For years, companies have been struggling to figure out how to quantify social media ROI — to put a number on a channel with so many moving parts.
Every company’s audience is on social media nowadays — and with trackable links and pixels, identifying which visits and conversions are attributable to social media is easier than ever. In fact, social media analytic tools allow you to easily map online conversations and locate your brand in them.
Even with these tools however, placing a value on social media ROI remains a big challenge for marketers. In fact, 86% of marketers polled identified measuring social media ROI as one of their top challenges for the coming year.
With social media activity happening simultaneously across multiple networks, and so many ways to interact with consumers online (comments, likes, shares…), it’s hard to know where to start.
So, let’s start with the basics. What is ROI?
ROI stands for return on investment, and it’s calculated via the following equation:
ROI = (benefits-costs)/costs
So for social media, ROI is what your company gets back from the resources (time, money) it specifically invests in social media.
So what’s the key to measuring your social ROI? First, it’s important to understand that social media ROI depends on your goals.
So, what’s your goal? We’ve identified eight common goals companies have on social media:
- Lead Generation. This is popular with B2B companies, particularly those with longer sales cycles or inbound marketing strategies. Key metrics: leads, cost-per-lead.
- Customer Acquisition. This is more common with freemium or lower-touch sales cycles. Here you’re measuring customers rather than leads. Key Metrics: number of customers, customer acquisition cost (CAC), customer lifetime value (LTV).
- Individual Sales. Most important for B2B, CPG, and retail. Key Metrics: number of sales, average sale value.
- Brand Awareness. Best for marketing and public relations, this is the measure of how recognizable your brand is to your target audience. Key Metrics: social reach, engagement, influence, share of voice (SOV).
- Product Innovation. As “the world’s largest focus group” (social media), many companies are using deep listening on social media to speed up innovation and modify the way they develop products. Key Metrics: sentiment, mentions, conversations, interactions.
- Audience Building. Social media allows you to reach a broader audience than any other marketing channel. Key Metrics: followers, email list size, clicks, shares.
- Customer Satisfaction. Being able to respond quickly on social media can help you gain trust and increase your customer retention. Key Metrics: response rate, response time, sentiment.
- Talent Acquisition. Social media is a great tool for employer branding and direct recruiting. Key Metrics: number of candidates and hires, cost per hire, time to fill.
Now that you have this foundation on which to build, how can you determine your social ROI?
Start by choosing your goal. Then:
- Track results. This ability is built into all facets of social media — be it link tracking or social attribution.
- Assign monetary value to benefits. This is where you calculate the dollar value of ROI. Relevant metrics include lifetime value and average sale.
- Assign monetary value to costs. Add labor costs and advertising fees from your campaigns by social network in order to determine total costs.
- Calculate ROI. Finally, use the normal ROI equation with your adjusted numbers for social.
Want to calculate your social media ROI down to the last decimal? Check out our template to measure your social media ROI, and read our ebook for more detail on goal-oriented ROI analysis.