In order to calculate your ROI on a Facebook contest you need to know how much revenue and profit comes from your Facebook page.
The best way to do this is with Google Analytics. Ensure your site will track the sources of your purchases.
You also need to track the number of likes and engagement levels of your page before you begin and during the promotion.
2. Determining Value
It is impossible to put an exact value on a Facebook fan or the number of people engaged with you on Facebook. Scenario’s such as a loyal fan on Facebook tells their friends via SMS or in person and as such make purchases based on that recommendation are very unlikely to be tracked.
We can however develop an estimate and that is all we need.
Take the revenue you receive from people who have purchased through Facebook in a month and divide that by the number of fans you have. Also do the same for the engagement rate. This will give you a rough idea of a value per fan.
You may want to lower this number slightly when running a contest. As we will discuss a little later, not every fan is created equal and fans you obtain during the promotion are likely to be less value in whole.
3. Increase Entrant Conversion Rate
Setting up and running a contest can be quick and easy. However if you want great results, you are going to have to put some effort in.
You must think of your entry page as a sale conversion page, enticing people on why they should enter. Even offering a free voucher or e-book for people entering can add a massive boost.
To get a great ROI, your entrant rate must be high. If you want to find out how to properly setup a contest have a look at Running Profitable And Successful Contests.
4. Drop Off Rate
After every promotion where the requirement is to like the Facebook page before entering or voting, you will see a drop off. These are from people who were there to support a friend or purely there for the prize. This drop off can be anywhere from 1-10% of the new fans gained.
When you have finished the promotion, either wait 2 weeks to see how the fan base stabilizes or take 5-10% off the new likes just to be on the safe side.
5. Calculating The ROI
Take the number of new likes (the increase since you started the promotion), take the drop off into account by removing a percentage, times that by the revenue you make per fan per month.
This will give you a rough figure of how much your promotion will give you in a month. You can times that by 12 to see a year-long effect.
Compare this with the cost of running a contest and you will soon see the benefits.
Example Of A Small Contest.
We have a fan page with 5,000 fans and through tracking and conversion we determine each fan is worth approximately 50 cents per month in profit. (Take note of the profit part, not revenue)
We develop a promotion, giving away $2,000 and also considering the time created to develop and the software to run it, add an extra $700 and add an extra $500 for marketing such as Facebook ads to reach $3,200.
Tip: Many times you can get prizes by donated by businesses for exposure, this may help you save on the prize costs.
Once the contest is over we now have 6,500, so that is an increase of 1,500 new fans. Take off 10% and we now have 1,350 new committed fans.
Why did I take off 10%? Normally after each contest there are people who will unlike your page and disappear, they were only in it for the prize. You get this with every contest and the drop off is normally under 10%. You will get further drop off if your page is not engaging or interesting to the new fans you gained.
That means our profit should increase by approximately $675 per month. Given the cost of the promotion it will take just under 5 months to break even. Then in 1 year you will have made a profit of $4,900.
Social media doesn’t generally work in this way, you will most likely see a higher profit in the long run, due to higher word of mouth, better engagement, you may also gain customers who spend more, it is very hard to tell.
Make sure you monitor your revenue and profit growth from a contest in the long run to gain a closer number for your business.
As with any marketing strategy, test, measure and improve upon. If it works, like the example above does, then keep doing it.