A Comprehensive Guide to Social Media ROI
To secure executive buy-in and budget for your social marketing strategies you need to demonstrate how your efforts are contributing to the business’ goals. Social media, like other channels, has to prove its return on investment (ROI).
But beyond proving the impact on your organization, measuring and tracking ROI lets marketers dedicate more time and resources into what’s working, and improve the tactics that aren’t delivering value.
What is social media ROI?
The definition will depend on what your organization’s objectives are—brand awareness, revenue, customer satisfaction, etc. But generally speaking, social media ROI is the sum of all social media actions that create value. After all the time, money, and resources put in—what’s the return?
If you were measuring ROI by revenue, for example, a simple formula to do that looks like this:
Profit / total investment (people hours, ad budget, etc.) X 100 = social media ROI (as a percentage)
So, if you made $1,000 in revenue from social media on a $500 investment, your profit is $500 (remember: profit = revenue – investment). And then your calculation would be: $500 profit / $500 investment X 100 = 100% return on your investment.
But that’s not a catch-all formula for proving social ROI.
Not every organization will be able to attribute revenue directly to social media. Value isn’t always measured in dollars and cents. Tethering the ROI of social media to such a narrowly defined objective prevents you from identifying the many other ways your investment in social is paying off.
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 another way to consider your social media ROI, think about the ratio between gain and cost, which includes things such as:
• Social media technology
• Agencies and consultants
• Social media advertising budget
• Business overhead
For estimating the gain from certain consumer actions (purchases, page views, downloads, email list signups, etc.) you need to look to analytics to determine which conversion events can be attributed to social media. This helps you define your social media ROI and prove the value to your organization.
Why measuring ROI is important
Talk is cheap, so while you could tell your stakeholders or clients about the value of social media campaigns and why they need budget and resources, nothing will convince them more than being able to show results.
Everything is taken more seriously when there are measurable and specific outcomes, and this is especially true for social media ROI.
Measuring your social media ROI is important for many reasons, including, but not limited to:
• Changes the perception of social within your organization
• Shows the potential impact social can have across multiple departments outside of marketing
• Let’s you discover where your efforts and resources are being used most effectively
• Allows you to adjust tactics in areas where efforts and resources aren’t being used effectively
• Identifies gaps in your overall strategy, key messages, and content
• Helps you better understand customer perceptions, preferences, conversations, and motivations
How to measure social media ROI: objectives, goals, and metrics
While it’s great to set social media goals and act on them, your job isn’t done until you’ve proven the value of your efforts.
How to set social media objectives to prove ROI
Now that you know what social media ROI is and why it’s crucial for your business, it’s time to set some objectives.
The brand awareness created by social media—measured through metrics such as likes, shares, or retweets—is valuable, but not enough. According to Altimeter, only 34 percent of organizations feel that their social strategy is connected to business outcomes. To demonstrate social media’s value, you need to set social media objectives that complement existing business and departmental goals.
Your social media objectives could be based on:
• Business conversions (such as customer acquisition or lead generation)
• Brand awareness or perception
• Customer experience
• Security and risk mitigation
How to set social media goals to prove ROI
Your objectives represent what social media will help your organization achieve. Once those are established you need to set goals, which represent how and when you’re going to achieve it.
For example, rather than simply saying that you want to improve customer service on social media, set a numerical value and a deadline for this, such as speeding up your first response time by 10 minutes by the end of your first quarter.
If your objective is business conversions, for example, a good goal to set would be a specific number of leads you want driven by social media for the quarter. Another example of a business conversion goal would be increasing landing page conversion by 10 percent. You would measure this by tracking the conversion rate of people who land on the page through social channels.
No matter what your goals are, audit your existing social media performance to establish baseline targets, and then set appropriate goals for improvement.
How to choose social media metrics to measure ROI
Metrics represent how you’re going to measure whether you’re achieving your goals and objectives.
Social metrics such as followers, likes, comments, and shares are sometimes called “vanity” metrics, but it’s important not to dismiss them entirely.
These metrics are integral to gauging the overall health of your social presence, measuring yourself against competitors, and determining what type of content is resonating with your audience. They only become “vanity” metrics when they have no relation to your business objectives. It’s important for social data to be relevant to all stakeholders within your organization, not just social media practitioners, so avoid using these types of metrics in isolation.
Instead, use metrics that directly demonstrate how social media is helping achieve your objectives. These could include:
• Audience engagement
• Site traffic
• Leads generated
• Sign-ups and conversions
• Revenue generated
When deciding what metrics to measure, ask yourself:
1. Does it align with my objectives?
2. Does it help me make decisions?
3. Do I have the capacity to measure it effectively?
Measuring social media ROI gives your organization valuable insight into the success of current and past campaigns, and what might work in the future. There’s always more to learn, more to test—and more to gain.
Source: Sarah Dawley from HootSuite