With more than 1.7 billion social media users worldwide, it’s not surprising that most businesses are exploring its potential. They see it as a way to increase brand awareness, present the “human face” of a company, build customer loyalty and trust and tap into word-of-mouth marketing.

But does it actually deliver a return on investment? This question is much harder to answer. A survey of chief marketing officers by Duke School of Business found that almost half were not able to measure whether social media had made a difference to their companies . Thirty-six per cent said they had a good sense of qualitative – but not quantitave results. Only 15 per cent had seen a proven quantitative return on their investment.

While marketers are expected to continue increasing their social media budgets, two thirds of respondents said they were under increasing pressure to show a return on investment from social media.

Of course there is plenty of anecdotal evidence on the benefits of social media, as well as indirect measurements of the numbers of fans or followers, and engagement. One survey found that 47 per cent of Americans said that Facebook was their number one influence when it came to purchases.

But is there a way for measure the impact of social media for your company?

Measuring the benefits
One area where it’s easy to quantify the benefits is increased traffic to your website. A simple tool to start with is Google Analytics, which can be used to see how many people clicked through to your website via a social media link. You can also track how many of these visits resulted in conversions – whether that’s making a purchase, signing up to your mailing list or downloading more information.

Many companies measure social media engagement in terms of the number of fans, followers, retweets, likes and comments. If content marketing is a key part of your strategy, then Facebook and Twitter are great ways to spread your message.  LinkedIn can be a valuable tool for recruitment – saving the costs of traditional advertisements.

Social media driving sales
Measuring the direct impact of social media on sales can be more difficult. However, it’s often easy to quantify the results of specific campaigns, if you have clearly defined goals.

For example, a successful campaign by Jimmy Choo used Twitter to promote its sneakers. They used geolocation to target potential customers, and promoted stores stocking the designer footwear. The results? A 40 per cent increase in positive tweets and message, while sneaker sales soared by 33 per cent.

Toblerone, the chocolate company, ran a carefully targeted campaign in the Philippines, persuading people to say it with candy for “National Thank You Day”. This resulted in half a million website visits, while sales of the chocolate bar increased by an impressive 132 per cent.

Building brands and creating communities
These campaigns show that a narrowly define campaign, promoting a particular product or service, can achieve significant measurable results. But in a wider sense, social media can deliver a range of benefits to your company, from promoting your brand image to increasing the chance casual web visitors will turn into repeat customers.

To get an idea of your return on investment, it’s important to measure the amount of time spent and set clear metrics. These might be different from traditional marketing metrics, such as conversion rates and numbers of abandoned shopping carts.

Instead, you might choose to measure web mentions, page views, audience reach, and sentiment.  By looking at the cost of other marketing activities, such as paid ads, this can give an indication of how successful your strategy is. You can also compare your company’s performance on various networks, to determine which is best for reaching your target customers.

There are a number of useful free tools that can help, such as SocialMention (which measures the sentiment of comments), Klout, Facebook and Twitter Analytics and Tweetreach.
Some of the benefits will be more difficult to measure, such as the value of building a community and providing social customer service. But these can be important to your long-term goals of promoting your brand and building up a positive online reputation.

Social media is developing fast, and choosing the right networks, strategy and degree of investment for your company isn’t easy. But from driving sales to engaging customers, there’s no doubt it can be well worth the investment for many businesses.