Measuring your social media ROI (return on investment) is how you figure out if the efforts you’re devoting to social media marketing are paying off.
Spending on social media marketing is on the rise. In fact social media spending, according to eMarketer’s US Social Trends Report for 2019, is expected to grow up to 19% this 2019. That would give us a total of $37 billion in ad spending. And based on Advertising Expenditure Forecasts by Zenith, the numbers are estimated to reach up to $329 by 2021 translating to 49% of worldwide ad spend.
You see, marketers are obviously investing in social media strategies and online advertising now more than ever. Although even so, only 20.3% of marketers say they can prove the impact of social media marketing quantitatively. This is because they don’t know how to properly measure social media ROI.
Your social media ROI tells you which social networks and techniques to dedicate your resources to so you’re not wasting time or money on anything that does not generate results. Analyzing your ROI is a vital part of determining which marketing tactics work for your business. This helps you to see the big picture of which marketing efforts to move forward with and which ones need changing.
The simplest way in measuring social media ROI is profit / investment x 100 = ROI as a percentage. So if you made $500 off Facebook ads and spent a total of $500 on the ads, it would be $500 / $500 x 100 = 100% return on investment.
However, this simple formula only works if you want to look strictly at revenue. ROI of social media typically also includes other details like follower growth, engagement, and brand awareness which are all important to running a successful business.
After all, value cannot always be calculated simply in dollars and cents. Your social media efforts just might be paying off whether or not you see a direct, immediate increase in revenue.
Calculating your total social media ROI can be tricky, but it’s totally doable. The good news is, your friends at LYFE Marketing are here to teach you how!
There are five basic steps to measuring your social media ROI. They are as follows:
- Identify key performance indicators (KPIs)
- Align social media goals and business objectives
- Track results
- Assign values to your KPIs
- Analyze results
In this article, we will explain what each of these steps means and how to calculate your social media ROI using analytics tools for yourself.
Step 1: Identify KPIs:
“Key Performance Indicator” is a fancy term that refers to anything you can measure to determine if your company is reaching key business objectives. Social media ROI cannot be determined by looking at revenue alone. You have to analyze any results that are valuable to your company, even if that value is not monetary. After all, non-financial outcomes like follower growth, engagement, growth in Facebook post shares or retweets, increase in your email list, online reviews, and positive public relations can lead to higher profits later on.
Popular metrics to look at are reach, follower growth, traffic, leads, reviews, and conversion rates. Different business owners have different conversion goals, so it’s all about figuring out what you want for your business.
The first step to determining your social media ROI is to decide what your social media goals are. Are you trying to build followers, increase engagement, boost your average sale, grow your email list? The goals you value the most will be your KPIs.
Step 2: Align Social Media Goals and Business Objectives:
In order for your social media efforts to translate to real-life ROI, your KPIs have to be linked to overarching business objectives.
Sometimes it can feel like online success doesn’t translate to the real world, but it does! For example, over 30% of word-of-mouth referrals occur via social media channels. Furthermore, 43% of social media users report buying a product after sharing or favoriting it on Facebook, Twitter, or Pinterest and 71% of consumers who have had a positive social media experience with a brand are likely to recommend it to others. Social media metrics beyond profit have a clear contribution to popular business goals.
So how can you link your KPIs to your business goals? That’s simple! If you want more brand awareness, you’ll focus on followers and engagement. If you want to generate more sales, the focus should be on leads and/or conversions. If you want to generate more traffic to your website, you should focus on link clicks.
Step 3: Track Results:
Regardless of what your goals are, you’ll need some way to track them if you want to know your social media ROI.
Similar to Google Analytics, most social media platforms include built-in tracking tools. Facebook Ads Manager will provide you with some pretty detailed information about your ad results. It can even tell you exactly how much revenue your business has earned solely from your Facebook ads. Twitter and Pinterest ads include similar metrics, as well. Upgrading your Instagram to a business account will provide you with some statistics like how many profile visits you get per week, ideal times to post to optimize engagement, and weekly impressions/profile visits.
For more in-depth tools, consider hiring a social media marketing company. Companies often have access to third-party data tracking tools that can give you much more detailed results than the free tools offered on your social media accounts. This technology can be extremely helpful when it comes to tracking your social media ROI.
It is important to check the results in your social media analytics regularly. You may not have to check on your social media campaigns and follower growth every day, but it helps to continually optimize your ads and make sure everything is running smoothly. This way you can address issues right away and fix errors before they become major problems.
To track landing page and website traffic and conversions, you’ll need to use a tracking pixel. A pixel is a small piece of code that can be embedded into a webpage. Pixels work by using cookies to track user activity on your website after they click on your ad. You can see which pages of your site users drop off from and even what type of device they view your website from.
This social media tool can also be useful for honing in on your target audience. You can use social data gleaned from your Facebook pixel to build a retargeting audience or a lookalike audience based on your website visitors. To better understand your audience, you can also use UTM codes to see information on what brought the customer to your website and how they move through it.
Depending on your KPIs, some important things to track may be cost per website click, cost per like, cost per conversion, cost per lead, and total reach. It’s also important to track how much money you’ve spent on your social media marketing through ads, boosted posts, hiring graphic designers or social media managers, etc. The bottom line is that you need to make sure that you track all these expenses in the same time frame e.g. cost per month. This will make calculating your social media ROI a breeze!
Step 4: Assign Values to your KPIs:
The next step in figuring out your social media ROI is to assign monetary values to your goals. How much would you be willing to pay for a new follower or a new lead? What about a website click? Different business owners value certain KPIs differently.
Assigning values to your KPIs can be very subjective depending on your budget and business goals, so you may want to contact a social media marketing professional to help you determine these values.
Of course, everyone wants the lowest possible cost, but this step is important to properly track your social media ROI. You have to be honest about how much you would be willing to pay for your goals. If your expectations are too high, you might be disappointed when your ROI isn’t as good as you want it to be.
The average cost per Facebook like in the U.S. is about $0.23. If you are running a global page like campaign, you can expect your cost per like to be a little lower and if you are running a local page like campaign, you can expect the cost per like to be higher. Likewise, if your product is very niche, you can expect a higher cost per like whereas if your product has widespread appeal, you can expect a lower cost per like. The size of your target audience will make a huge difference when it comes to how much you can expect certain KPIs to cost.
Step 5: Analyze Results
Once you’ve assigned monetary values to all your KPIs, it’s time to do some math. To get your total social media ROI as a percentage, use the following equation:
(Benefits-costs) x 100
In this equation, “benefits” refers to the added value of all your results with your KPIs. “Costs” refers to the total amount of money spent on your social media, including ad spend as well as labor costs including fees from marketing companies, graphic designers, employees hired to run your social media accounts, etc.
Be sure to add together the revenue from all social media accounts for your total social media ROI, but analyze each separately to know which platforms work best for you. You’ll definitely want to know if any platforms are not turning out to be worth your time or money.
Here is an example of a typical social media ROI calculation. Keep in mind that these values and results are purely fictional:
KPIs (and values): followers (valued at $0.25 per follower), leads (valued at $5 per lead), link clicks (valued at $1 per link click)
Results after one month: $500 in sales generated from Facebook ads, 300 new Facebook followers, 100 new Instagram followers, 250 new Twitter followers, 150 link clicks, 50 leads
Total benefits: $500 from sales + $162.50 from followers + $150 from link clicks + $250 from leads = $1,062.50 total benefits
Costs: $300 on Facebook ads + $500 to hire a marketing company = $800 total costs
(1,062.5 – 800) x 100
_______________ = 32.81%
This company owner would have seen a 32.81% social media ROI. Further analyzing their results, they may realize Instagram has a lower follower rate than Facebook and Twitter. Taking this into consideration, this business owner may want to alter their Instagram follower growth strategies or forget about Instagram altogether to focus more energy on the platforms that are working best for them.
Here is an example of a negative social media ROI calculation so you can see what you don’t want in terms of ROI:
KPIs (and values): followers (valued at $0.10 per follower), leads (valued at $1 per lead), engagement (valued at $0.50 per comment).
Results after one month: $700 in sales generated from Facebook and Twitter ads combined, 200 new Facebook followers, 5 new LinkedIn followers, 100 new Twitter followers, 20 comments, 100 leads.
Total benefits: $700 from sales + $30.50 from followers + $10 from engagement + $100 from leads = $840.50 total benefits.
Costs: $100 on Facebook ads + $2,000 to hire a social media manager to their staff = $2,100 total costs.
(840.5 – 2,100) x 100
_______________ = -107.13%
As we can see in this example, even though the business generated more sales than the business in the first example, their costs drastically outweighed their benefits, resulting in a largely negative social media ROI. One clear change this business owner could make would be outsourcing social media management responsibilities to a marketing company rather than hiring a social media manager onto their staff. This can be a much more cost-effective way to improve social media ROI.
If your social media ROI is negative, like the one in the last example, it may be time to reevaluate your strategy. If you’re not happy with your ROI, it is best to A/B split test other options. After all, the key to successful social media marketing is testing.
If your Facebook follower growth is going well but your engagement is low, you may want to reallocate some of your page like ad budget to boosting posts. Likewise, if you are receiving a lot of leads but they aren’t qualified, you may want to A/B split test new audiences for your lead generation campaign. Even if you are satisfied with your social media ROI, there is always more that can be tested and improved upon.
Benchmark your results against your own goals as well as your competitors. This way you can see if you’re meeting your own business goals and if you’re on the same track as other companies in your field. No one wants to spend money on something if they’re not sure it’s working. That’s why determining your social media ROI is so important!