Social media is the term used to describe online platforms where people can create and share content or participate in social networking. For brands social media is a powerful tool for building relationships with their target audience. But do people enjoy interacting with brands on social media? The data says:
- 53% of consumers say they’re likely to buy from brands that are transparent on social media.
- 73% of marketers believe that their efforts through social media marketing have been “somewhat effective” or “very effective” for their business.
- 71% of consumers who have had a positive experience with a brand on social media would recommend the brand to their friends and family.
This data confirms it’s worth investing in social media. However, do you know how to track if your efforts are paying off? Let’s see how you can measure your social media ROI with this article.
Useful Data on Social Media ROI
Calculating your social media return on investment (ROI) can be tricky. The reason for that is because the term “ROI” is usually associated with the return on investment being calculated in monetary terms.
Sometimes you can measure your social media success with metrics like higher engagement rates, more shares and comments, which doesn’t directly lead to sales but can improve your brand awareness in the long run.
Let’s take a look at some statistics that prove ROI measurement needs extra efforts:
- 56% of marketers think they’re unable to track their social media revenue
- 58% of businesses measure ROI in terms of engagement, such as likes or shares
- 21% measure conversions
- 16% measure market share or dominance
- 2% 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
Tools for Calculating Social Media ROI
Calculating social media ROI would be difficult without using analytics and performance tools. We will list some of the most popular choices, however, you are free to use other ones that may suit your business needs better.
Google Analytics is a must when it comes to tracking your social media and the performance of your business. In terms of social media, you can monitor:
- Which social media platform give you the most traffic
- Allows you to set goals
- See what content works best with individual platforms
- Ensures that you are tracking the right demographics
- Shows how many sales or conversions your business gets from social media
UTM parameters are short text codes you add to your URLs on social media posts. They can help you to track the value of your social media marketing campaigns and monitor where the traffic and conversions are coming from.
The data collected from the UTM parameters go into your Google Analytics account, where you are able to see a more comprehensive view of your social performance.
Facebook Pixel is another must in your social media tracking toolkit. This is a code you place on your website to track conversions from Facebook ads.
Social ROI calculator by Hootsuite
As the tool states, this is a “calculator that will do the math for you” after you’ve launched a campaign on social media.
To calculate your ROI, you need to:
- Have launched a paid or organic campaigns on social media
- Have built a dedicated landing page with a sign-up form or some other lead capture approach
- Have sent leads to a sales team who will turn them into sales
How to Measure Social Media ROI – a Formula
For measuring social media ROI Buffer provides the following generic formula:
Social media ROI = (return – investment) / investment
It’s quite a simple formula, as it has two parts – return and investment. The challenging part is calculating the return part, which is the focus of this article.
It’s important to note that the return part could mean different things for different businesses because each of them has different goals. That’s why you need to decide from the start what you want to achieve – sales, email sign ups, freebie downloads, free trial subscriptions, etc.
In other words, you need to set your goals and KPIs. Then add a monetary value to the KPI to help ease the calculation.
Define Clear Objectives and Set KPIs You Are Going to Track
To measure your social media ROI you need to define clear objectives. This means you are going to gauge exactly what you want to achieve. You should align the objectives with the stages of the buyers’ journey:
- Awareness: These metrics illuminate your current and potential audience.
- Engagement: The metrics for measuring engagement rate will show you how audiences are interacting with your content.
- Conversion: The engagement rate metrics demonstrate the effectiveness of your social engagement.
- Consumer: These metrics reflect how active customers think and feel about your brand.
Let’s check a few more examples of social media objectives and the KPIs you could check out when tracking your social media ROI.
Increasing brand awareness
In the early stages of business establishing brand awareness is one of the top priorities for business owners and marketers. This is a way to track the noise around your brand and monitor if people can recognize it.
KPIs: The number of followers, number of impressions, traffic, reach
Generating leads and sales
This can be used to track how your leads convert into customers.
KPIs: Sales revenue, lead conversion rate, email sign-ups
Increasing community engagement
Although “likes” and “shares” might be considered as “vanity” metrics they still show the rate of engagement and the relationship you have with your customers.
KPIs: These are clicks, likes, shares, comments, and mentions.
Increasing traffic to your website
You track people who land on your site after interacting with your brand on social media.
KPIs: These are your traffic, link clicks, conversions, email signups, subscriptions, product trials.
The SMART Framework to Set Goals
SMART is an acronym that stands for Specific, Measurable, Achievable, Realistic, and Timely. The framework is all about setting up the right goals and keeping you motivated to achieve them.
Let’s explain the idea behind the SMART goals and how to use them in tracking social media ROI:
- Specific: Have a clear idea of what exactly is important for your brand on social media. Be specific with your goals. It could be 200 new followers, higher engagement rate, reach, more likes and shares, etc.
- Measurable: Each goal should be measurable. For instance, if you want to improve your customer service, you can set up goals to increase the positive feedback you receive from your customers.
- Attainable: Don’t set goals that are impossible to achieve. Be realistic.
- Relevant: Set goals that fit your business and will help you grow. If you measure the number of followers on Instagram, ask yourself if this will benefit your business?
- Timely: This means you need to decide on the deadlines necessary to achieve those goals. You will be able to track your success and growth over time.
Assign Values to the KPIs
Once you’ve chosen your goals and KPIs, it’s time to add monetary values to them.
Assigning values to your KPIs can be very subjective because it depends on your budget and your goals. There are several different methods to assign value to choose from:
- Lifetime value: How much do you earn from each customer on average?
- Average sale: How much is the average completed purchase on your website?
- PPC valuation: How much would you end up paying if you were to use ads to achieve the same social media results?
Track How Much You Spend on Social Media Campaigns
To figure out whether you’re getting a positive or negative ROI from your social media campaigns, you’ll also have to measure how much you’re spending. Here we aren’t talking only about money. There are other important metrics to consider in your calculations:
- Time: The hours you or your marketing team have spent on social media – organic posts, paid campaigns and different initiatives.
- Content: Do you have a professional copywriter to handle your social media accounts or create content for your landing pages? Is it on-site or have yours outsourced?
- Social media tools: Do you use additional social media tools that support your work? There are various software designed for social media – scheduling posts, providing analytics and so on. If you pay for such tools, you need to include them in your calculations.
- Ad costs: Do you run social media ads on Twitter, Facebook or Instagram? This is fairly easy to track as you’ve probably decided on the ad budget.
If your target audience is hanging on Instagram, and this is your primary channel, check out this useful guide where you will be able to identify KPIs and boost your Instagram marketing efforts.
How to Improve Your Social Media ROI
You have an idea of how to measure and improve your social media ROI.
- Test and optimize
There is no magic formula that will skyrocket your business. You need to test different formats and optimize the ones that work the best for you If you run ads on social media, there is a lot to be tested on your audiences, creatives, and copies.
- Use data to test theories
If specific posts on social media are performing better than others and there seems to be no clear reason why, analyze the posts so you can create a hypothesis. After that test to see the results of your campaign.
- Stay up to date with new trends
Social media is always changing. Monitor new content strategies or trends.
Measuring and understanding your social media return on investment (ROI) is crucial to a good social media strategy and budgeting. It will help you create successful campaigns that work and limit your spending on unnecessary activities.
Have any doubts about your social media marketing strategy?
Don't hesitate to get in touch with one of our marketing specialists at DevriX and get your project up to date.