A marketing campaign’s 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. From business to business, ROI can take on different forms and different roles in business strategy.
Determining your ROI is crucial in marketing, as it measures success over time and takes out the guesswork when making long-term business decisions. The ability to calculate ROI is extremely valuable for any business, regardless of size or industry. When surveyed however, it’s evident that businesses across the board are struggling to determine the effectiveness of their social media strategy. Over 40 percent of companies say they have no idea whether or not their social media efforts are actually paying off, so it’s unlikely that ROI is reinforcing business goals and objectives for these brands.
Social media ROI is understandably difficult to measure— it’s hard to say how much revenue was generated by an Instagram post, or if your most recent Snapchat story boosted your bottom line. But determining your social media ROI isn’t impossible. To learn what social media ROI is, why it’s beneficial to your business, and how you can start measuring it effectively, keep reading.
What is Social Media ROI?
At its core, ROI measures the time, money and resources you’re devoting to any project. How you choose to measure ROI can be specific to your brand’s overall goals. Goals can include increased visibility, profit, customer engagement, or any other objective you can think of.
Not all ROI valuations can be broken down into dollars and cents, especially when it comes to social media. Because social media can provide many benefits to your business, tethering your social media efforts to a narrow view of profit and revenue might not accurately demonstrate your successes (or failures). In fact, non-financial outcomes can often do a better job of depicting human behavior and can act as a better “screenshot” of your social media performance.
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 be better suited to measure success as metrics like audience reach and engagement, rather than profits gained. When speaking business strategy, cost isn’t limited to just expenses of the campaign, but rather what was forgone to deliver a service (in this case, social media output). Be sure to consider the amount of time employees spent on crafting and reacting to posts when you begin to assess your social media ROI. More hours are spent on this activity which can also take time away from other, “more productive” work.
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?
The Benefit of Measuring Social Media ROI
Social media marketing is common among many businesses in many different industries, but without tracking your results, it’s difficult to determine if your efforts are actually worth your time. Measuring ROI identifies which campaigns are working best, social media channels that are most beneficial, areas to boost investment, places where improvement is needed and even tactics you should abandon.
When assessing performance metrics, you and your business are able to better understand customer preferences, perceptions, conversations, and motivations, all of which contribute to increased sales and revenue. Social media marketing is relatively low-cost, but you’re still investing time, resources, and human capital. Specific and measurable outcomes will allow you to monitor success on social media and ensure that it continues over time.
How to Measure Social Media ROI
1. Set a Specific Goal
If there’s one thing you should take away from this guide, it’s that specific, measurable, achievable, realistic and timely goals are crucial to business success. A well-defined goal serves as a framework for growth and makes the remainder of the ROI process much easier. Setting specific objectives and holding yourself to them is the best way to optimally monitor your social media strategy.
There are tons of social media goals that will help you boost your bottom line over time. A few impactful goals can include:
– Increase brand awareness
– Drive website traffic
– Boost brand engagement
It’s important that your goals are specific to your business, its service, and its current state of operations. For example, a newly-launched clothing line may want to increase views on a post to improve brand awareness, but a business advice blog may want to direct traffic to its most recent article.
2. Continuously Track and Monitor 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.
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 idea 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.
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 effort.
Here’s 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 also extend to paying photographers, blog writers, or other outsourced content, so remember to add these costs too.
4. Calculate Your ROI
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 try to adjust by spending less, or by making your campaigns more effective.
If you’re not tracking your ROI for your marketing efforts, you need to start! Tracking ROI for your social media marketing campaigns is critical so you can understand if all the resources you’re pouring into it is making a difference for your business. Yes, calculating ROI, especially for social media efforts, can be challenging, but it’s not impossible. Read the sections above to make sure you understand what social media ROI tracking is and how to do it.
Amanda Peterson, Enlightened Digital
Author Bio: Contributor to Enlightened Digital and software engineer from the one, the only New York City. When I’m not trying to find the best record store in the city, you can find me curling up to watch some Netflix with my Puggle, Hendrix.