Brands are investing more in and expecting more from their social media channels than ever before. In fact, we’ll all collectively help spend 105,863 million dollars on ads in 2020 alone. As a group, we’re also doing more to track the ROI of our social media activities.
Measuring the return on investment of specific campaigns is often simple enough. It’s when we crank it up a notch and try to estimate the social ROI on a company-wide level that it gets a little tricky.
A solid understanding of the high-level ROI for social media marketing is possible though, and it starts with a clear understanding of every touchpoint social media has with your organization.
Knowing where your money goes
The first component of understanding social media ROI is getting an accurate, complete view of your investment in social. In other words; how much money does it cost to be on social media?
You’d be tempted to just track the cost of your paid social campaigns. God know, I was. But that’s not enough, sadly. What you need to do is look at your spending at a broad, organizational level, including indirect costs as well.
What do I mean by indirect costs? Let’s take a look.
So, direct social media costs can be tracked in a fairly straightforward manner. You spend a certain amount of money on things like ads, tools, and salaries for dedicated social media employees.
Indirect costs, however, vary quite a bit from company to company, and identifying them can be a little trickier. Understanding indirect social costs is a matter of knowing what proportion of more general expenditures should be “credited” to social.
Fees for legal services would normally be separate from social. But if, say, you need a consultation to ensure compliance with social data laws in different countries, that would be a social expenditure.
If the content is conceived and created for both social and traditional media channels, part of the costs should be counted as a social investment.
Looking at social from all angles
Marketing was the first function to head to social channels for a lot of companies. And social marketing has grown more complex, taking place on multiple networks, involving larger teams, and integrating with other marketing activities. Can you measure the ROI of your social media marketing for all of this? Having a solid idea of social ROI starts with knowing what marketing goals you wish to accomplish on social.
For many brands, these goals can be broadly broken down into higher-level objectives, related to branding and awareness, and goals that are closely tied to selling, like driving traffic, influencing behaviours (signups, for example) and increasing conversions.
The process for measuring returns for the latter is often more clear-cut, as those objectives are closely tied to specific metrics that you can relatively easily assign a financial value to. You can determine how much a website visitor is worth to you, use campaign tracking to find out how many visitors are driven by social, then calculate the returns on your social campaigns.
You do have to consider, however, how to calculate ROI when someone has had multiple points of contact with your brand. If, for example, a user clicks through on a Facebook ad and purchases a product, the return could be attributed to that specific Facebook campaign.
But if that user had already engaged with your brand on your website, possibly influencing the purchase decision, should the sale still be counted as solely the result of the Facebook campaign? Multitouch and weighted attribution models can apportion results according to the channels a user interacted with.
Branding goals can be more of a challenge. Nearly every company that has a presence on social tracks metrics for audience, engagement, and sharing. These are crucial, but strictly speaking, tracking them is not tracking ROI. There are, however, a number of tactics you can use to track the return on investment for branding/awareness campaigns on social, including correlating metrics with financial variables. We explore them in more detail in our handbook on social media ROI.
Not just for marketing
Seeing the big picture on ROI also means looking beyond marketing to any other activity that your company performs on social.
If you use social media as a recruiting channel, you can track, for example, the time cost of doing candidate searches on social, or the response rate and costs for running recruiting campaigns on social media versus those of doing so on a dedicated job site.
The same goes for customer service on social. Every brand is different, but research from McKinsey shows that, on average, it costs a company $6 to $8 to handle a customer service issue over the phone, and less than $1 to do so on social media.
“On average, it costs a company $6 to $8 to handle a customer service issue over the phone, and less than $1 to do so on social media.”
Gabi BenMark McKinsey Quarterly, 2014
Track to optimize
As business becomes more social, social plays a role in a wider number of functions. Truly leveraging social ROI information is a matter of perspective. Getting a business-level view of social ROI means knowing the relative costs and returns of different functions, both on and off social, allowing you to adapt your strategy and maximize your returns. This process is both challenging and ongoing, but it pays big dividends for those who do it well.