A simple example on what data would be required to estimate the ROI of social media.

1. BUSINESS RESEARCH & APPLICATIONS LIMITED
http://www.matterof.biz

2. ● Project lifecycle is 24 months; although social media actions
are to be considered long-term investments, for the calculations
a project lifespan assumption is needed.
1. Costs directly attributable to social media: these may be a one-off at the
beginning of the project, or be a monthly expenditure.
A: HUMAN RESOURCES = 2,500 (initial investment), 875 (per month)
● Consultancy = 2,000 (initial investment)
● Community manager = 750 (per month)
● Opportunity costs = 500 (initial investment), 125 (per month)

3. B: TECHNOLOGY = 1,200 (initial investment), 75 (per month)
● Hardware = 1,200 (initial investment)
● Software = 75 (per month)
C: OTHER COSTS = 500 (initial investment), 750 (per month)
● Web design and creativities = 500 (initial investment)
● Advertisement expenses = 250 (per month)
● Content = 300 (per month)
● Other costs = 200 (per month)

4. 2. Benefits attributable to social media:
A: NEW CUSTOMERS ACQUISITION = 11,605.20 (equivalent initial value)
● Customer Lifetime Value (CLV) is calculated using the Net Present Value
(NPV) formula. The whole equivalent initial value is calculated considering
100 new customers are acquired through social media, who spend 150
dollars per month each, providing a 35% profit margin for the company.
● A retention rate of 60% is considered, together with a 5% interest rate.

5. B: HIGHER SALES FROM CURRENT CUSTOMERS = 4,003.79 (equivalent
initial value)
● 345 current customers are considered, who increase their expenditure by
15 dollars per month. The 5% interest rate still applies.
C: COST REDUCTION = 11,349.66 (equivalent initial value)
● 500 dollars per month are considered to be saved. The 5% interest rate
still applies.
D: IMPROVEMENT IN BRAND VALUE = 2,500 (equivalent initial value)

6. 3. Social media ROI: the calculation in the video has been concealed.
● Costs = 4,200 (initial investment) + 1,700 (monthly expenditure); an
approximation to an equivalent initial value is 7,079.33.-
● Benefits = 11,605.20 + 4,003.79 + 11,349.66 + 2,500 = 29,458.66
SOCIAL MEDIA ROI = (((29,458.66 – 7,079.33) / 7,079.33) x 100) = 316,12%