Measuring the return on your social media investment isn’t optional. Making sure you demonstrate how your social media campaigns are contributing to an organisation’s broader business goals secures their buy-in.
To do this, you need a firm grasp of social media ROI and to make sure you’re tracking campaigns as effectively as possible. We explain the nuts and bolts of ROI, and then explain how you can measure it effectively in minutes.
Why Measure ROI?
A study by The Alternative Board (TAB) found that two-thirds of entrepreneurs don’t think social media is essential for business. You might find the perception of social media among the entrepreneurs surveyed surprising. 18 percent didn’t have any social media presence at all. 66 percent had beginner or intermediate social media managers running their campaigns, and 22 percent said they only checked social once or twice a year.
‘Business owners have trouble understanding the importance of social media because they don’t understand the ways to monetize or measure the return on investment, or perhaps they previously invested a significant amount of time or money into the tactic and saw no return,’ says chief marketing officer at TAB Jodie Shaw.
Those in the industry know that social media is vital when it comes to marketing a business of any size. To make sure business owners understand that social is no longer experimental, but rather a core strategy, their spend needs to be justified with results (metrics). Social media is an advertising channel that’s competing with other channels like print and TV for marketing budget, so ROI needs to be demonstrated.
What Is Social ROI?
According to Investopedia, ROI is ‘A performance measure used to evaluate the efficiency of an investment or to compare the efficiency of a number of different investments. ROI measures the amount of return on an investment relative to the investment’s cost. To calculate ROI, the benefit (or return) of an investment is divided by the cost of the investment, and the result is expressed as a percentage or a ratio.’
The formula for calculating ROI looks like this:
ROI = (Gain from Investment – Cost of Investment) / Cost of Investment
Social media ROI is (almost) exactly the same thing. No business wants to put money into a marketing channel that isn’t making them money. That is, you need to show your clients the return they’re getting on their investment so that they understand that you’re worth the budget. When looking at social media ROI, businesses are going to ask some of the following questions:
● Are the results worth our time and effort?
● Is the cost worth it?
● How can you prove this?
● Will come content have a better ROI than other content?
● How can this be measured?
When it comes to ROI, as you can see, measurement is everything if you want to prove that your social media strategy is working. While the way you work out ROI will depend on your client’s specific goals, what you’re basically looking to prove is how well your campaigns are doing the job.
Measuring Social Media ROI
Just as in the measurement of any ROI, there’s some maths involved in measuring social ROI. It’s not too complicated, though, if you have all of the variables. The social media ROI formula looks like this:
Social media ROI = (SM return – SM investment) / SM investment percentage
The key here is financial outcomes, but what if it’s not easy to quantify your objectives? What financial experts call ‘non-financial outcomes’ include what your target audience did after a campaign, whether these actions were in line with your goals, and where they might be improved on next time around.
A simpler way to look at it is to think about what goes into your social media campaign, and what comes out of it. Costs going into your campaign could include:
● Paid media
● Business overhead
To better understand the result of your campaign, look at your analytics to see the conversions that happened while you ran your campaign. These can all help you estimate your ROI to share with your client.
Why Measuring ROI Matters
Even brands who take social media seriously want to see what they’re getting out of their spend. If calculating ROI seems like a lot of work, remember that being able to share it with a client can:
Prove how valuable social media is to an organisation’s overall goals and objectives (make sure you’re clear on these before you set out calculating ROI)
Showing exactly where your social media budget is being used, helping you pull back in certain areas if necessary and being able to tell the client where you’ve found ways to save them money
Allowing you to show your client that all resources are being used efficiently, and highlighting where they’re best being put to use
There are also helpful things that you can learn from calculating your ROI on a campaign:
● Where there are gaps in strategy and key messaging
● Where content isn’t performing as well as it should
● Where you should improve how efficiently you use the resources
Now, Set Your Goals
Before you can measure your ROI, you need to know what it is you’re measuring. What are your goals? Likes and retweets matter, but they’re not as valued by business owners as metrics that they can more easily translate to revenue.
Three important metrics most clients would want you to track are:
● Reach and engagement
● Site traffic
● Brand awareness
The next time you start tracking a campaign, keep specific goals in mind. Reporting on them, including other metrics you normally bring up in monthly meetings, will impress key stakeholders and convince them that you’re doing a good job.
Campaign Tracking: Three Quick Steps
This is where your performance tracking tools and a little internet savvy come in. If your goals are increasing reach, site traffic, and brand awareness these are the metrics you need to measure:
1. Increasing engagement
Measure likes, shares, retweets, mentions, and favourites
2. Increase site traffic
Measure clicks on URLs and traffic driven to the website from social media (Google Analytics can be a big help here, as well as a Bit.ly)
3. Increase brand awareness
Measure follower growth, the percentage of change in followers over time, sentiment across platforms, clicks by region, reach by region, and untagged conversations about the brand – doing some social listening will give you an edge
Your social media analytics tools should make this a very easy job. Create templates that reflect your goals and that will automatically pull the data you need. Do this for specific campaign tracking when a specific campaign has certain goals, but be sure to customise all of your reporting based on metrics your client will find important.
Always pay attention to organic traffic versus paid traffic, as this will help your client see that their platforms are not only growing because of spend. The challenge here is that social networks are designed to work around advertising, and that organic growth and engagement has been steadily declining over the years. Still, don’t be afraid to explain this to your client. Data-driven business owners like to be in the know.
The takeaway: People in business like numbers that make sense to them. Make ROI a priority if you want them to understand how valuable your social media campaigns are. Careful campaign tracking is the way to do this.
Read more: The Social Media ROI Religious Wars