Social Media ROI has baffled even some of the most seasoned marketers. This elusive topic is notorious because of the difficulty in measuring the relationship (cause & effect factor) between social interactions and the tangible sales or revenue they generate for a company. So the question has to be asked: Is it even possible to calculate Social Media ROI? The optimist in me says yes, but how do you go about doing it? And is measuring Social ROI relevant?
While there is no accepted Social ROI framework, opportunities exist to calculate ROI.
As marketing professor David Reibstein aptly describes it, marketing through social media is much ado about almost nothing. You need a metric that correlates your social media marketing to revenue. You must understand how your marketing efforts affect your financial goals. This important step will allow you to understand how much time, money and manpower should be allocated to building and implementing a campaign over social channels. But in order to determine that, you must first understand how to use metrics to measure the value your marketing campaign has created in relation to what you wish to invest in it.
Please read the book “Marketing Metrics: The Definitive Guide to Measuring Marketing Performance “ for more detailed study that was co-authored by David Reibstein.
While it is easy to put Social Media on the back burner for lack of measurable ROI, it is important to understand and acknowledge that the presence of your brand online potentially holds tangible revenue opportunity.
A research study conducted by the Internet Advertising Bureau (IAB), illustrates that consumers who have interacted with a brand via social media are more likely to purchase/recommend that brand. This study, which was conducted on certain FMCG brands claims, “for every £1 spent on Social Media, a potential value of £3.34 can be generated.” Now while the study may seem mildly reassuring at best, it is indicative of a growing trend in the Social landscape and that is: people want to be connected.
Another example of this trend can be found in this article, which highlights research studies that indicate a growing trend in consumers who are active on Social Media
• The number of Americans using Social Media has risen by 4% between 2011-2012
• Nearly 66% of Social Media users are trying to learn about products and services
• Brand-following behavior on Social Media sites has steadily increased over the past few years
Another key focal point when measuring ROI is to understand the costs associated with any social endeavor. A very helpful article in CMS Wire provides details around the “Four orders of benefit for calculating Social ROI.” The article classifies two kinds of benefits when calculating ROI: direct and indirect benefits. The direct benefits are those that are tangible, measurable and attribute to a direct effort and link to the cost incurred. But indirect benefits are those that cannot be measured or be linked to a specific effort or cost directly.
Nevertheless, it is important to acknowledge that there are direct and indirect benefits. Besides these different elements, the fact that there is no established framework, defined parameters or appropriate tools makes it harder to measure Social ROI.
Managing your campaigns and promoting your brand on social while keeping your costs in check is a very tricky task. So what do you need to achieve this elusive Social ROI?
- Firstly, you need to identify the relevant data elements (e.g., cost & revenue elements) associated with each social scenario
- You need to determine the data sources that can deliver these data points
- You need to determine if you have the right tools (e.g., social analytics tool) that can collect and deliver this data
- Lastly, you need to bring them all together to calculate your own Social ROI
The Social ROI framework will require multiple iterations so that you fine-tune this model to suit your respective business. There is no universally acceptable or foolproof Social ROI model yet. You will need to develop your own ROI model but most importantly adopt it as a conscious effort to measure the benefits. There is significant upside to measuring the Social ROI.