I see many business people who engage in social media programs simply because others do. Further, they make no attempt to quantify the value of such initiatives and therefore tend to underinvest. In turn, social marketing brings few new customers to the company and in a self-fulfilling prophecy, it’s not worth investing more.

I maintain that measuring the costs and benefits of your social media programs (and more broadly, all of your digital marketing initiatives) is critical. With a calculation of the actual value, you’ll have a basis for deciding which initiatives merit increased or decreased investment going forward. Otherwise, you’re just guessing and hoping. In business, we all know that, “Hope is not a strategy.”

There is no guaranteed inherent value in having a LinkedIn Company Page follower, a Facebook “Like”, a Ning member, or a Twitter follower. Rather, its value depends on your ability to motivate the participant to voluntarily execute your desired actions.

Consider the value of the following sequence of actions:

If (1) a LinkedIn Company Page visitor or follower, clicks to (2) your “Products and Services” tab, then notices and reviews (3) some of the eighty-three recommendations for that product and clicks on (4) the description of your “Unified Data Center” service (to use a hypothetical product example), then sees and clicks on (5) the link to your blog post about that service, and finally reads (6) that post and clicks the button (7) to “Have a Salesperson contact me”, you’ve achieved the desired outcome for that person.

What I’ve described here are seven sequential “conversion” steps from being a random member of LinkedIn to being an interested prospect for your company.

Similar conversion steps are definable for any social media follower whether reading your blog, following you on Twitter, participating in your external Ning network, or Liking you on Facebook. After all, you’re in business to make money, not to make friends, right?

Have you considered the conversion objectives and associated steps for your social media and digital marketing programs (including website and landing page visitors). Once understood and explicitly defined, your conversion steps can be tracked, measured, and even valued. Your marketing team or outside agency partner should be thrilled to tackle this task because they can then prove their value to your organization.

Quantifying the Value

Google Analytics (free) can track much of what happens on your website and blog including, for example, where people come from (e.g., LinkedIn, Twitter, Google search, etc.) and what they do after arriving.

With conversion steps defined, conversion rates can be measured and improved. Let’s look at a simple example.

Let’s say that you have defined the following sequence of conversion steps for readers of your blog:

• Read a given blog post
• Click a link near the end of that post to an associated landing page with details about the relevant product or service
• Click the gold-colored button that says, “Have a Salesperson contact me.”
• Purchase your product

Let’s say that your typical blog post attracts 1,000 readers in the first 6 months after posting (for simplicity, we’re ignoring the likely substantial benefits of the “long tail”).

Your measurements show you that 5% of these readers execute the desired conversion action (clicking a link), meaning that 50 out of 1,000 of them visit your targeted landing page.

Of these, 10% of the landing page visitors click the gold-colored “Have a Salesperson contact me” button. Your sales team follows up as requested, making a total of 5 calls. Note: While the sample sizes in my example become small and therefore “statistically insignificant”, across all of your blog posts, social initiatives, and web pages, your numbers should be larger and therefore statistically significant (i.e., show less variance and be more predictive).

Of these 5 calls, over time (you have a twelve-month sales cycle), 1 such prospect ultimately buys your product or service, equaling a 20% conversion rate.

Now let’s work backwards to calculate conversion values. Say that your average “lifetime customer value” for buyers of this product is $50,000 (net profit).

Therefore, the value of a click on your gold-colored “Contact me” button is $10,000 ($50K x 20% conversion rate). Checking the math: 5 clicks x $10K is equal to 1 buyer at $50K.

Backing up further, the value of a blog visitor clicking to your landing page is $1,000 ($10K x 10%). Checking the math: 50 clicks x $1K still equals $50K.

And backing up one more step, the value of a blog reader is $50 ($1,000 x 5%). Again checking the math: 1,000 readers x $50 still equals $50K. Summarizing in table form:

Now, if you’re doing one such blog post per month and seeing similar results across all posts, the total value of your blogging initiative on an annual basis is 12 x $50K, or $600,000. If the cost of your blogging initiative (and downstream conversion sequence including the associated percentage of payroll for the designers building land pages, the salespeople following leads, etc.) on an annual basis is less than $600K, then you’re making a good investment. Your social marketing initiatives are yielding a positive ROI. If that ROI is better than your other investment opportunities, you should invest more.

Specifically, if you can acquire additional blog readers for less than $50 without degrading your conversion rate, you’ve still got a positive ROI. Invest more.

Using blogging as my hypothetical initiative was not accidental. Indeed, companies that blog attract an average of 55% more web traffic. If you want to maximize your sales and marketing profits, then know your intended conversion steps and measure their effectiveness.

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