By Amanda Peterson, Enlightened Digital
Social media return on investment (ROI) is one of the most frequently debated subjects in the digital marketing world. Why? Mainly because social media ROI is different for every business, so there’s not one agreed upon definition. If you ask five social media managers to define ROI, you’re likely to receive five different answers.
When surveyed, it’s evident that businesses across the board are struggling to determine the effectiveness of their social media strategy. Over 40 percent of companies said they have no idea whether or not their social media efforts are actually paying off, which is definitely not a reassuring feeling for any marketing team.
Social media ROI is understandably difficult to measure— it’s hard to say how much revenue was generated by a single Tweet, or if your most recent Instagram post boosted your bottom line. However, it still comes as a shock to me when marketers say things like “social media marketing is optional”, or that it “certainly isn’t measurable”.
Determining the ROI of your social media strategy isn’t impossible. It’s time to clear up this social media myth, so follow the steps below to learn what social media ROI is, why it’s beneficial to your business, and how you can start measuring it effectively.
So What is Social Media ROI?
Though I’ve already claimed that there isn’t a true definition for social media ROI, at its core, ROI measures the time, money and resources you’re putting into any project.
In this case, the project is your social media strategy. How you choose to measure ROI however, is specific to your brand’s overall goals, whether it be visibility, profit, customer engagement, or any other objective you can think of.
Not all ROI valuations can be broken down into dollars and cents, however. Tethering your social media efforts to a narrow view of profit and revenue won’t accurately depict your social media successes (or failures).
Author Oliver Blanchard sums it up well in his book Social Media ROI: Managing and Measuring Social Media Efforts in Your Organization by explaining that non-financial outcomes can “tell the story by capturing changes in human behavior.”
Metrics such as reach, engagement, and impressions can give a more personalized view of social media value in some instances. For example, if your goal is to drive brand awareness, you would measure success against metrics such as audience reach and engagement, not profit.
If you need a completely simplified perspective of ROI, think of it as the balance of gain and cost.
In a strategy sense, cost isn’t limited to just expenses, but rather what was forgone to deliver your service (in this case, social media marketing). When crafting your social media strategy, costs can include anything from time spent to labor. When you begin to assess your social media ROI, be sure to take these less-quantifiable metrics into consideration.
Analyzing social media ROI can be summarized in one simple question: after all the time, resources, and money put into social media strategy, what’s the return?
How do you answer this question most effectively? Keep reading!
The Benefit of Social Media ROI
Social media marketing is commonplace across all industries, but without tracking your results, it’s pretty difficult to determine whether or not anything you’re doing is actually worth your time. By measuring ROI, you identify which campaigns are working best, social media channels that are most beneficial, areas to boost investment, places where improvement is needed and even efforts you should probably abandon.
Without tracking ROI, you’re essentially flying blind through your social media strategy.
When assessing performance metrics, you and your business are able to better understand customer preferences, perceptions, conversations, and motivations— which all contribute to the bottom line. Though social media is relatively low-cost, you’re still investing time and resources. Specific and measurable outcomes will ensure that success on social media continues over time.
How to Measure Social Media ROI in 4 Easy Steps
Now that we’ve discussed what social media marketing is and why it’s important, it’s time to put these ideas into action. Unsure of how to get started? I’ve broken it down into three simple steps that even the most analytically-challenged can follow.
STEP #1: Set A Goal
If there’s one thing you should take away from this guide, it’s that goals are important! Setting measurable, attainable and quantifiable goals is the best way to optimally progress your social media strategy. Buffer published a great list of social media goals you can set for your business including:
- Increase brand awareness
- Drive traffic to your website
- Boost brand engagement
In order to achieve the most accurate ROI, you want select goals that are directly related to converting casual browsers to leads (your paying customers). A well-defined goal serves as a framework for growth and makes the remainder of the ROI process much easier.
STEP #2: Track Your Goals
Once you’ve set up your goals, the next step is to track them. This is why it’s so important to establish well-defined and measurable goals. The more informed you are about customer behavior on your social channels, the more likely you are to retain and convert your audience.
There are great tools online that can assist in goal-tracking.
One of the most common ways to monitor your goals is through Google Analytics, which can be set up on any web browser. When you set up the tool, you’ll be prompted to create a goal. These can be completely customized depending on the goals you defined in the previous step. Anytime you enter the Google Analytics homepage, you’ll be able to view real-time updates of these conversions.
On a smaller scale, Facebook, Instagram, and Twitter all have analytical functions for users with registered business profiles. Each platform offers personalized metrics and demographic information tailored for users on the specific platform. This method provides a quick snapshot of growth per channel and even performance indicators for individual posts. The data provided by these social platforms can easily be compiled into a spreadsheet on a regular basis to watch growth over time.
STEP #3: Determine Your Investments
In order to determine whether you’re yielding a positive or negative ROI, it’s necessary to find the sum of your costs. Remember, spending isn’t limited to just monetary value, but also intangible elements like time and labor. Here are some things to factor into your cost:
- Man-hours: Time is valuable. Whether you’re working solo or managing an entire social media team, add up the hours that are spent crafting social media material over a certain period of time. Be sure to separate time spent per campaign for the most accurate result.
- Ad costs: If you’re running promoted social media campaigns, make sure to include those costs.
- Content creation: Social media costs can also extend to paying photographers, blog writers, or other outsourced content, so remember to add these costs too.
STEP #4: Calculate Your Results
Once you’ve totaled both earnings and costs, you can calculate your ROI with this simple formula:
[(Earnings – Costs) / Costs] x 100
After analyzing ROI for any given segment of social media, you will be able to determine your best performing areas and places that can be improved. For any social networks or campaigns that are bringing in a negative ROI, you can either try to adjust by spending less, or by making your campaigns more effective.
Contrary to popular opinion, tracking social media ROI isn’t impossible. It just takes a bit of strategic thinking and careful planning. The more organized and specific your goals are, the more accurate your ROI results become, but it’s important to note that goals can always be fine-tuned. As your social media strategy progresses, be sure to revisit your goals and objective and structure them to fit the growing needs of your business.
Amanda Peterson is a contributor to Enlightened Digital and software engineer from the one, the only New York City. When she’s not trying to find the best record store in the city, you can find her curling up to watch some Netflix with her Puggle, Hendrix.