ROI (Return on Investment) appears to be a straightforward idea in itself.
But how do we put it in terms of social media?
The value you get from a social media strategy compared to the costs of that plan is known as social media ROI.
It’s not as simple as figuring dollars in and dollars out when it comes to social marketing ROI.
In certain circumstances, estimating social media ROI may be a clear-cut process. For example, you may analyze revenue from eCommerce sales in relation to your ad expenditure and the cost of developing the advertising in paid social media ad campaigns.
However, the majority of cases are more complicated.
How can you figure out how much money you’ll make from obtaining a new Instagram follower?
Or a million views on your most recent viral video? Not every social media move you take will result in a monetary gain.
However, we can’t fully abandon computing social media ROI because we need to assess the worth of different strategies.
As a result, we need a broader definition of social media ROI that allows us to account for longer-term or more indirect effects.
Choose metrics that match with your larger business goals, such as reach, engagement, followers, clicks, downloads, or newsletter sign-ups, and compare them to your costs, such as labor, training, tool subscriptions, or advertising campaign expenditures.
Below, we’ll go into more specific computations and comparisons.
6 Reasons Why You Should Calculate Your Social Media ROI
You might be using an unlimited number of social media marketing tactics.
As a marketer, your job is to determine which techniques and methods will yield the most return on investment.
And, to the extent possible, those initiatives should be backed up by data.
You’ll be much better positioned to design successful social media strategies if you plan out how you’re going to evaluate ROI, how you’re going to track it as you go, and then how you’re going to report on it.
You may do the following things by estimating and tracking social media ROI:
- Plan more comprehensive strategies.
- You’ll have an easier time persuading stakeholders of your strategy’s worth.
- Demonstrate how your actions have a measurable impact.
- Demonstrate that you’re aware of the expenses and benefits.
- Determine which tactics are the most beneficial.
- It’s easier to spot when a tactic isn’t working.
How to Calculate Social Media ROI
Here are the steps to calculating your social media ROI.
- Align Social Media Objectives with Business Goals
You’ve previously ran a social media campaign with the sole purpose of “raising awareness.”
It’s fine; we’ve all done it.
That could have been justified when there were only two or three viable social media platforms or a limited number of strategies to choose from.
However, there are now so many platforms on which we may deliver our message, so many ways in which we can engage with our audience, and so many tools with which we can track and measure our success.
While this opens up more possibilities and creativity, it also needs more precise planning and goal-setting.
Aligning your social media objectives with your business goals is more important than ever.
Your company’s objectives are most likely divided into the following categories:
- Boost brand recognition
- Enhance the customer experience
- Customer service should be improved.
- Increase revenue
- Generating leads or acquiring new clients.
- Retain a larger number of consumers
Meet with the executive team to determine the most important objectives.
- Set quantifiable goals for each of your objectives.
Then, for each aim, define clear, quantifiable objectives.
The goals may not even be linked to social media at this point. At this stage, we’re establishing targets that will be used to develop our social media plan and assess ROI.
If you want to increase brand awareness, for example, you could create targets like:
- In just six months, you may increase your social media followers by 10%.
- By next year, increase the social share of voice by 20%
- By the end of the quarter, we’ll have increased organic searches for our brand by 15%.
If you want to generate more leads, your objectives could be:
- Every month, 50 eBooks are downloaded
- Every month, 20 new newsletter subscribers are added
- 10 service inquiries every month
If you want to improve the customer experience, your objectives could be:
- Increase client satisfaction by 10%
- Cut the average response time in half, to 11 minutes
- Increase client satisfaction by 5%
The idea is to set goals that are closely related to your business objectives, which can then be used to not only teach but also evaluate your social approach.
- Determine the Most Important “Return” Metrics
We determine the business and social media metrics that are most closely related to our goals, or that may lead to our goals being met, in this step.
If you want to increase brand awareness or generate leads, you should keep track of KPIs like:
If you’re trying to figure out what kind of content your audience responds to the most, engagement metrics like:
- Average Engagement Rate
- Average Engagement
Of course, you should add business-related data as well, such as:
- How Much Traffic Do You Get From Social Media?
This is a metric that counts the number of website sessions that came from social media. You may examine this data in Google Analytics if you’ve already conducted a campaign.
- What Is Your Website’s (or Landing Page’s) Conversion Rate?
This is the proportion of social media traffic that translates to leads or purchases on your website. This may be calculated by dividing the total number of conversions on your website by total social media traffic and then multiplying by 100.
- Is your objective to generate leads or sell directly?
If the goal of your website is to generate leads rather than make direct online sales, the average lead-to-closing rate is crucial.
- What Is Your Business’s Lead-to-Closing Rate?
This is a percentage indicator of how many leads your sales force is able to convert into sales.
- What Is Your Business’s Average Transaction Size?
This is the total revenue you expect from your consumers over the course of their lifetime. This information can be found in your sales dashboard or in Google Analytics.
- Total expenditure incurred for Running Social Media Campaigns
This includes the cost of recruiting a social media team or contracting a social media firm, as well as all equipment and content creation expenditures.
After you’ve made a list of the metrics you want to track, compare them to your business goals and quantifiable targets.
Make sure they’re a true measure of performance that helps you make better decisions, not just another data point. When it comes to design, sometimes less is more.
Would you still consider your campaign a success if your goal is a lead generation and it generates a lot of reach and engagement but no leads?
In that situation, perhaps reach and engagement isn’t worth tracking. They may, however, provide insight into which content is best suited for your target audience.
Make sure you choose metrics that you can track and report on, as well as things you can really include into your day-to-day or week-to-week process.
4. Calculate the Costs of Social Media
The cost of a social media campaign is often disregarded, but it is a critical variable in the social media ROI equation.
Because some of these costs may be divided among campaigns, make sure to give an adequate amount to your campaign.
The following are some examples of possible social media costs:
- Internal Employee Time
This is the most overlooked cost of social media.
All of these steps take a long time: research, planning, meeting, making, publishing, and reviewing.
Each team member’s time should be estimated and tracked, and that time should be linked to a cost.
Don’t forget to account for individual hourly wages or salaries. Offloading duties to freelancers or lower-cost employees may help you increase ROI. But then again. You can only take upon yourself so many tasks.
- Creating Content
For the actual posts, most social campaigns will include videos, blog articles, graphics, and copywriting.
Some of this expense will be covered by internal staff time, but you may also have employed freelance writers, videographers, or graphic designers to develop the material.
- Platforms, Tools, and Software
You probably have many tools or software subscriptions to make your life easier if you’re deeply invested in social media and content development.
This could involve the following:
- Tools for publishing on social media
- social media Competitor Analysis Tool
- Tools for marketing automation
- Programs and tools for creating content
- Modifications to the website
5. Ad Spend
Budgeting for boosting posts or running social ads will be included in most social media efforts. This expense should also be included.
Calculate the Return on Investment (ROI) from Social Media
You’re ready to calculate your social media ROI now that you have your success and cost KPIs.
It won’t be as simple as plugging numbers into an equation because your investments and returns aren’t all in dollars.
However, in the planning and reporting stages, you can still utilize a preliminary ROI calculation.
Predict your returns based on the indicators you identified and compare them to the costs while planning. How does this stack up against other possible strategies?
Lay down all of the real gains in relation to your costs during the reporting phase. In most cases, the comparative ROI will become evident.
How to Compile a Social Media ROI Report
After you’ve decided which metrics and costs to track, it’s time to keep track of them and report on them on a regular basis.
Keep in mind that you may be dealing with a variety of people. You could be reporting to your marketing team, company decision-makers, or a client.
When it comes to reporting social media ROI, here are a few best practices to consider:
Business goals should be included.
Include the important business objectives you’re working toward at the start of your reports.
This way, when it comes to comprehending the data in your report, everyone will be on the same page.
- Maintain a straightforward approach
Don’t use data or marketing lingo to confuse yourself or your audience. Use plain language and just report on the important metrics that are most closely related to business objectives.
- Consistency is key
Select a reporting period and stick to it. Present a report every two weeks, or on the first of each month, for example.
You and your audience will build a comfortable cadence and feel more at ease discussing the outcomes in this manner.
“The Why” must be understood and communicated
Data for the sake of data isn’t going to help anyone make better choices. When preparing reports, make sure you can explain why each data piece was included and provide evidence to back it up.
- Make use of third-party data and industry benchmarking
Without any sort of reference or baseline, some numbers will be fairly worthless.
You can provide more context for your audience by leveraging benchmarking data or third-party research.
- Automated Reporting
Only if your reports are convenient will they be valuable. Make sure there isn’t a lot of manual work involved in gathering data from various sources.
You’ll be able to examine your metrics as often as necessary as a result of this.
- Use a tool for social media analytics.
Vaizle, a social media tool, can make measuring and reporting your social media ROI much easier.
It consolidates all of your data into a single, easy-to-understand dashboard and allows you to link data from all of your social media accounts.
Use this calculator to predicate ROI on social media campaigns based on previous benchmark data or Estimate the ROI of the current campaigns based on the data points available.
Start Tracking Your Social Media ROI
You now have everything you need to finish your social media ROI puzzle!
While quantifying ROI isn’t always easy, understanding the impact of your decisions will help you argue more effectively for your social media activities.