Note: This “Social Media ROI” post is a guest blog post by Michael Deane — the editor of Qeedle. He has been working in digital marketing for over a decade – has managed teams large and small, and still sees every working day as another way to be creative and drive leads and sales.
Why Social Media ROI, you ask? It doesn’t matter if you are doing social media marketing for your own blog, your online business or if you have clients for whom you provide this service – you simply need to know how well your campaigns are working and what your return on investment is.
Unfortunately, many people are unaware of how to do this correctly, settling for various “soft” metrics that can be useful, but which provide almost no data on how effective a social media campaign is on a purely business level.
So, how do you become a true data-driven social media marketer? How do you properly measure the ROI of your social media campaigns?
Defining Precise Goals
The logical first step in calculating and measuring the precise ROI of your social media campaigns is defining the goals that you hope to achieve.
It should be pointed out that goals can involve pretty much anything that can realistically be achieved by using a smart social media strategy. Here are just a few examples:
- New followers/fans
- Increased engagement
- Improved reach
- Increased traffic to the website from search engines
- Increased purchases
- Newsletter signups
- Downloads of website content
Of course, these are just some examples and you can decide on any goal you wish.
The important thing is that the goal you set is well-defined, precise and measurable. Keep in mind that this is not important only for calculating your ROI. When you learn how social media works, this is one of the first things they teach you – always be as precise as possible with your goals.
Social Media ROI: Tracking Your Results
Once you decide on what your goals are, you need to determine how you will be tracking the results that your new social media campaign is yielding.
In the vast majority of cases, Google Analytics will provide you with all the stuff you need to track your results and monitor them over time. Of course, this means setting up the analytics for your website and setting different conversion goals (keep in mind that conversion here does not mean strictly conversion, but any goal that you choose).
Over time, you will become more GA-savvy, and you will start getting more precise and actionable insights into your social media campaigns.
This will also enable you to better modify your campaigns and even do tests to find out what you should perhaps change.
It should also be pointed out that there is plenty of specialized social media marketing software out there that you could also research, as it is quite possible some of their options and features might help you track your conversions even more precisely.
It is crucial that you have a way of tracking your conversions and the ongoing success rate of your campaign since this will be crucial for calculating your ROI.
Figuring out Value
When we are talking ROI, we are talking about money, plain and simple. This means that, in order to measure the ROI of your social media campaigns, you need to figure out what kind of value you are getting for each conversion coming from that campaign.
Let’s say that your goal is to increase traffic from social media to your website and you want to know how much each new visitor is worth to you.
You probably already have some figures when it comes to the lifetime value (LTV) of your customers, or how much money an average customer spends with you. You probably also have some stats on how many visitors to your website become your customers.
According to Eckhard Ortwein — CEO & Founder at Lean-Case, The money you spent to convert your visitors into paying customers is the customer acquisition cost (CAC). To build a viable business – the LTV should be significantly higher than the CAC
For instance, you know that 1 in 20 visitors to your website turns into a customer, this means that 2,000 visitors equal 100 customers (on average). If your average LTV is $50, this means that every 2,000 visitors to your website bring in $5,000 total revenue.
Using this simple formula, you can calculate the value for each individual conversion.
Sometimes, there will be cases where the math is not so straightforward and where you will need to be more inventive with the ways in which you will assign values to conversions, like, for example, approximating values based on common sense or comparing it to how much you would spend for the same number of conversions using other channels.
The important thing is that you have some idea of the value of each individual conversion.
How Much Are You Investing?
The final piece of the equation is the amount of money you are investing. In case you are hiring an outside agency or expert to do this for you, your investment will be represented by the fee you are paying them.
However, if you are doing it yourself or if you have an in-house social media marketing team, figuring out the costs of your investment can be somewhat more complex.
In such a case, you will need to figure out the work hours that were spent on that particular campaign, the value of those hours, any tools that you purchased to get the work done and so on.
In the end, you should have a figure that you can use to finalize your ROI calculation.
Now that we have all the elements, it is time to work out the calculation. In short, it comes down to this very simple formula:
ROI = Total Value – Costs x 100
The number you will get will represent the ROI in percentages, so you will get figures like 17% or -25% (which is not good).
This way, you will be able to decide whether a campaign is working, what kind of long-term results you can expect and whether you will want to change anything.
In the end, it all comes down to figures. Of course, there are always more esoteric and less-obvious benefits that a social media campaign can produce for a company, but if you want cold, hard numbers, this is pretty much it.