Calculating the ROI of Your Social Media Campaign

Okay, now that we’ve covered some of the more important tools you need to monitor your social media campaign, let’s talk about how to measure the effectiveness of your campaign.

One of the most important formulas you need to know is CLV. As mentioned previously, CLV is the amount of revenue a customer brings to your company over the course of a lifetime with your brand.

For example, if a cable company knows a typical customer spends $80 per month and the average customer stays with the company for 3 years, then the CLV is $80 × 12 months × 3 years = $2,880.

When you know your CLV, you can figure out how much you want to invest to acquire a customer. This is called your Allowable Cost Per Sale. Many people use 10% of their CLV as a starting point for their Allowable Cost Per Sale. In the previous example, your CLV is $2,880 and 10% of your CLV is $288, which is your Allowable Cost Per Sale.