As a marketer, I've often wondered what the ROI is on a follow or fan, and how does that compare to a mobile SMS opt-in of a loyalty program? It is critical for today's businesses to know what a Facebook fan, a Twitter follower, or an SMS opt-in is worth in real dollar terms to substantiate marketing efforts, demonstrate ROI, and optimize allocation of marketing spend.
According to PCmag.com the actual stats on the value could vary based on a number of factors, such as how active the company is on social media and how much a user interacts with said brand.
Twitter, for one, is doing its part to increase engagement between users and advertisers. As far back as late 2012, AdAge reported that Twitter was planning to let advertisers build experiences into brand pages like e-commerce, contests, sweepstakes, and the like. Facebook provides your business with the ability to customize branding with custom landing pages, fan contests, and paid ads placed in user timelines.
If your organization is willing to put in the effort to establish meaningful goals — to collect and analyze social media and site metrics — it is possible to discover the value of social media relationships.
So what is the value of a Twitter follow, or a Facebook like?
According to PCmag.com, a Twitter follower is worth about $2.00, whereas a like on Facebook is valued at $8.00. In raw form, does this present a real value for your business? If these likes and followers become a customer, what value can be provided to your company?
There is a tool provided by Harvard Business School Publishing called the CLVC, or Customer Lifetime Valuation Calculator. This calculator can be applied to discover a value for your fans or followers once they move through your marketing funnel, and tracked through social media as a source.
First, your business will need to determine the following data points from your sales data:
- The average size of a basket size (avg. spent per purchase).
- The average number of purchases per customer each year.
- The cost of goods sold per transaction (FIFO, LIFO, or cost average).
- The fixed overhead cost per transaction excluding marketing.
- The average one-time customer acquisition cost.
Here is an example:
Keep in mind that the cost of acquisition, cost of goods sold (using FIFO, LIFO, or cost average), varies from business to business (e-commerce, brick/mortar, hard/soft goods). The examples provided are to show you how to determine customer value via acquisition method.
For a social media example, we will use an online retailer with an average basket size of $200, a combined cost of goods sold, and non-marketing overhead of 40 percent. In our example, the average online customer completes two purchases per year. Using these figures, the estimated value of each new customer is $160 per year ($200 x 0.4 x 2 = $160).
From $160 annual value subtract the average cost of marketing and customer acquisition. This cost will either be pay-per-click (PPC), or ad spend on social media marketing (SMM), or the time invested by employees on social media sites to engage, share, tweet, or comment.
Take the time spent, then subtract acquisition cost. If the average acquisition cost for each customer is $55, your customer value for the first year is $105. Each year after, you would only calculate a marketing retention cost, on average about $25 per customer, for a 2nd year value of $135.00.
The initial acquisition cost does not need to be applied for subsequent years. So by year two, this example customer is worth $145.
Considering a customer stays loyal —on average— for 2.5 years, this customer’s value is $322.50 — $105 the first year, $145 the second year, then $72.50 for 6 months in the third year.
What is the value of an SMS mobile loyalty list opt-in?
In a recent blog post, FunMobility CEO Adam Lavine described in-depth, the average lifetime value of a mobile loyalty list (SMS) subscriber. The Annual Value (AV) and Lifetime Value (LV) of a mobile subscriber (opt-in) are important mobile marketing metrics.
These values can vary depending on industry, type & value of the offer, as well as the level of marketing and promotion efforts.
An example of AV & LV mobile loyalty list (SMS) subscriber:
- Determine total number of mobile (SMS) loyalty list subscribers – FunMobility Mobile Promotion Software can provide this information
- Estimate Net Sales over the Past Year (or other period) from your mobile loyalty list – Calculate this number from redemptions directly attributed to your campaign using a unique coupon code tracked at the POS
- Assign a Timeframe for the calculation – Determine the timeframe that makes the most sense for your business – A 12-month timeframe is ideal, but may need to be reduced depending on other factors such as seasonality and available of data
- Calculate the Annual Value of your subscriber – for example:
- Number of active subscribers (A): 2000
- Sales attributed to mobile loyalty list over 12 month period (B): $725K.
- Annual Value = B/A = $725K/2000 = $363 per subscriber per year.
The Bottom Line
From the above examples, we have provided the ability to calculate the value of Twitter followers, Facebook likes, and SMS mobile loyalty list opt-ins.
Which customer acquisition method is the clear winner? Based on the personal relationship that mobile opt-in loyalty lists provide, the ROI and value of the mobile opt-in subscriber is 64% higher than Twitter and Facebook. Plus, the overall retention, and personal relationship that this develops goes a long way to make it possible to retain a customer for more than 2.5 years. This powers your mobile marketing with the mechanism to not only grow your mobile opt-in loyalty list, but to exponentially scale your top-line business revenue growth.
Want to learn more about the value of your a mobile loyalty list (SMS) subscribers and how mobile loyalty promotions can grow your opt-in list, convert that list into sales, and measure ROI? Speak with one of our mobile web promotion experts today at: 855.849.4900, firstname.lastname@example.org.
Want to learn more about FunMobility products and services? Request a free demo to see how FunMobility can boost your mobile marketing results.