits to conversion.”

So if a customer visits you four times on average before buying (Facebook, paid search, email, and then display, then the incremental value is about $8). Your math will vary.

If you’re lost or forgot high school algebra from 20 years ago, don’t worry — give the assignment to your analytics staff to figure out.

You just want to determine how much overlap there is between your Facebook audience and your other marketing channels so that you can determine a true incremental contribution of your social marketing efforts.

3. Assemble Your Interest Targeting Grid

What is the unique selling proposition of your brand?

In other words, why do people choose you over the competition?  Who are these people and what characteristics identify your best customer? Where do they live, what TV shows do they watch, what other brands do they like?

You may even have target personas already set up to bucket your customers — such as young single moms, college kids, the urban elite, and so forth.

Now create a spreadsheet that has one row per type of customer (or interest target) and then columns for the interest name, your brand or conversion message to that interest, how many are in that audience on Facebook, and how many folks in that audience you have.

For a shoe company that wanted to reach males 13 through 17 years old in the U.S, we determined they had about three percent of the audience for basketball, one percent for baseball, and varying other percentages for other sports.

If you made it this far, congratulations!  You must be a marketing maven, since most folks get stuck at step two, since the math bogs them down.

But when you persevere, believe me, it’s worth it. You then have a foundation against which you can rigorously measure your social efforts.

If you automate data collection via a dashboard, you can set thresholds to show alerts if a component of your marketing program has gone out of whack — your fan lifetime value is decreasing, your clickthrough rate is increasing and a particular message against a certain interest target is resonating.

That leads to action — refresh your marketing creative, post different items on your wall, come up new variations of what’s working, spend more against a particular target, and so forth.

When you’re doing systematic marketing, you’re letting the data guide, but not blindly control, your decisionmaking process.

Not only are you growing your marketing effectiveness measurably, but proving to your chief executive officer your value to the bottom line via numbers that she and the chief financial officer can understand.

Instead of just more fans, gross rating points, or media mentions, you have hard statistics that the board will appreciate.

While this initial exercise on paper may take a couple hours, the actual implementation of cross-channel measurement may take several months—then the development and execution of programs that tie into this measurement may take 18 to 24 months.

The accounting and finance folks have SAP or whatever system tracks and manages the general ledger and chart of Accounts.  It’s now time that the marketing folks have their system— PowerPoint and Excel don’t count!

Dennis Yu is Chief Executive Officer of BlitzLocal.

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