Quantifying your social media return on investment (ROI) is not easy, especially when dealing with organic social media and more so if your strategy overall doesn’t tie directly to specific attribution links or CTAs. And even with paid social (apart from e-commerce and direct-to-consumer), measuring the value of ads’ returns is tricky.
In this article, you’ll learn the steps you can follow in measuring more precisely your social media marketing ROI and things that are a must that you do.
Understanding Social Media ROI
Simply put, social media ROI refers to a metric that shows the value of your social media investments. Generally, this ROI is measured in monetary terms, and there are cases where it might not be easy to allocate any direct monetary impact of social media efforts. In such scenarios, ROI is quantified using non-monetary metrics.
For instance, if your social media paid campaign goal is to increase your brand’s influence and awareness, you could measure ROI using your published posts' impressions or the growth in the number of people that follow your brand. For this reason, you should design your social media ROI based on your business’s primary objectives on social networks.
The Importance of Quantifying and Measuring Social Media ROI
The following are the main reasons why you should seriously consider measuring and quantifying your ROI for your social media efforts:
- To prove beyond any doubt that your efforts on social networks are driving your intended results
- To identify areas in your social media strategy that might need improvements as well as those performing as you’d expect
- To inform social media campaigns resource allocation moving forward
How Do You Calculate ROI for Social Media Marketing?
The most effective social media marketing strategies follow certain steps to ensure that the ROI is quantifiable and measurable. These include:
Align business objectives with your social media goals
Beyond creating social media campaigns dubbed “growing awareness,” you must design your social media campaigns with more transparent, more quantifiable objectives. Growing awareness may have been a good enough objective back when social media sites were limited to Facebook, Twitter, and Instagram, but it falls flat in today’s cluttered social media landscape.
Given the large and ever-growing list of social media networks and the now available ROI tools, you cannot afford to be still satisfied with growing awareness. Businesses that are hacking social media marketing today do so through thorough planning and goal setting. Beyond growing awareness, other common business objectives on social media include:
- Improving customer perception
- Growing revenue
- Retaining more customers
- Generating leads and winning new customers
Before anything else, plan a meeting with your team and discuss which goals would most effectively represent your brand’s social media marketing objectives. It is from this point that you must design all your marketing efforts on social networking sites.
For each goal, set targets that you can quantify
The effectiveness of your social media efforts will be determined by how measurable your targets are for every goal you have set. The goals you set need not be limited to social media, and they could be general goals for your business but will help you better design your social media campaigns.
For instance, if you’re hoping to generate leads, your objectives could include:
- 20 inquiries about your service every month
- 40 new subscriptions to your newsletter every month
- 100 eBook downloads every month
The idea here is to create clear goals that have a direct relationship to your business objectives.
Identify the most relevant ROI metrics
The idea here is to define social media and business metrics that would be most closely aligned to your business goals or that could push the business towards achieving its goals. For companies whose primary objective is prospecting for sales, lead generation or brand awareness, it might make sense to track visibility metrics like impressions, reach, and followers.
If you want to know the type of content that resonates most with your target audience, you might want to work with engagement metrics like average engagement rate. On the other hand, if specific demographics define your target customer, you may want to look into audience metrics like languages, keywords, devices used, gender, and countries. In addition to such metrics, you should include the following business-centric metrics:
- Website traffic
- Social media conversions
- E-commerce purchases
- Sign-ups and form submissions
- Leads generated
- Online reviews
- Customer service ratings
- Business app downloads and reviews
After listing the metrics, define what you wish to track, re-evaluate them vis-à-vis measurable objectives and your business goals. Ensure that the metrics can effectively measure your success, which will ultimately help you make better decisions for your business. Also, ensure that your business has the know-how and the resources necessary to—daily or weekly—track and report on the metrics you decide to monitor.
Calculate the cost of your social media efforts
While many marketers overlook the need to calculate social media costs, doing so is extremely important if you’re going to develop a sustainable social media strategy. Identifying all the costs associated with your social media efforts will allow you to create more realistic short and long-term campaigns.
The costs will include:
Time your employees allocate for social media efforts
This includes the time dedicated to research, meeting, planning, content creation, publishing, and reviewing. Consider incorporating individual salaries and hourly wages into account. You could consider improving your ROI by finding low-cost freelancers to carry out some of the tasks.
Content creation
Social media content includes blog posts, videos, graphics, and the copies needed to accompany the posts you will publish. While some of the content creation costs will be included in your internal employee time, there are incidences where you may need extra help, say from a graphic designer or videographer, that you don’t have in your employees’ list.
Tools, platforms, and software
Companies that want to invest heavily in social media have to also invest substantially in platforms, software, and tools that make social media marketing easier. The tools may include:
- Content creation programs and tools
- Marketing automation tools
- Social media analytics tools
- Social media publishing tools
- Social media-related website modifications
- Chatbots
Ad spend
Sometimes businesses try to avoid spending money on social media ads and instead hope to grow organically. But in today’s social media landscape, it is almost impossible to record any notable growth without a decent ad spend. Therefore, it helps, from the get-go, to have prepared yourself by allocating and regularly reviewing your ad spend for boosting posts, paying influencers to market your products, running social ads and contests, etc.
Measuring your social media ROI: the calculations
Social media investments and returns can’t simply be expressed in dollar terms, but there’s still a way to calculate your social ROI roughly. Keep in mind that to get a clear picture of your ROI, you must base your metrics on your business goals, then evaluate them against costs.
Of course, there are cases where calculating social media ROI is pretty straightforward, e.g., for paid ad campaigns. In such scenarios, tracking your revenue sales against your social ad spend will tell you whether you’re getting any noteworthy ROI.
But, as is mostly the case, the situation is more complex. For instance, how would you calculate the revenue your business gets every time it gets a new follower on Twitter? Or what are the 100K views on your marketing video that went viral actually worth to your brand?
Obviously, not every action on social media will have a direct impact on revenue. Yet, even in such situations, we still must find a way to measure ROI. For this reason, we use a method that more effectively captures the nuances of social media marketing.
Here’s the social media ROI formula:
Social media ROI = (Social media returns – Social media costs) / Social media costs X 100%
It can also be calculated this way:
Profit / Investment x 100 = social media ROI %
Where:
- Profit is the money you earn that can be attributed to your efforts in social media marketing.
- Investment is the monetary value of all your efforts in social media marketing.
As we’ve already discussed, in scenarios where it is challenging to attribute social media efforts directly to revenue, you can quantify ROI using non-monetary metrics like the number of subscriptions, increase in follower count, etc. That said, it is advisable always to attribute a monetary value to your efforts on social media to understand your investment’s value objectively.
Reporting on Social Media ROI and Performance
After calculating revenue, you need to report on it. To do this, you need to create a social media ROI report. The report should be insightful, analyzing each ad format, ad placement, and social media platform separately to accurately assess the biggest revenue contributor. Present the data stretching over a period that’s long enough to create a clear picture of the impact your social media marketing efforts are having on your business objectives.
It would also be helpful to include in your report insights that describe how the non-monetary, less tangible parts of your social media strategy are contributing to the business’s bottom line. Clearly list areas that the strategy has proven effective and those that are still a work in progress. In scenarios where your efforts seem to be falling short, make observations and recommendations on adjusting the social strategy to improve ROI.
Conclusion
Measuring your social media marketing ROI will give you invaluable business insights; you will learn what has been working in past campaigns and get a good idea of what you could improve to achieve better business outcomes. Measuring social media ROI is always an ongoing process. You should, therefore, create a schedule of how you plan to continuously track and analyze those efforts, including how your brand plans to adapt to the ever-changing social media landscape.