The question that any manager dreads when talking about their projects is “So, what was the ROI?”. For social media marketers, the question is even harder because much of their process deals with the complexities of relationships. Or so it would appear on paper anyway.
The reality is that social media ROI can be measured, just like any other business process. The true value of social media is defined by what your business gets in return for the time, effort, and resources invested.
Before ROI, consider your social media goals
Before you can define ROI, you need to understand what your social media goals and objectives are. What exactly are you trying to achieve, and what effect do you expect this to have on your business?
This entry about social media KPIs will give you more specific advice, but the key to successful goals is ensuring they align with wider business strategy. If your social media program does not contribute to meeting strategic goals, the overall ROI will be minimal.
Sales and marketing are increasingly focusing on the need for a steady stream of new, relevant leads for instance. Obviously social media marketing plays a part in that process, so one of your own goals should be to tailor campaigns to generate new leads.
How to measure social media ROI
Calculating social media ROI is a multi-stage process:
#1 – Identify your social media metrics
With your goals defined, the next step is to identify the metrics required to assess progress. Obviously these metrics will vary between organizations, but they need to be meaningful; vanity metrics like follower count, or status update ‘likes’ do little to generate value for your business.
Instead you should be considering factors like:
- Clicks on links.
- Newsletter sign-ups.
- Content downloads.
- Support and sales queries received from followers through social channels.
In effect, the instances where your social audience take action.
#2 – Start collecting data
You will also need to understand how to monitor these metrics. Each of the major social media platforms – Facebook, Instagram, Twitter, YouTube, etc – provide tools that assist with measuring the reach and success of your campaigns, both paid and organic.
A comprehensive social media marketing campaign will span multiple services – most businesses are using an average of between five and nine social platforms – so you could end up trying to manage and aggregate several disparate data sets. To simplify the process, you should consider investing in a social media management platform that can centralize and streamline the collection and analysis process.
And don’t forget to check metrics regularly – HubSpot research suggests that those businesses checking metrics 3 or more times each week are 20% more likely to achieve a positive ROI.
#3 – Assign a financial value
The moment of truth is the point at which you calculate the financial benefit of each metric. Take the process of generating leads, for instance. You can calculate the value of socially-generated leads with a basic formula.
If x is the cost of resources invested to generate one lead using traditional outbound techniques (print ads, cold calling, etc). And y is the cost of resources invested to generate one lead using social media channels
Social ROI = x – y
According to statistics published by HubSpot, the average cost of inbound/social lead generation is 13% cheaper – more than $14 each.
You should also never forget that social media marketing campaigns take time to generate sales. As Jay Baer of Convince and Convert said: “You have to embrace the paradoxical notion that social media results are often accrued over the long haul, as you engage with prospects and current customers a few at a time.”
The ROI generated by social media tends to be in terms of cost savings or new efficiencies. Consequently most of your social media ROI calculations will be based around these efficiencies and cost savings.