When you measure the return on investment of your social direct response campaigns, how do you determine success?
Click Through Rates? Cost Per Clicks? Total Conversions?
These industry-standard KPIs are a quick and convenient means of quantifying direct response ad performance, and should by all means play a role in your reporting. However, these numbers only reveal the tip of the iceberg when it comes to capturing the value of a converted Facebook user.
When reporting fails to take into account information beyond Facebook provided metrics, you are leaving value on the table that could be attributed to your social ads, as well as learnings that can be used to shape your future campaigns. In order to get the complete picture, juxtapose social campaign performance with downstream CRM data to finish connecting the dots. There’s more monetary value in an online conversion than meets the eye (or the wallet)—all it takes is a little extra investigation.
Consider a retail brand using Facebook ads to drive online purchases of women’s accessories. Post-campaign analysis will typically focus on basic media performance metrics that aggregate user clicks, actions and conversions, and then report on the marginal cost of each KPI. For example, cost per click, cost per action and total conversions completed. This tells the story of sales volume and budget efficiency. While these type of reports quantify the success of the media itself, they do not represent the total worth of newly earned online customers, or the campaign through which they were acquired.
Attributing Customer Lifetime Value to Social Marketing
To associate a more accurate and outright value with campaigns, social marketers must start thinking about the Customer Lifetime Value (CLV) of both patrons and leads acquired via social channels. As opposed to individual sales, this measurement is a forecast of the projected revenue a customer will generate over the course of his or her lifetime.
By taking the extra step to complete this analysis, you’ll be more equipped to determine the incremental value of a customer beyond their most recent purchase, and also better project the total value of your social campaign.
For a quick & dirty CLV calculation, follow the steps below:
- Determine the average value per transaction of your online customers.
- Determine the average number of transactions per week.
- Multiply these two numbers.
- Multiply the number you found in Step 3 by 52 weeks.
- Multiply this number by 20 years (or your typical retention cycle).
*For a more info on the various methods of calculating CLV, check out this infographic.
This should produce a rough CLV estimate that you can use as a starting point. From there, you can drill down even further to look for evidence of repeat customers, high-value customers and other pieces of supporting data to complement your investigation. This rounded out package of analyses can help broaden your view on what constitutes the total value of a Facebook conversion or campaign. While a Facebook user may have originally purchased just one accessory, hopefully that turns into repeat business down the road.
No matter how detailed your CLV calculations, what’s important is that you’re bringing a more long-term focus to your internal definition for the “success” of your social campaigns. In today’s world of social media marketing, where fast-click, action-focused ad campaigns dominate, this kind of measurement can help prove out the impact you are making not just today, but for years to come.