How to measure social media ROI
Wednesday, August 31, 2016
Measuring the return on your social media efforts has been steadily increasing in importance.
To justify spending money, time and resources on digital/social marketing has become crucial for marketing departments as well as the senior management of an organization. The investment made needs to demonstrate the positive effects on the organization's broader business goals.
Social media has come a long way from being treated as an "experiment" to a core business strategy in terms of marketing. It is now significant enough that it has to compete with other marketing channels for budget and resources.
Measuring the return on investment (ROI) depends a lot on your overall business objectives. For instance, if the goal of your social media campaign is to drive sales, then your social media return is the number of sales you can attribute to your social media campaign.
If your goal is to drive consumer engagement, then your social media return is the quantity and quality of the consumer engagement you get from your fans and followers. If your goal is to drive awareness of your brand, then your social media return is the number of people reached, site traffic, etc.
Key examples of social media metrics to track include:
- Site traffic
- Leads generated
- Sign-ups and conversions
- Revenue generated
The success of a campaign is not always measurable or quantifiable. To account for this, you need to keep track of changes in consumer behavior: What kinds of things did your target audience do after exposure to your campaign? Did these actions align with your goals? Where did they fall short? How can they improve for next time?
If you need another way to consider your social media ROI, think about the ratio between cost and gain. Costs are anything being invested in your social media efforts, with some examples being:
- Social technology
- Agencies and consultants
- Paid media
- Business overhead
To estimate the gain from certain consumer actions (purchases, page views, downloads, email list signups, etc.), it is crucial to refer to internal analytics that will help understand the conversion events that happened during social media activity. These are all areas that can help you define your social media ROI and prove the value to your organization and brand.
In the financial world, ROI is used to measure the financial efficiency of an investment. ROI is based on the financial formula: ROI = (return – investment) / investment %.
Having calculated the ROI of your social media campaign, you use the ROI number to compare to other social media campaigns and also your TV, print, radio and other campaigns to determine efficiency of your efforts.
Social media data has to be relevant to not just your social media or marketing department but also to stakeholders within your organization. Tying social media to the big picture by linking it to organizational and departmental goals will help you achieve that.
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