Hi, Dan Sheehan from Social Merlin back again for another Marketing Minute. Today’s Topic: “How Much Should a Financial Advisor Spend on Social Media Marketing?”
Many financial advisors can testify to the fact that they’ve used social media successfully to convert prospects into new clients, and so can you. Social media is a great way to create awareness, expand your network, build trust, and target your niche effectively. As advisors, we love crunching numbers. Return on Investment (ROI) is part of our dialect. So how much should we spend on social media marketing? Is there a predictive formula that can give us an indication of the return on our social media efforts?
Social Media spend is a contentious issue for some people because they view marketing spend as an expense and not an investment. It’s also difficult to present an industry benchmark in social media marketing spend because Client Acquisition Cost (CAC) can vary anywhere between $340 per client to a whopping $25,000! As a general guideline though, the lifetime value of your client should always greatly exceed the acquisition cost of that client to make your advisory practice viable.
So, let’s look at a three-part formula for the number crunchers among you. You’ll need to calculate your Annual Revenue from Social Media and Investment Amount accurately to determine the ROI, so it will take a little work, but when done properly you’ll have your true ROI.
- To calculate your REVENUE FROM SOCIAL MEDIA:
# Network Connections x Key Events% x Acquisition% x Average Annual Revenue Per Client x Average Years Per Client
- Start by counting the number of connections you have in your social media network. You may find you have Facebook connections that are not LinkedIn connections and vice versa. Remove duplicates and calculate the total number of network connections that are in your target market. You don’t need to be exact, but very accurate in your counting.
- Your Key Events% is calculated by the percentage of people in your network that are potential clients for a 401K rollover, for example. Or any other life event that creates an opportunity for your services. It requires analysis of your network and social listening for qualified leads. This will take the most work and again it doesn’t have to be exact, but your accuracy here will pay dividends in getting the most precise ROI.
- The Acquisition% is based on the number of qualified prospects that you manage to convert into new clients — also known as your Win Rate.
- By analyzing your current client data, you’ll be able to calculate your average annual revenue per client. I realize that there is a variety of fee and commission schedules in the financial services industry. Utilize the one that is relevant to your cost model.
- Determine the average number of years per client by either using an actual figure or an estimation based on the industry average of 7 years.
- To calculate your INVESTMENT IN SOCIAL MEDIA (Expenses) accurately, use the following formula:
Your Time + Direct Marketing Costs + Cost of Social Media Marketing Education
- If you spend an average of four hours per week at your hourly rate, then multiply that by the number of weeks you work per annum to get to a $ value for your time.
- Add all your annual direct marketing costs. You may be paying for a LinkedIn Premium profile, paid ads, or other outsourced social media services.
- If you are paying for any social media marketing education, include those costs for your final Investment or Expenses amount.
- Now you’re ready to calculate your ROI:
(Take your annual REVENUE figure – your annual INVESTMENT figure) and divide it by the annual INVESTMENT amount.
This formula will help you determine the effectiveness of your current marketing strategy to deliver a positive return on your marketing investment. When advisors ask how much they should spend on social media marketing, they are often met with the answer, “Well, how much do you have available to spend?” Instead, it’s imperative to accurately measure your ROI and correctly determine how much to spend on social media. Doing this will avoid miscalculating how effective your social media investment is and allow your spending to be most effective or to alert you that something needs to be improved.
What’s your biggest marketing problem? Before you lose another ideal client get this and other issues resolved today by going to my website, socialmerlin.com, or click the link here now. You can also ask a question, make a comment or just get more information, and I will personally respond to you super-fast. Thanks, and see you next week.