Social media return on investment (ROI) is a heavily debated topic in the online marketing world. This is because measuring the effectiveness of social media marketing efforts is not as clear cut as other campaigns, like a Google AdWords campaign. Users find it difficult to tell how much revenue a Tweet, post, or other social media effort sent out the previous week brought in. According to one study, 56 percent of businesses survey said they had an inability to tie social media to business outcomes, while another 39 percent said they suffered from a lack of analytics, expertise, and/or resources.
Why bother, then?
Social media marketing can yield amazing results for your business, and usually costing less than traditional marketing. Business have obviously recognized this. In fact, My News Tips reports an estimated increase of 14% in Digital Marketing job openings between 2014 and 2024.
To take this a step further, a recent annual report from Social Media Examiner found that 92 percent of marketers agreed that social media is important for their business, which is up from 86 percent in 2013. The report found that 92 percent of all marketers indicated that their social media efforts have generated more exposure for their businesses, while another 80 percent found that their social media efforts increased traffic.
As you can see, a social media marketing campaign can offer some great returns for your business. While measuring the ROI of your social media marketing efforts is not impossible, it can be tricky without the right information. Before we jump into tips for measuring social media ROI, we should learn what it is.
What is Social Media ROI?
The definition of social media ROI can actually change, deepening on what your specific marketing goals are. However, at its centre it is what a company is getting back from the time, money and other resources it has put toward social media marketing.
The two key concepts with social media ROI are:
1. How much money is going into the company’s social media marketing efforts
2. How much money the company’s social media goals are worth
For most companies, the first point is easy to determine. It gets tricky when you get to the second point. Point 2 is completely dependent on the goals set by the company. ROI has its roots in business finance. Business use ROI to calculate the dollars-and-cents return on a dollars-and-cents investment. Therefore, social media ROI is what the company gets back from all the time, effort, and resources committed to social media. While you can count your success in other ways, such as number of followers, to really determine the value it is important to calculate success in dollar amounts.
How to Measure Social Media ROI
Because there are no dollar signs attached to “retweets” or “likes.” Some social media efforts also do not cost anything, such as creating a Facebook Page and posting to followers, which can make determining your “investment” a little more difficult. To effectively to track your social media ROI, focus on identifying your monetary investment in social media and, once you have done this, attach a dollar amount to your social media goals.
While this may seem straight forward, there are many companies who focus on vanity metrics, like the number of followers or likes a company has. While you certainly want to have a focus on bringing in new followers, these numbers are really meaningless compared to other metrics for measuring success.
Here is the formula for calculating your social media ROI:
ROI = (return – investment) / investment
This straightforward formula is comprised of two parts: Return and Investment. Keep reading to learn how to calculate both your return, and ultimately your social media ROI.
How to Calculate Your Return
“Return” is a trickier element of social media ROI to determine because it can mean many different things to many different businesses. The first step is to determine your goal(s). What is it you want to achieve with your social media marketing campaign? What are the right actions you should take to meet this goal?
Here are a few examples of common social media marketing goals:
· New followers
· Clicks on link in update
· Online purchases
· Filled out contact form
· Signups for newsletter
· Downloads of .PDF file
· Time spent on important webpage
Once you have determined your goal(s), you must determine how to meet them. While taking steps to achieve your goal(s), track your progress. For example, you can track website actions like sales, downloads, and signups in Google Analytics with the “setting up goals” and “event tracking” features.
Finally, you must determine how much these actions are worth to you. You must assign a monetary value. There are several different methods to choose from to accomplish this:
- Lifetime Value – How much you earn on average from a customer
- Lifetime Value, Multiplied by Conversion Rate – How much each potential visit worth to you
- Average Sale – The cost of the average purchase through your site
- PPC Costs – How much you would end up paying if you were to use ads to achieve the same social media actions. To accomplish this, you would compare the amount you would pay in advertising for a new follower, etc., and extrapolate for what you actually earn via you free social media sharing. For example, if it costs 25p to gain one follower through ads, then your “organic” (or free) gain of 20 fans is a £5.00 gain.
Buffer has found some benchmarks that can be helpful for comparison:
- Facebook like average – $0.50 per page like
- Facebook reach average – $0.59 per thousand impressions
- Facebook click average – $0.50 per click
- Promoted tweet – $3.50 per thousand impressions
- LinkedIn – $2.00 per click
Keep in mind that this will vary dramatically based on industry, how well you setup your ads, and messaging and will also vary from country to country.
How to Calculate Your Investment
In addition to figuring out your return, you must calculate your investment. While many social media platforms, like Twitter and Facebook, are free, the time you invest is not. In addition, you can spend money on ads. Here is a breakdown of what you are investing when you launch a social media campaign:
- Time – To determine how much your time is worth, multiply your labour-cost per hour by the number of hours you have committed over a given period (such as per week, month, campaign, etc.). According to Payscale.com, the median hourly rate for social media managers in the UK is £9.79.
- Social Media Tools – Add up the costs of all the tools and services you use for social media. Find the weekly or monthly costs by dividing annual fees by 52 for the weekly cost, or by 12 for the monthly cost.
- Advertising Costs – This is the amount you spend on social media advertising to boost Facebook posts, promoting tweets, and so on.
Once you determine all of these costs, add them together to determine your actual investment.
Determining these key elements will allow you to plug them into the ROI formula:
ROI = (return – investment) / investment
Once you do this, you will have your social media return on investment. This information will help you determine if you are reaching your goals or if you need to make some adjustments in your investments.
If you found this article helpful you may like to try out our social media training, where we’ll match you with a social media employer so you can try to deliver a return-on-investment by running your first social media campaign. Find out more here >>