How to calculate your social media ROI
So, you want to calculate your social media return on investment (ROI)? Well, you’re in luck! Because that’s what we’re going to explain today.
But before we go in all guns blazing, measuring metrics, outlining objectives and so forth, let’s make sure we’re all on the same page. So, to start off our social media ROI journey is a simple definition of ROI itself, courtesy of Cambridge Dictionary:
‘ROI; the profit from an activity for a particular period compared with the amount invested in it.”
Sounds simple doesn’t it? Unfortunately, if it were so elementary, we wouldn’t be writing this article. You see, ROI doesn’t have to be financial. It can be absolutely anything that’s important to YOUR brand. From engagement metrics to conversions, ROI often differs from company to company.
As you can see, the benefits speak for themselves, but unfortunately, measuring ROI remains understood and utilised by a fortunate few. Thankfully, we’re here to save the day (satin superhero cape not included).
Here’s how you can track and calculate your social media ROI, to get more from your results.
Determine your objectives
As previously noted, there’s no ‘one-size-fits-all’ approach to measuring social media ROI. Imagine different businesses as shoppers looking for the perfect pair of shoes. These companies all have their own personal style and preferences. One may need a larger pair and want the biggest and most badass there is, while another may prefer the more delicate and ornate. Both of these ‘shoppers’ probably won’t see eye to eye on specific wants and needs – much like their definition of ROI.
Therefore, like these shoppers, organisations need to define which metrics and objectives are most important to them – and only them – before diving in head first. After all, like the management mogul Peter Drucker once said, “if you can’t measure it, you can’t improve it”
“If you can’t measure it, you can’t improve it.”
By taking the time to clearly outline your objectives, and thus what you’re going to judge your performance by, you’ll be able to connect your social strategies to the wider business outcomes. Better yet, you’ll also save valuable time and resource staying on track with metrics that are relevant to your strategic goals, rather than aimlessly guessing and getting side-tracked.
How to decide on your objectives
When deciding on your objectives, don’t worry if you’re struggling to visualise dangling dollar values. You’ll be pleased to know there are plenty of other measurable goals that are fantastic indicators of how well your business is performing.
Some common social media objectives include:
- Driving traffic.
- Building brand awareness.
- Encouraging conversions.
When defining your objectives, always remember to follow the SMART rules – smart, measurable, achievable, realistic and time-sensitive. A great example could be, “we want to gain 200 new leads from Facebook during XX campaign from x time to x time.”
Align objectives with your social media strategy
SMART social media objectives? Check! Now, it’s time to link them with your wider social media strategy to get the best ROI possible.
Let’s start by taking the big picture objective and breaking it down into tiny chunks. This helps the wider campaign become even easier to measure.
Our overall objective is ‘increase brand awareness’. But how are we going to get there? We need to establish smaller objectives that will act as stepping stones to the end point, giving us clear directions to follow.
For this particular objective, we’ll need to increase followers and get more impressions. Here are a few ways we can do this:
- Engage with people who follow your brand by replying to comments and sparking conversation.
- Follow five new people who are relevant to your industry and customers every day.
- Increase posting on social media to boost reach. Use each platform’s specialised social ad options to bolster this even more.
Each objective will require different social media tactics, and recognising and applying these will help you achieve ROI.
Track your objectives through KPIs
KPIs, or key performance indicators, are metrics that demonstrate whether a company is effectively achieving its objectives.
KPIs and ROI go together like Batman and Robin. Without Batman, we’re left with a man in green hot pants.
By identifying your KPIs, you’ll know what to focus on and therefore it’ll be so much easier to measure your ROI. Although KPIs differ from company to company, objective to objective, experts around the globe have compiled a list of the most common, to make your life a whole lot easier:
Tips for tracking KPIs
Now you’ve decided on your KPIs and your social strategy aligns perfectly with your business objectives, it’s time to start tracking your activity.
Thankfully, there’s no need for compasses or sniffer dogs. Instead, the world wide web provides businesses with a fantastic range of tools that make tracking ROI incredibly easy. Here are some you can use:
- Google Analytics: This is one of the easiest and most effective free tracking applications online. Here, you can view visitors, their behaviour, their location and what brought them to your site. All of this information is collated in handy reports and makes tracking conversions a total breeze.
- Facebook Pixel: This little snippet of code is a great addition to your webpage. Once locked in, you’ll be able to see how many people converted after interacting with your Facebook ads. Overall, it helps you better understand the demographics of your audience which then allows you to tailor-make future social strategies.
- Buffer: Manage all social platforms in one space by installing Buffer. This free tool is great for scheduling posts, analysing analytics and creating a cooperative space for all relevant employees to add input.
Assign value to your goals
Assigning value to your goals enables you to see and explain your data in relation to your business’ social media objectives and how each has impacted your operation.
If you’re sitting there shaking your head wondering how you can apply a value to something that doesn’t have a dollar sign next to it, let us explain. Unlike Houdini, we don’t use magic tricks. In fact, assigning a value to your objectives is a lot easier than you think.
- Let’s say one of your goals is for customers to fill out a contact form on your website.
- Imagine your data shows a lead is accepted roughly 50 per cent of the time.
- On average, you end up with a client paying around $3,000.
- You can then assign a value of $1,750 to this goal.
While this is a rough estimate, you’ll have a better grasp on applying dollar values to what were once hard-to-quantify metrics moving forward.
Calculate the costs of your efforts
As well as metrics, KPIs and clear objectives, identifying your costs is another integral part of the ROI calculation.
Determining this total starts with analysing the amount you’ve spent on the content itself. From here, round up the costs associated with promotion and distribution.
However, it doesn’t stop there. Here are other elements you’ll have to factor in to get an accurate representation of expenses:
The total cost of all employee hours who worked on the social task.
- The total price of hosting other software fees.
- The total expense of any third-party output.
Now for a bit of maths
Once you have the numbers filled in, it’s time to piece them together to create your complete ROI puzzle. Now, you’ll have accurate data that enables you to see the performance of your tactics and hard work.
Let’s pretend you’ve obtained $1,500 profit and spent $400 promoting on Facebook. Simply take your expenses away from this profit to receive your ROI. In this case, you’re looking at a return on investment of 275 per cent.
This is a very good result – in fact anything positive translates into a profitable and worthwhile endeavour. Remember, the higher the ROI, the more likely your campaigns will be profitable!
So there you have it! You’ve successfully mastered the art of ROI, and now you can begin accurately tracking your strategies and understand exactly how they’re performing.