What is social media ROI anyway?
In business, return on investment (ROI) is a measure of how much you’re gaining for the investment you make. On social media, it’s what you get back from all the time, effort, and resources you spend doing social media tasks. Yes, you indeed have a social media ROI.
However, it’s not as simple as it may sound. Obviously, likes, retweets, and shares, as well as other important metrics like engagement, downloads, and customer satisfaction don’t always directly translate to dollars and cents. That’s why many believe it’s irrelevant and impossible to know your social media ROI.
We’re here to tell you otherwise.
Why is it important to measure your social media ROI?
When you effectively measure your social media ROI, you’re able to get valuable insight into how to drastically improve your social campaigns. It helps you better understand how to attract and convert followers into customers, and how to engage with your audience. More importantly, it points out where your efforts and resources are being used effectively (or being wasted) so you can adjust your strategies accordingly.
Essentially, measuring your social media ROI is an opportunity for you to grow your business and stand out from your competitors.
The Basic Formula
The most straightforward way of calculating your social media ROI measures how much your ads make (revenue) versus how much you spend (investment). This is often expressed in % and can be computed by:
ROI = (Revenue – Investment)/Investment x 100
ROI = Profit/Investment x 100
Let look at one example: If you run a paid ad that directs people to a product page, spending $500 on the ad, and it generates $2,000 in revenue, you can easily calculate your ROI by:
ROI = ($2000 – $500)/$500 x 100
= $1500/$500 x 100
=3 x 100
However, this is not a catch-all formula as brands will have different goals and KPIs, and thus different measures of success.
If you’re looking to calculate better (and more effectively) your social media ROI, here are the six actionable tips you need to take.
How to Calculate Your Social Media ROI
1. Identify Your Social Media Objectives.
It all starts with a solid foundation. Instead of flying by the seat of your pants, be sure that you have a social media strategy that will help set your direction and keep you focused.
Think about exactly why you want to use social media for your brand. Do you want to:
Boost audience engagement?
Generate business conversions like leads and sales?
Grow your email list?
Improve brand awareness and perception?
Increase website traffic?
Manage customer experience and relationships?
Remember, social media isn’t a one-size-fits-all approach. To have a meaningful and measurable ROI, you need to be specific about what you want to achieve. This will then give you an idea of how much of an investment – time, money, effort, and other resources – to put in.
Above all, keep your social media objectives aligned with your overall business and marketing goals.
2. Set concrete KPIs.
The next step is to determine SMART key performance indicators (KPIs) based on the objectives you’ve set. By SMART, we mean specific, measurable, attainable, relevant, and time-bound. This means knowing what to do, how to do it, and by when.
For example, if your goal is to manage customer experience and relationships, you’ll want to make it actionable by setting a KPI of (for example) reducing average response time on all social media channels from 1 hour to 30 minutes by the end of Q1 2021.
Likewise, KPIs can involve prompting customers to take a course of action that has monetary value. This can include:
Filled out contact forms
3. Keep a close eye on your progress.
Monitoring your progress is important in determining if your actions are working, if your audience is converting, and if you’re on track to achieving your KPIs. Be sure that you’re not only looking at the vanity metrics, but also on the numbers that can prove your ROI – audience engagement, reach, site traffic, leads, sign-ups, and conversion rate.
Tracking can be done in different ways, with the most common through Google Analytics and the built-in systems of each social media platform.
For instance, Users Flow report on Google Analytics allows you to track site visitors and see which pages generate leads and provide value. Also, you can incorporate tracking links to your CTAs to monitor what social channel or ad copy is producing the highest conversion rate.
4. Assign monetary values to your KPIs.
Since ROI is all about monetary returns, it’s essential to know the dollar-and-cents side of your KPIs. But first, you’ll have to know some of these values:
Lifetime value (LTV) – How much you earn on average from each customer
Lifetime value x conversion rate – How much each potential visit is worth based the percentage of conversions
Average sale – Average cost of purchase through your website
Pay-per-click (PPC) cost – Amount you pay if you use ads to achieve social media results
One way to assign monetary values is by using your historical data. For example, if your average LTV per customer is $100 and 20% of your downloaders become paying customers, then the cost of each e-book download is $20 ($100 x 20%).
On the other hand, if you’re a startup with no historical data, you can make projections in the meantime. For instance, if a business partner commits 500 newsletter signups in two weeks, you can research online on the industry benchmark for each signup. Or you can estimate a value and revise when you have data.
5. Take into account your other investments.
To find out if you’re getting positive or negative returns, you’ll need to measure all the expenses that went into creating, setting up, and monitoring your ads.
Here are some key elements you need to account for:
- Time and Labor Cost – Multiply the labor cost per hour by the number of hours committed or renderer for a specific campaign.
- Social Media Tools – While the social platforms themselves are free, the social media management software will have costs to use. Make sure you also measure this by campaign to get an accurate ROI figure.
- Content – Whether it’s your in-house creators or freelancer writers, account for the costs incurred to produce the actual campaign materials.
- Ad Spend – Add in the amount you spent on boosting posts, promoting tweets, and other advertising efforts.
Once you’ve taken into account your expenses, you can calculate your ROI by:
ROI = (Revenue – Total Investment)/Total Investment x 100
ROI = Profit/Total Investment x 100
Following the very first example: You run a month-long paid ad that directs people to a product page, spending $500 on the ad, and it generates $2,000 in revenue. But you’re also paying an employee $200/week ($800/month) for content and social media work and $59/month in tools. The computation changes to:
ROI = ($2000-$500-$800-$59)/$1359 x 100
= $641/$1359 x 100
Using this formula, you can now calculate your ROI per channel and per campaign. From here you’ll have a better understanding of how your efforts are performing and adjust your plan of action accordingly.
But don’t stop there! There are methods you can implement to bring in more returns to your social media marketing.
Use tools to manage and analyze your campaigns.
Consistently monitoring and analyzing your social media efforts is key to making sure you’re on track to achieve your goals and KPIs. Thankfully, this doesn’t mean you have to sit there for long hours checking your numbers.
As we’ve mentioned, Google Analytics can track your campaign goal. Google URL Builder can give you trackable links to add to your ads. Plus, eclincher can help in scheduling, managing, monitoring, and analyzing the details of your ads.
Up your influencer and content marketing game.
Social media users look up to influencers who they can relate to as consumers. If you want to improve your ROI, consider partnering with influencers who are relevant and highly impactful to your audience. These individuals can impact people’s purchase behaviors and decisions, turning followers into paying customers.
It’s also beneficial to create high-quality content that provides value to your audience. Whether it’s publishing blog posts, using keywords wisely, or optimizing your images, stepping up your content marketing can help improve your ROI.
Bonus tip: Leveraging your user-generated content can drive more people to your brand. This free promotion shows that you value your customers, which in return makes them feel like they’re part of your community.
Monitor your competitors.
Paying attention to what your competitors are doing can be a growth opportunity for your brand. Just to be clear, this doesn’t mean you should copy what they’re doing.
Rather, know what they’re successful in and learn from what they’re not doing. This way, you’ll get an idea of how to stand out from the crowd and be heard amidst the social media noise.
Calculating your social media ROI can give your business invaluable insights on how to learn from your past campaigns and succeed in your current and future ones. It gives you ideas on what works and what doesn’t, on what to retain and what to improve on.
Keep in mind that this is an ongoing process. That’s why it’s vital that you continuously track and analyze your campaigns. And you must be ready to make adjustments and changes when necessary. Since social media is an ever-evolving space, there’s always more to learn and adapt to.
To stay on top of things, eclincher is here to help. We’re your one-stop-shop for everything social media management and reputation monitoring. We provide you with all the data and insights you need to make sure you’re hitting your KPIs and gaining positive ROI. Sign up today for your free 14-day trial and experience what the buzz is all about.