How to measure ROI from Social Media Marketing
What is Social Media ROI?
ROI stands for “return on investment.” What that means for your social media strategy depends on your organization’s objectives (brand awareness, revenue, customer satisfaction, etc.). But, generally speaking, social media ROI is the sum of all social media actions that create value. After all the time, money, and resources put in—what’s the return?
If you were measuring ROI by revenue, for example, a simple formula to do that looks like this:
Revenue/investment (people hours, ad budget, etc.) X 100 = social media ROI (as a percentage)
So, if you made $1,000 in revenue from social media on a $500 investment, your profit is $500 (remember: profit = revenue – investment). And then your calculation would be: $500 profit / $500 investment X 100 = 100% return on your investment.
But that’s not a catch-all formula for proving social ROI. Again, there isn’t one definition (here are a few more common social ROI formulas).
Not every organization will be able to attribute revenue directly to social media. Nor should they. Value isn’t always measured in dollars and cents. Tethering ROI to such a strict definition prevents you from identifying other ways an investment might be paying off.
If your goal is to drive brand awareness, you would measure success against metrics such as audience reach and engagement, not profit.
If you’re not sure what to measure, ask yourself what kinds of things your target audience did after exposure to your campaign. Did these actions align with your goals? Where did they fall short? How can they be improved for next time?
If you need another way to consider your social media ROI, think about the ratio between gain and cost, which includes things such as:
•Social media technology
•Agencies and consultants
•Social media advertising budget
To calculate the value of certain actions (purchases, page views, downloads, sign-ups, etc.) look to analytics to determine which ones came from social media. This helps you define your social media ROI and prove the value to your organization.
Why you need to prove ROI
Talk is cheap. Sure, you could tell your stakeholders or clients about the value of social and why they must invest in it—but nothing will convince them more than data.
When there are measurable and specific outcomes, people take notice.
Measuring social media ROI is important for many reasons, including, but not limited to:
Can change the perception of social within your organization
Shows the potential impact social can have across the business (not just marketing)
Shows you where your efforts and resources are being used most effectively
…And when they’re being wasted, so you can shift tactics as needed
Helps you better understand your audience (what they care about, what they respond to, etc.)
How to measure social media ROI
While it’s great to set social media goals and act on them, your job isn’t done until you’ve proven the value of your efforts.
Social media spending in the United States alone is expected to hit $17.34 billion in 2019. Still, only a fraction of marketers say they are able to prove its value.
To do it yourself, you need to follow three simple steps.
Step 1: Have clear objectives
Brand awareness created by social media (shares, likes, followers etc.) is valuable, but not always enough.
According to Altimeter, only 34 percent of organizations feel that their social strategy is connected to business outcomes. To show value, you need to set social media objectives that are aligned with business and departmental goals.
Your social media objectives could be based on:
Business conversions (such as customer acquisition or lead generation)
Brand awareness or perception
Security and risk mitigation
Step 2: Set smart goals
Your objectives represent what social media will help your organization achieve. Once those are established you need to set goals, which represent how and when you’re going to achieve it.
Here are a few simple examples:
- Business Conversion: Provide our sales team with high-quality leads through social media
- Brand Awareness: increase awareness of our new product before it launches and takes attention away from our competitors
- Customer Experience: Turn our customers into loyal brand advocates by improving customer service.
- Security and Risk Mitigation: Protect our customer and organization from threats on social media
- Drive 30 email sign-ups per month
- Boost our social share of voice by 10 percent by end of year
- Reduce average response time on social media to 1 hour
- Increate detection speed of potential social media PR increase by 20 percent by end of the year
For example, rather than saying that you want to improve customer service on social media, set a number and a deadline. So, for example: ‘We will speed up our first response time by 10 minutes by the end of the year.’
If your objective is to grow conversions, a good goal might be a specific number of leads you want to drive via social for the quarter.
Another example of a business conversion goal would be increasing landing page conversions by 10 percent. You would measure this by tracking the conversion rate of people who land on the page from social channels.
Whatever the goal, be sure to measure past performance to establish benchmarks. And then set targets for improvement.
Step 3: Track the right performance metrics
You need social media metrics to determine whether you’re achieving objectives and meeting your goals.
So-called “vanity” metrics—such as likes, comments, and shares—get a bad rap, but they have value. Use them to gauge the overall health of your social presence, measure yourself against competitors, and determine what content is resonating with your audience. They should only be considered “vanity” metrics if they don’t align with your business objectives.
Other metrics you could track to prove ROI include:
- Audience engagement
- Site traffic
- Leads generated
- Sign-ups and conversions
- Revenue generated
When deciding what metrics to use, ask yourself:
- Does it align with my objectives?
- Does it help me make decisions (what to do more of, what to do less of, etc.)?
- Do I have the capacity to measure it effectively?
Step 4: Know how much you’re spending on social media
You need to be clear about the scope of your investment in social media if you hope to determine whether you’re getting a good return. There are four key things you need to measure you return against.
Cost of tools and platforms
Most networks are free to use, but do you pay for a premium version of a social media management platform? If you’re measuring the ROI of a campaign that only lasts half a month, for example, you’ll need to take the monthly cost of the tool and divide it by two when doing your calculations.
Budget allocated to social ad spends
This is the easiest thing to track as the cost of each boosted Facebook post or Instagram carousel ad will be recorded in the platform’s ad dashboard. If you’re running ads across multiple networks, you can use a tool like Hootsuite Ads to manage each campaign and measure ROI from a single platform.
How much did it cost to produce the materials you shared on social during a specific campaign? Did you have in-house writers create blog posts? How much does the writer make an hour? How many hours did it take to produce that blog post? Make sure you also account for any meetings—or portions of meetings—that went into the ideation and creation of the content.
Time spent by employees responsible for social media
How much time does your team spend on social media? From meetings to creating and promoting content to running ads—add it all up. You can do this for a specific timeframe to determine the ROI of a campaign, or calculate how much time your business spends on social media every month or year.
Once you’ve added up all the above, you can measure it against the goals and metrics you committed to in steps two and three.
So, if you’re using social media to drive website traffic—to support a business objective of increasing brand awareness, for example—you can determine the cost of each visit with a simple formula:
“Profit” (in this case website visits via social) / total investment (people hours, ad budget, etc.) X 100 = ROI (as a percentage)