We all know that social media marketing is an important part of the digital journey. The question is, exactly “how” valuable are your social media efforts?
Though more companies are embracing social channels to help them engage with customers every day, most brands still don’t understand what they’re actually getting out of their social efforts. While there’s no shortage of metrics available to gauge performance – from measuring your retweets to adding up your fans and followers, but when it comes to figuring out ROI, most of us are left wondering where we should start looking.
One of the most fundamental issues of social media marketing is the fact that there’s no common way to measure return on investment. Fortunately, there are steps you can take to get a better insight into whether your marketing materials are paying off.
What is Social Media ROI?
Before we start exploring the steps you’ll need to take to measure social media marketing performance, let’s take a look at what social ROI is. You can get different answers to this question depending on who you ask. However, for the most part, social media ROI is defined as the amount of money you get back from the time, resources, and cash you put into your social profiles.
To figure out social media ROI, you’re going to need to know how much money you’re spending on social marketing, and how much your outcomes from social media are worth. The first part of the strategy is simple enough; the second part is where things get tough.
So, how do you measure your social ROI?
Step 1: Know Your Goals
The first thing any business needs to do when it comes to measuring ROI in social media is figuring out what success looks like to them. You can’t know if you’re on the right track if you don’t know what the end destination is. Your goals need to be quantifiable and link back to a particular campaign. In other words, you can’t just say you want your customers to like you better; you need a goal you can attach a number too. You might measure your:
- Email newsletter subscriptions
To get the best insight into your social media ROI, you need to go beyond the standard things you can measure like tweets and retweets. While interaction from your audience is great, people can “like” your Facebook status without ever buying a product. On the other hand, signing up for an email newsletter or downloading something turns a person into a lead for your brand.
Once you’ve got your goal in mind, you need to link it to a campaign that you can track. A campaign is anything that you’re deliberating doing to drive you towards your goals. For instance, if you want more newsletter subscriptions, you might use influencer campaigns and videos to drive people towards your newsletter signup “thank you” sheet. Having a specific campaign with a link attached gives you something you can measure with tools like Google analytics.
That brings us to the next step in measuring ROI.
Step 2: Track Your Goals
Once you’ve got your goals defined, you’ll need to start tracking them. This is easier than you might think – particularly now that we have free tools like Google Analytics. to help out. Log into Google Analytics and enter the “Social” tab, then click on “Conversions.” Here, you’ll be able to set goals for your campaigns, where you can place the destination URL that you want to track – such as your newsletter sign-up sheet “thank you” sheet. Don’t just link to the form page, as people can easily click out of this page without signing up.
To get the most accurate results from your analytics, you’ll need to make sure that the page you’re tracking isn’t naturally indexed in Google. This means that people won’t end up on the page just by going to the search engines – the only way they’re going to get there is to go through the sign-up process. Once you’ve added your URL, you’ll be able to choose a value for each conversion.
Step 3: Work Out Your Conversion Value
This is the part that requires a little bit of math on your end. Don’t panic – it’s not as complicated as it seems. To calculate the value of your conversions you have two options. The first option is to look at the lifetime value of your customer, multiplied by your conversion rate. Simply calculate the lifetime value.of your customer using the following formula:
Profit contribution per customer x the average years they remain a customer – the initial cost of customer acquisition.
Once you have your CLV, you can multiply that by your conversion rate (the average number of people who subscribe to your email) to find out the possible value of each visit. Alternatively, you can calculate the average sale amount from each conversion and multiply that by the conversion rate instead.
Step 4: Figure Out Your Social Media Expenses
To properly calculate your customer’s lifetime value and get an accurate ROI for your social media strategy, you’ll need to make sure that you’re taking the expense of your social campaigns into account too. Remember, even if you’re not using paid ads, social media isn’t free. Here’s what you need to calculate:
- Cost of labor: The time of the people responsible for your social media strategy is valuable. Even if you’re just a one-person marketing team who’s managing social media by yourself, it’s important to give a value to the hours that you put into measuring and tracking your campaigns.
- Content costs: If you have someone else writing content for you – either for your shares or for your landing pages, then you’ll need to take that cost into account too. You’ll also need to think about content costs for visuals like graphics and eBooks too.
- Social media tools: If you’re using a specialist tool to track your conversions, automate your social media posts, or even manage your strategy, then you’ll need to add these costs in too. Remember to calculate these costs on a per-campaign basis. For instance, if you’re only running your campaign for a month, you only need to add the costs for a month of using the tools.
- Promotional costs: If you use paid advertisements like promoted tweets or Facebook ads, then you’ll need to add that cost too.
Once you’ve figured out the ongoing costs for your social media campaigns, you’ll be able to figure out whether you’re earning more from your social strategies than you’re putting into them. Ideally, you should be getting a profit from your social strategies. If you’re not, it might be time to change something.
Step 5: Review Your Results and Adapt Your Goals
Finally, once you know how to calculate your ROI from social media strategies, you can organize that information into useful reports. The reports you create aren’t just helpful for your marketing team – they can also give you handy literature to share with potential buyersif you decide to sell your company at a later stage.
If you’re not sure how good your results are, then you might want to compare your social media efforts against the results achieved by your competitors. Benchmarking against the competition is a great way to uncover areas of strength and weakness in your own social media strategies.
Remember, don’t be too stressed if your social media marketing results aren’t as amazing as you’d like them to be straight away. It can take some time and testing to make sure that you get the best results. At the very least, measuring ROI should help you to optimize your campaigns.
An entrepreneur with specialist knowledge in selling digital companies, Jock Purtle is an expert in the online space. He acquired his first company at the age of 19 and has developed his personal brand through contributions to numerous high-quality publications such as Forbes and Business Insider. He loves sharing his tips and insights with the world and is currently CEO of Digitalexits.com.