How to Calculate ROI for Social Media
Over the past decade, social media positioned itself as a legitimate marketing channel for businesses irrespective of size. With this new advancement comes a swath of tools, analytical software, and KPI tracking that allows companies in various industries to quantify ongoing social efforts. So, how can you prove your social media efforts contribute to your organization’s bottom line?
Whether you have a substantial presence on TikTok, Facebook, Instagram, or Snapchat, your company still wants to enjoy a positive return on investment (ROI) on social media. So whether you’re just diving into the social media landscape or a seasoned veteran, read on to learn helpful tips to help establish a clear ROI you can present to your stakeholders at the next roundtable meeting.
What is ROI on Social Media?
“ROI” is the acronym that stands for “return on investment,” which refers to an equation that measures the financial result of a monetary investment. In layman’s terms, social media return on investment (ROI) is the benefit that your organization receives from the time and resources that you put into social media efforts. So if a company spends $50,000 in Facebook ads, your team might hope to generate $750,000 in gross revenues, and earn an ROI score of 15.
But quantifying returns in the complex digital landscape is a multifaceted process that isn’t always clear. To better gauge your return on investment, you’ll need to know what to measure your return against. For the majority of businesses, social media spending includes:
- Salary costs for social media department employees
- Paid social media content
- Content creation costs
- Social management tools
- Agency or freelance costs
Please note that not every organization can accurately attribute financial transactions directly to social media. Brands without an eCommerce presence, for example, receive value from social media in ways that are less directly tied to revenue, like reach and awareness.
Why does ROI on Social Media Matter?
Without obvious benefit to your social media efforts, your marketing manager may question the justifiable reason for continuing a campaign on Facebook or Instagram. Verifying the ROI of social media will justify your team’s efforts and help you build a stronger case for further investment. Measuring ROI on social media can help businesses:
- Adjust areas where efforts and resources aren’t used efficiently
- Identify gaps in your brand’s strategy, key messages, and content
- Better understand your audience’s perceptions, preferences, conversations, and motivations
You can then determine the platforms best suited for your brand’s goals, the content that resonates with your audience, the value of attracting social users onto your site, and where you can grow or expand on your marketing efforts.
Tips for Calculating Social Media ROI
1) Establish Objectives
The first step for calculating social media ROI involves defining objectives. Try reviewing your brand’s end goals. Are you trying to expand brand awareness? Offer better customer service? Build a tight-knit following around your brand? Here are several objectives that many businesses examine when calculating social media ROI:
- Business Conversions: Social media actions directly tied to revenue
- Brand Awareness: Social media actions that help you reach new audiences or change your brand’s image
- Customer Experience: Social media actions that help you increase the satisfaction of your current customers
- Security & Risk Mitigation: Social media actions that reduce risk, improve security, and provide support for crisis control
Whatever the aim, you must define what success looks like before moving forward on a social media campaign. Once you understand and define the criteria of success, you can set more relevant goals that will ultimately make the best use of resources to generate a positive ROI.
2) Define Goals
Goals are unique to each organization. You can set goals to retain current customers or acquiring new prospects. Some common examples of social media goals can include engagement such as follows, likes, comments, purchases, or downloads. To prove the value of social across your entire organization, you need to connect social media activities to specific business outcomes. Some examples include:
- Business Conversions: provide the sales team with high-quality leads through social media
- Brand Awareness: increase awareness of our new product before it launches and steal attention away from our competitors
- Customer Experience: convert customers into loyal brand advocates by improving customer service
- Security & Risk Mitigation: protect our customers and organization from threats on social media
You must set goals that require measurable actions and have a time frame to confirm if the goals generate a positive ROI. Define the various conversion targets along the sales cycle. Don’t limit your thinking to only measuring direct revenue. Instead, focus on finding the value of other actions like event registrations, eBook downloads, proposals generated, scheduled face-to-face meetings, etc. Ultimately, you want to convert a casual browser into a lead, and then into a paying customer.
3) Analyze Then Optimize
Better measurement is the key to elevating your social media marketing strategy to new horizons. Google Analytics can help your team test ROI because you can set up specific metrics you want to track for your goals. Through using Google Analytics, you can uncover data about your website and your users as well as gain valuable insights that can enhance your social media marketing strategies.
Moreover, social media marketers may utilize the data provided on each social platform’s insights and tabs. These free-to-use tools essentially reveal the types of content your audience wants to see. These analytic tools afford valuable insight into your campaign’s performance. Harnessing analytical data will help move you away from a guessing game and help you understand users visiting your website and how you might want to integrate data-driven improvements to your digital marketing strategy.
Refresh Your Social Media Strategy to Better Calculate ROI
Measuring your metrics is a beautiful thing and will ensure that you’re stepping in the right direction. Your social media ROI can be valuable for your company and give you insights to use in other areas of your marketing.
Need help setting up a social media strategy on Facebook, Instagram, Snapchat, LinkedIn, or the other social media platforms? Dial (973) 346-8100 to schedule a meeting with Premiere Creative’s social media consultants.