The holy grail of determining true social media ROI is to be able to line social media activities up to sales. The relationships are valuable, yes. So is the engagement, the content, the brand awareness. But ultimately, you’re building all of those things so that you can increase the odds that people will spend money on you, donate to your cause, or otherwise help you further your business goals.
The trick here is that tying social media activity to your sales database means that you need to do the work to correlate the data. You’ll probably never be able to determine strict and untainted cause as it relates to social media activity and sales, but there are some ways to compare your social media channels to your other ones and see how they’re impacting the bottom line.
Today, we’ll explore 10 Key Sales Metrics to Track, and the importance of comparing your social media to your more mainstream efforts.
1. Lead Volume
One of the most straightforward measurements, measuring lead volume is just that. How many leads did you get through particular channels? That means the event you went to, or the contact form on your website, or signups for your webinar. There’s also a difference between any lead (just some contact information) and a qualified lead, which means they’ve crossed a certain threshold of direct, demonstrated interest in buying from you.
What that is is ultimately up to you, but you probably know when a contact moves from filling out a form to something “warmer”.
2. Cost Per Lead
Assessing the cost per lead means determining what it cost you to get it. That includes investment of time, manpower, and capital expenditures (like registration or sponsorship costs for an event, or hard costs of setting up website pages or lead gen mechanisms).
Again, I think here it’s more valuable to look at the cost of *qualified* leads, because they’re the ones that will take the most investment to get, generally speaking. Take your total cost for one particular lead generation channel, like Twitter. Look at how much time your folks log on there each day (approximations are okay unless you want to get really granular about it), and their average hourly cost (including salary, benefits, overhead). Divide that number by the number of qualified leads you get in a given period.
Measuring this in individual channels – Twitter vs. Newsletter vs. Events – is where the valuable data starts to emerge about ROI, and what efforts yield the most.
3. Lead Value
A bit more sophisticated than just the cost of a lead, this helps you determine how much that lead may ultimately be worth to you and your company. It requires a bit more math, so bear with me here. And of course, like all of this, the magic is in comparing this metric across several channels to determine those that are returning the best lead value to you overall.
You’ll need to determine:
- The potential deal value of that lead were it to close or, retroactively, the actual dollar value of the deal once that lead does close.
- Your average customer retention rate (see below)
- Your average conversion rate for new deals
Then you need to do this math:
((Deal Value for Qualified Lead) x Customer Retention Rate) x Average Conversion Rate
The true value of the lead is effectively it’s profitability, or how much you stand to gain from it after you factor in how long you keep customers, and how well you close deals. Also remember that you need to use the same period of time for all of these. If you’re looking at a deal value for a 12 month period, you should also use the retention rate and close rate figures for a 12 month timeframe.
(Hat tip to Christopher Penn for making this formula easy to understand, and spreading the gospel in Blue Sky Factory webinars like this one).
4. Conversion Rate (And Channel Conversion Rate)
Simply put, this is the percentage of leads that convert to actual sales. Otherwise known as your close rate, you can track conversion rates for other things, like newsletter signups, but in this context we’re tracking sales.
Ideally, you should know your average conversion rate across your entire business, as well as breaking this out into the varying channels and methods you’re using to generate leads. This is where you can really start seeing how social media is performing against your channels that have non-social touchpoints.
It also requires taking your sales databases and actually tracking those prospects and leads that either originate through or have touchpoints within social media channels (and which ones) so you can distinguish them. Some ideas for the types of conversions you might want to track:
- offline and in-person events
- engagement interactions (commenters, blog subscribers, Facebook Fans)
- newsletter and email subscribers
- website referral traffic and inbound link traffic
- organic search traffic
- content leads (whitepaper downloads, webinars, other people’s blog posts)
There are more ways to dice that up, but you get the idea.
Are you tracking the people that come to you by way of other people? You should be.
Referrals are a key source of income for many businesses, and you ought to be finding ways to track when a lead originates via another person. If they cite directly that they were referred, that’s easy. But it’s also important to ask when you can, such as on online forms, about whether someone else recommended you to them. And remember, recommendations and referrals don’t always come from your customers. They can come from the community at large, too, based solely on your reputation or brand awareness.
6. Retention Rate
It’s important to know how long your customers stick around once you’ve got them. Are they one and done? Do they renew their subscriptions or go elsewhere based on price or other criteria? Do they buy from you multiple times in a year-long period?
Look at the percentage of customers who are still with you after 6 months, 12 months, or two years. Look at the percentage of those that renew (and even those that upgrade their product or service). Obviously, the higher the retention rate, the better.
7. Average Transaction Value or Average Account Value
This is another important metric to track over time, as well as to break out by some key channels or media types in order to determine the effectiveness and efficiency of those channels.
Average transaction value is just that: taking the total value of all of the sales and purchases by a single customer in a fixed timeframe, and dividing that by the number of purchases they make overall. Likewise, the average account value is determined by taking your total sales for a period of time – say, six months – and dividing it by the number of active and current customers or accounts you have in that same time period.
Break out these numbers by media type – say, the transaction value for accounts that touch a social media channel vs. those that don’t – and you can start to see the impact value of having social media interactions to enhance sales (or not).
Bonus round: Look for the accounts that increase in value by more than X percent in a given time period, to see what channels or customer touchpoint paths (i.e. those that sub your newsletter, attend your webinar, AND met you at an event) net the best results over time.
8. Sales Value Per Fan/Follower
In order to determine a value per fan or follower, you have to determine the overall value of the medium itself.
That means if you want to know how much you can count on a Twitter follower to bring in in terms of revenue, you have to know how much revenue Twitter helps bring in for you as a whole. You can determine this in an exclusive fashion, by tracking direct sales using unique offers for that one media type that aren’t used anywhere else.
You can also track sales that have an impact point in Twitter by indicating which of your prospects are also Twitter followers, and better yet, which of them have had direct interaction with you there. That indicates potential influence over the sales likelihood, but not necessarily that it’s where the transaction initiated or ended.
Still with me? Have a look at this post over on my Altitude Branding blog for a bit more about determining the value of fans and followers.
9. Time to Close
A next level of the conversion rate is the conversion time, or how long it takes you to move from the initial acquisition of the lead to closing the deal.
This of course only applies to accounts you’ve actually closed, but it can give you insight into how long your sales cycle typically is, and what touchpoints you often need to have along the way to meet that average. It’s also a good way to diagnose what happens in a particularly short close process (did they have more interaction with you via your blog, perhaps? Get referred by a friend?), and particularly long ones (maybe a cold lead you got in a giveaway at an event).
Justifying your social media efforts can be easier if you show that your close time decreases by a certain amount when you you have consistent social media touchpoints with those people. Or, conversely, if your social media efforts don’t impact this process at all, perhaps the value in them lies elsewhere.
10. Highest Value Lead Sources
Using the above metrics like lead value, conversion rate, and time to close, you can start looking at and comparing the leads and sales that:
- Originated in social media
- Originated offline, like at an event, and didn’t have social media connections
- Originated offline, but touched other online channels
- Originated through the website or newsletter, and moved or touched other channels
See where I’m headed here? What you’re looking for are the common denominators for which paths of connection with your company are generating the highest overall lead, account, or transaction value over time. It requires some data crunching, and lots of analysis to see where the overlaps are. But if you’re really serious about directing your time and efforts only to the places with proven and direct ROI in the past, that’s how you get there.
Is there value in investing in places with out that proof? Heck yes. Is there value to social media beyond just sales? Absolutely. But that, my friends, is a discussion for another day. Or year. Or a bunch of social media blogs.
So then. That’s today’s list of 10 Key Sales Metrics as they can apply to social media and help you justify your time spent there. What are yours?