Understanding your return on investment (ROI) from marketing is important, as businesses which spend more than they receive in benefits from these activities could be placing themselves at a disadvantage.
As a result, the fact that 44% of companies don’t know how to measure their social media ROI spending is both surprising and worrying. It points to a clear lack of transparency that could hinder future marketing efforts, as well as a poor understanding of the reasoning behind this activity in the first place.
What is social media ROI and why is it important?
Defining social media ROI is relatively simple and it’s easier to pinpoint what it is than it is to actually measure this metric. As social media is an important part of the marketing mix, it’s vital that those investing in it can see what returns they’re getting for their money.
Social media ROI measures the effectiveness of your social media campaigns pitting the profit generated against the money and resources invested. It’s most commonly displayed as either a ratio or a percentage, and when the spending has been done efficiently, these values should be high.
Measuring social media ROI will help inform decisions going forward. You can use the metrics to see what’s worked well and which areas of your social media strategy need improvement. It can help the marketing department to make a business case for further investment in social media and demonstrate the value that’s being delivered to your target audience.
Why is it difficult to measure social media ROI?
Among the biggest challenges of measuring social media ROI is setting it in context. Many marketers use the social channel’s own metrics instead of those recognized in the wider business world. Instead of ‘likes’ and ‘retweets’, it’s important to show how these factors translate into:
- Website visits
- Email subscribers
These are used throughout all advertising channels and can be easily understood by executives at all levels of an organization. They impact the bottom line, which is something all departments have their eye on, so marketers must find ways to measure their ROI to reflect this side of the business.
5 simple tips for measuring social media ROI for your company
Monetizing the true value of social media marketing can be difficult, as how do you attribute a financial value to a 'like' or social media share? However, there are ways to do this, so fear not, for help is at hand. Here we outline some of the simple measures you can put in place to make ROI from social media marketing much easier to determine:
1. Consider cost of investment
Determining ROI means weighing up costs against realistic benefits. It means you need to have a clear understanding of the amount of resources, time and effort that will be needed to craft your social media campaigns, as well as the overarching aim of doing so.
To calculate the true costs involved in social media promotion, you must include all aspects of production. Things to consider include the cost of tools and platforms used to promote content, internal costs in terms of resource for content production/promotion, as well as any budget allocated to ad spending.
Once calculated, these costs must be weighed against the overall aim of the campaign, which could include anything from increasing the number of customers entering your sales funnel, through to selling specific products or raising brand awareness. What’s important is that a monetary figure should be worked out and associated to these gains.
2. Set clear goals and KPIs
From the outset of any campaign, it's important to understand what you’re trying to achieve; this enables you to know whether your efforts have been successful or not. This means the creation of clear goals from the start, as well as setting up key performance indicators (KPIs) that will enable tracking of progress once a campaign is launched.
You need to be SMART when it comes to goal-setting, so use this acronym to remind yourself that all the goals you create for your projects should be Specific, Measurable, Achievable, Relevant and Timely. An example might be, you want to achieve four sales conversions within the next two months that can be directly traced back to engagement generated through social media engagement on Facebook.
You can use a number of tools to track whether or not your social media efforts are having the desired result. These include the use of Google Analytics (GA) to track page views or social referrals from specific posts.
3. Track the correct metrics
Once a campaign is live, it's important to remember to track its progress in order to provide clear updates and make any tweaks that could potentially boost your ROI as it evolves. But to do this, you need to be aware of the right metrics to consider.
Metrics including 'likes' and 'shares' can be a positive way to track the overall health of a social campaign, but when it comes to demonstrating ROI, these become almost intangible values. Instead, you should focus on attributing clear links between your social media activities and financial gains.
GA reporting can play a crucial role here, especially as the Conversions tab in the reports section can provide information around each conversion's value in dollars. This can be crucial data to compare to your original cost analysis to determine whether your campaigns are proving profitable overall.
4. Maximize returns with optimized content
Ultimately, you want to ensure the content you’re pushing out across your social channels is optimized correctly to deliver the best return in terms of engagement and conversion, as this will directly impact ROI.
In order to effectively tailor your content to deliver maximum impact, you first need to understand your target audience and this means investing in activities like persona research or customer polling. Find out what attracts people to your brand and who your ideal customer is. It's then important to tailor your social media campaigns to reflect these findings.
Finally, don't be afraid to tweak your campaigns as you go. If, for example, you see high levels of engagement with a video you've created and posted to social, this could show a strong appetite for this type of content and so it's something to consider repeating in future. At the other end of the spectrum, if you see your posts aren’t driving traffic that creates a positive ROI, you should consider shaking things up and implementing a new approach.
5. Which tools can you use to calculate social media ROI?
According to LinkedIn, only 60% of marketers actively share the results of the social ROI measuring they’ve carried out. This shows a missed opportunity for 40% of marketing pros to improve communication and understanding about the importance of social media to the rest of the organization. To do this successfully, they must regularly produce ROI reports and use various tools to help create them.
All social media platforms have in-built analytics that allow you to track brand awareness through posts shared on your profile. However, this has limitations and should be used alongside Google Analytics, which takes a wider view, taking both owned and earned social into account, demonstrating how posts have affected your bottom line.
Using Google Analytics will allow you to look more closely at audience behavior and track website traffic, conversions, and sign-ups from social media campaigns. Be sure to set up UTM parameters correctly, as tagging links with these short pieces of code will give you better insight into the types of traffic your social media campaign is creating.
Facebook has gone further than any of the other social media platforms so far in helping marketers understand their ROI from the site. It’s done this in the form of Facebook Pixel, which is another piece of code, which sits on your website and measures your audience, helping to identify traffic from the platform and how to optimize for it and create more targeted demographics.