If you run an e-commerce business such as an online store, and pay a social media manager to help generate sales for you, then this is required reading.   Depending on whether or not you are tracking the ongoing ROI from your social media investments, the data shared below may come as a shock.  

Last week, VentureBeat reported some disturbing data they found in the latest Monetate e-commerce report.  The VentureBeat article was titled Social commerce is like a unicorn: beautiful, alluring, and almost totally imaginary.

What this e-commerce report shows is that:

• Social media referrals represents just 1.55 % of all traffic to major e-commerce destinations, and
• Only .71 % of those referrals actually results in any kind of sale

In fact, conversion rates for Facebook, Pinterest, Twitter, and Linkedin were a paltry 1.08%, .36%, .22%, and .04% respectively.

Example ROI Breakdown

What this means from a weekly ROI perspective is the following:

• Let’s say that you pay a part-time social media manager about $20.00/hour for 20 hours a week or $400.00/week
• At the same time, the average product sold through your online store is $40.00

A quick break even analysis gives us the following result:  You must convert at least 10 visitors from social into paying customers each week.

$400.00 weekly salary / $40.00 avg sales price = 10 social sales per week

Therefore, with the average conversion rate of just .71% for social, to get 10 sales you must get about 1,409 unique visitors to come to your website as a result of your social media efforts.

10 sales / .0071 conversion rate = 1,408.45 unique social visitors per week

That seems like a reasonable goal.  However based on industry averages, to get this number you would likely need to be also generating nearly 68,000 unique visitors to your site every week from all traffic sources including email, social, and direct visitors.

1049 social vistors /.0155 of all traffic = 67,677.42 overall unique visitors per week

If you are niche online store, you would have to be targeting a pretty popular niche to hit these numbers every week. As this would mean you are getting over 3 million unique visitors to browse your online store every year.

68,000 visitors a week *4 weeks *12 months =  3,26,4000 overall unique visitors per year

Email Marketing vs. Social Media Marketing

Now let’s compare the Monetate e-commerce report data on email conversion for online stores to social media conversion rates online stores.

Source: Monetate
Conversion rate by email, search, and social

As you can see, email marketing is more than 450% better than social media marketing when it comes to converting a visitor into a customer. That’s a big difference.

Using the same numbers from our example above, we find that if we changed the social media manager to a email marketing manager, you would need to drive only 314 unique visitors per week for a break even ROI.

10 sales / .0319 conversion rate = 313.47 unique visitors per week

What this means is that it takes roughly 4 times more traffic from social media to generate the same ROI that you get from email.  Better yet, it’s easier to convert an email subscriber to a customer that it is to convert a social media friend or follower.

This data should not be new to you if you have been reading this blog over the last month.  A few weeks ago we shared a test that showed that a  Facebook fan is only 3.8% of the value of an email subscriber. 

Actionable Takeaway

The takeaway for you is NOT that you should fire or cut the salary of your social media manager if they aren’t hitting your ROI numbers.  Please don’t do that!

There are many intangible benefits from social that cannot be measured using strict ROI calculations such as customer service, branding, SEO, and lead nurturing.

The takeaway is that is that e-commerce social media managers must be trained to integrate social with email marketing.  This is without a doubt going to be your ROI sweet spot.

We now have several years of real data under our belt. It’s safe to say that social media is an additive to email and search engine marketing that can no longer be managed on an island of its own.