Reality Digital Inc., a San Francisco-based technology company that helps other businesses launch social media campaigns, is a big proponent of calculating ROI -- for its own uses of social media as well as for customers'.
CEO Cynthia Francis says calculating return on investment starts with understanding what you want to accomplish: Do you want to promote internal collaboration? Establish real-time connections with customers? Generate and track sales leads?
Then, you have to figure out what tools will help you achieve that goal, she says.
"The idea that everyone should have Facebook and Twitter is not true. You have to think about what people and customers want. Maybe all you need is a blog with three people in your company blogging. Bigger companies might want to be in all the public environments," Francis says.
In addition to a Web site and e-mail newsletters, Reality Digital uses Twitter and Facebook to interact with existing and potential customers.
Here's how the company's numbers break down:
- Total investment for social media programs (including technology costs and PR agency hours): roughly $3,000 per month
- Total sales leads generated in April, May and June: 72
- Average sales leads per month: 24
- Average cost per sales lead: $125
- Lead conversion to sales opportunities: 11.1%
- Lead conversion to closed deals: 1.4%
"Given the typical size of our deals, the annual cost of our social media programs is covered by revenue from one closed deal (annual contract)," marketing manager Lawrence Mak wrote in an e-mail about the figures.
He adds: "Because we started our social media program only three months ago, I consider it to still be in ramp-up phase. I expect cost per lead and conversion metrics to improve as the program matures over the next three to six months."