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"Not long ago, I wrote about how to calculate the ROI of your social media campaign, which generated a lot of interest from the social media community. The article outlined how businesses can use Customer Lifetime Value to calculate the return on their social media investment. After writing the article, I started analyzing how businesses go about setting up, launching and running their social media campaigns. My conclusion is that there are three distinct stages to this process, which I\u2019m calling the Social Media ROI Cycle. My rough estimate is that about 50% of the business community is still in the Launch stage, about 40% is in the Management stage and about 10% is in the Optimization stage.\n\n\n\n\nEach one of the three stages has its own nuances, so let\u2019s take a look at what happens during each. The percentages referenced in each stage are estimates based on my own experience.\nStage 1: Launch\nDuring the Launch stage, 100% of a company\u2019s focus is on setting up the big four: LinkedIn, Facebook, Twitter and YouTube. Some companies focus on the big four plus more such as Flickr, e-newsletters, blogs, SlideShare and other social media platforms. But most companies kick things off by quickly getting into the big four networks simply as a way to have a social media presence.\nThe approach during this Launch stage is very executional with very little long-term planning. The primary objective is simply to get started. After all, those in charge want to ensure the brand is utilizing cutting-edge techniques, so the marketing department typically responds by jumping in without much plan for the long haul.\n\n\n\n\nUnfortunately, the results of the Stage 1 process are negligible. Sure, you\u2019ll be able to claim that you\u2019ve \u201Cgot a social media campaign,\u201D but you won\u2019t really see much traction unless you move on to Stage 2.\nStage 2: Management\nDuring this stage, roughly 60% of a company\u2019s efforts are focused on the big four (or the big four plus more).  About 10% of the focus is on creative and offer development, 20% on tracking quantitative metrics such as traffic, inbound links, Facebook \"Likes,\" etc., and about 10% on qualitative metrics such as brand sentiment, survey results and customer polls.\nThe approach during the Management stage is still very tactical, but the focus is on mid-term instead of short-term results, which is an improvement over Stage 1. The corporate objective at this stage is to engage prospects and customers in some way that gets them to connect with the brand. Ideally, this would mean buying something, but it can also mean downloading a white paper, liking a Facebook Page, responding to a survey, or any other measurable evidence that they\u2019re connecting with your brand.  \n\n\n\n\nStage 2 is where many of the more sophisticated companies find themselves right now. They\u2019re managing their social presence, testing creative ideas, tracking quantitative metrics and analyzing qualitative data.\nMost companies today are still at either Stage 1 or Stage 2. But many of the companies I work with have started to reach the Stage 3. \nStage 3: Optimization\nAbout 25% of the focus at this stage is on the \"big four plus more,\" and about 30% is evenly split among creative and offer development, quantitative metrics and qualitative metrics. Another 25% of a company\u2019s focus is on improving conversion and optimization of campaigns. What do I mean by that? It's all about tracking inbound leads and traffic across social media platforms, using tools such as Atlas and DART, and watching those leads turn into customers, either on e-commerce landing pages or through B2B lead generation programs.\nIt also means testing your way to success with social media campaigns. This can be as simple as trying two different landing pages to see which one drives more clicks. Or, it can be as complex as multivariate testing that analyzes more than one component at a time.\nThe final 20% of a company\u2019s efforts in Stage 3 include measuring the success of the campaign on an ROI basis. And yes, you can measure a social media campaign on an ROI basis, despite what some social media \u201Cexperts\u201D will tell you. \nThe process involves understanding your Customer Lifetime Value (the total revenue the average customer generates for your business during the lifetime of their engagement with you) and comparing it to the results generated by your social media campaign.\nFor example, if you know the typical customer spends $10 per month with your company and stays loyal to your brand for an average of three years, your Customer Lifetime Value is $360.\nMany companies are comfortable spending 10% of their CLV to acquire a new customer. So, in other words, they\u2019ll spend $36 to acquire a new customer who will spend $360 during his or her engagement with the brand.\nIf your social media campaign costs, say, $36,000 a year to run, and it generates 1,000 new customers each year, you\u2019ve got a winner on your hands. (For a more detailed explanation of this process, please see my previous post, HOW TO: Calculate the ROI of Your Social Media Campaign.)\n\n\n\n\nThe Bottom Line\nIn the end, all roads should lead to social media ROI. After all, businesses don\u2019t do social media to be social, they do social media to grow sales and revenues.\nIf you carefully navigate your way through Stage 1, Stage 2 and Stage 3, you\u2019ll eventually be able to go up to your CFO and say, \u201CHey, Chief Financial Dude, remember when you told me we wouldn\u2019t be able to measure the ROI of our social media campaigns? Well, we\u2019re already doing it, and we\u2019re making a profit, you knucklehead. So there!\u201D\nOf course, you don\u2019t have to use those exact words, but you get my point.\nMore Business Resources from Mashable:\n- HOW TO: Calculate the ROI of Your Social Media Campaign- Creative Constraint: Why Tighter Boundaries Propel Greater Results- 10 Ways to Turn Your Local Business Into a Global Success- 6 Top Tips For Managing a Coworking Space- 3 Podcast Success Stories from Creative Small Businesses\nImage courtesy of iStockphoto, ewg3D"^^<http://www.w3.org/2001/XMLSchema#string>
<http://mashable.com/2011/03/03/social-media-roi-cycle/>