How to measure your social media ROI
An essential step in growing a business lies in making the right investments and turning a profit from those investments. And to calculate that, companies rely on the use of ROI equations. The common mistake business owners make is to look at ROI as a result of doing business rather than one of many digital marketing KPIs to consider. Measuring the amount of money you earn from each advertising channel that you use can help provide a holistic image of the real status of a company and the potential improvement opportunities hiding under the surface. To exemplify that, we will use this article as the ultimate guide on how to measure your social media ROI.
The basics – what is social media ROI
Simply put – social media ROI is a metric that demonstrates the effectiveness of your social media marketing strategies. The result can be presented in a monetary format or one that focuses on non-monetary values such as subscriptions, comments, followers, etc.
Social media ROI is a metric showing how much value you generated with your social media investments. It is usually a sum of money, but some companies view ROI as a non-monetary value such as comments or newsletter signups. What social media ROI means for your own business depends entirely on your objectives.
Why is it important to measure your social media ROI
The reasoning is simple enough – the first step to improving your current activities is knowing how you are performing so far. And so, the importance of monitoring and understanding the ROI of your social media activities comes in a variety of reasons:
- Testing the value that social media marketing can bring to your business;
- Confirming that your current social media activities are working;
- Identifying any potential holes in your strategy and patching them up;
- Redistributing your overall budget to those areas of your social media strategy that are more effective;
- Staying within your marketing budget and maintaining a steady ROI.
Most businesses tend to avoid the hassle of having to keep track of their activities by relying on professional digital marketing agencies to handle it for them. With a team of professional social media marketers New York, you would be able to save time and energy on constantly tracking results and researching improvement options. Instead, you would get regular reports with expert advice and solutions on how to improve your social media activities and grow your brand and business online.
What is the easiest way to calculate your social media ROI?
The formula for calculating social media ROI is simple:
- PROFIT / INVESTMENT x 100 = SOCIAL MEDIA ROI (percentage)
Sound simple enough to calculate, right? Well, it is – when you don’t include the different variables. The thing is that social media marketing is not a single activity – more of a strategy that consists of several different approaches for each of the social media platforms that your business might use. So, it is important to take it all into consideration in order to get a more accurate idea of your success.
What falls under the Profit section?
The usual issue that marketers have with determining the amount of profit a client made based on their strategy is a lack of understanding, information, or relevant data. And if you have no idea how much money you earned, you won’t be able to determine the return on the initial investment you made.
What falls under the Investment section?
Companies usually think that investing in social media marketing comes down to direct spending. And so, when they calculate the ROI, they focus only on paid social media advertising campaigns. The fact of the matter is that you need to account for the entire picture rather than just the part you spend directly on. And that includes:
- Website design;
- Hosting costs;
- Buying software solutions;
- Business space costs;
- Bills, etc.
These are all factors that can influence your social media activities, no matter how insignificant they might appear. And it takes time to get the entire picture of those costs. Not only does it take time but it also requires knowledge and experience to put together.
A 7-step guide to measuring your social media ROI
1. Start by defining your goals when it comes to social media
In order to measure the return of your investments in social media marketing, you need to define a goal for your business to pursue. Otherwise, you’ll end up with results that have little to no meaning because you have no growth structure for your business to follow. To start with, consider the following goals that companies look to establish through social media success:
- Stronger brand awareness. With the use of followers and engagement growth via mentions, likes, shares, etc. – social media networks are a great way for companies to build their online brand today.
- Attracting more website traffic. Measuring the traffic on your website is a challenging task. Instead, you want to categorize the crowds you attract to your website, depending on the sources they come from. Knowing which visitors came from social media will help you monitor your overall traffic.
- Continuous lead generation. There are a plethora of social media strategies for generating leads. With the use of landing pages and contact forms, you can not only engage better with customers, but you can also track the leads that arrive through social media platforms.
- Higher conversion rate. Understanding the profit that you are looking to gain will help you measure just how good your social media ROI is.
- Collaborations with influencers. Influencers are a great way to gain a stronger foothold for your business on social media platforms. And you can use a unique referral code/link, so you can track how much traffic, clicks, leads, or conversions you get from them.
To get a precise measurement of the progress of your social media activities, you need to have a starting point to compare them to. And so, you need to assess and establish your current status. To do this, you can either consult with our social media professionals and get a detailed analysis of your current activities, or you can go about doing it on your own through the following steps:
- Conduct a website analysis and record the findings.
- Confirm the number of followers on all your social media networks.
- Determine your current engagement rates.
- Note down all the KPIs of your business (even those outside social media ranges).
- Record current ratings based on reviews and comments from customers.
Getting data on all these factors will provide you with a benchmark on which you can build and measure your social media ROI in the future.
3. Establish the metrics you will follow
You can’t simply generalize the performance of your social media activities when you measure ROI. You need a detailed image of each segment of your strategy, and a specific metric to help you measure that performance. So, let’s take a look at some of the essential metrics to focus your efforts on:
Actionable metrics are your key determinators when it comes to the effectiveness of your social media marketing. And here, you have two factors to monitor and work on:
- Engagement rate. Back in 2017, Facebook modified its algorithm to neglect the number of followers a page has and to instead focus on the engagement the posts on the page generate. The higher the level of engagement with your posts is, the higher your EdgeRank score will be. And this score is basically the equivalent of SEO for Facebook. And the same principle applies to all social media platforms.
- Bounce rate / Social shares. Search engines now include the attention your tweets and other social shares get into their valuation of your rankings. Simply getting views for your content earns you no real value so long as followers leave the post or web page upon viewing it. You need content that will keep the attention of viewers, instigate a desire to explore more or share that content with others, etc.
- Clicks-to-website-by-source – getting insight into which social media channels your website visitors are coming from.
- Email opt-ins by source – finding out where your new subscribers got their referrals from.
- First click attribution – determining the very first click that brought someone to your site.
- First opt-in attribution – looking at the click that led to a prospect subscribing to your emails.
- Last engagement attribution – measuring every sale against the last time someone gave their email address after they were already on your email list, to begin with.
- Converting click attribution – a report looking 24 hours back, to find the click to give credit to for the sale might.
Once you understand the essential metrics that you need to measure your social media ROI accurately, it becomes a matter of tracking them. And a first good step is to start with the native analytics tools that social media platforms offer:
- Insight Tab for Facebook
- Twitter Analytics
- Social analytics through business accounts for Instagram and Pinterest
However, this is only an entry step, and one that will provide you with a load of data, both relevant and irrelevant. That is why the knowledge and expertise of professional social media marketers can prove useful. That and the implementation of third-party social media analytics tools. Combine these two and you will get the foundation you need to give you an impression of the value you are getting from the money you are investing in social media.
5. Assign monetary values to your KPIs
If you want to measure your social media ROI, you need to assign a monetary value to the KPIs that you monitor. And this can be daunting for those not as familiar with social media as they would like to be. But the solution to this obstacle lies in the approach you take – so here are some methods to consider when assigning monetary values:
- Lifetime value – the average amount of money you earn from each customer.
- Lifetime value x conversion rate – the value each potential visit is worth to you based on the percentage that converts.
- Average sale – how much the average purchase on your website is worth.
- PPC valuation – the comparison between using organic vs paid social media ads.
To help exemplify this, popular studies found some benchmarks that could help you in your comparison with your own ROI:
- Facebook like average – $.50 per page like
- FB reach average – $.59 per thousand impressions
- FB click average – $.50 per click
- Promoted tweet – $3.50 per thousand impressions
- LinkedIn – $2 per click
As we already mentioned above, measuring a general image of your earnings is the first and simplest step. But if you want the entire picture, you need to look at each social media channel separately. You need to look at each of the metrics we mentioned. And you have to create a structure that will help you identify where you are returning what you invested and where you are losing money. Only after doing that can you come up with the right plan of action to turn the tables.
7. Analyze the results
The idea of getting a net positive for all your social media channel sounds simple enough, but it is far from it. Once you measure your social media ROI, you need to analyze the results and explore your options. That is where new strategies and ideas come into play – the constant need to explore tactics that will improve the result and tip the scales in your favor on all social media fronts.
Sometimes, the cost of running an effective social media marketing strategy is nullified by the expense of hiring an in-house team of marketers. And this is a scenario that you can resolve by turning to the expertise of a digital marketing consultant or an agency.
Other times, you will get a lot of incoming leads that are lacking in terms of quality. And that can lead to the decision of A/B testing your posts and activities on social media platforms. Even when you achieve a positive ROI, you shouldn’t stop there. Because further testing can lead to a higher ROI.
Some interesting social media ROI worth considering
Staying up-to-date with on-going information gives you a better perspective on where your business is and where you want it to be. Whether you are looking at SEO trends or SEO statistics, both will only benefit your idea of identifying the goals of your business. And both will help you in measuring your current results and the potential they carry. So, if you are looking for some context to fill in your idea when it comes to social media ROI, we might have just the right data for you:
- 60% of marketers that measure social media ROI see it as one of their top three challenges.
- 56% of marketers claim that they are unable to track their social media revenue
- 58% of businesses measure ROI in terms of engagement such as likes or shares
- 21% of businesses measure conversions
- 16% of businesses measure amplification (share of voice)
- 2% of businesses measure customer service metrics
- The most-tracked metrics for paid social campaigns are audience reach and growth, clicks to site/page, engagement, and conversion rate
- 2023 predictions are doubling social media advertising budgets
- Facebook boasts almost $20 average social media ROI per user
- Instagram users spend an average of $65 per referred sale (more than Facebook and Twitter users)
Tips for improving your social media ROI
Once you do get a realistic image of your social media ROI, you need to focus on how to take it to the next level. And this starts with optimizing your social media efforts. To translate – you need to start spending more on tactics that have been showing results thus far. Here are some useful tips for building up your ROI on social media:
- Never go all-in with your social media content promotion. Instead, play the long game and put diversify your money on a variety of social media posts. Once you establish which posts have higher engagement, put more budget on them but keep the other posts as well. Trends come and go every day on social media, and you never know what could happen.
- Time your social media activities carefully. Timing plays a big role when it comes to social media marketing activities. Knowing when your audiences are most active and when to publish your posts to earn the most engagement can boost your social media ROI significantly.
- Never stop looking at your competitors. Competitive analysis can always be useful, especially when looking to improve your own activities through innovation. Look at their social media content and the tactics they use in promoting that content.
Start working on measuring and improving your social media ROI today
The presence and influence of social media in the world of digital marketing has become too big to ignore. And this is a fact that every professional digital marketing agency is familiar with. Therefore, the need to measure your social media ROI is a fundamental step in monitoring the success of your efforts and improving them on a long-term basis. Start investing time and energy into getting the most out of your social media activities today and watch your business and brand grow.