Worldwide, social media advertising budgets doubled between 2014 and 2016 and were predicted to increase by a further 26.3% this year. Despite this, 6 in 10 small businesses say they are not able to track return on investment (ROI) from social media.
We dropped quite a few stats there – so let’s step back and analyse. With spending on social rapidly increasing, the majority of small businesses still don’t know exactly what they’re getting back from it. That’s pretty scary, right?
To prove it’s worth investing in, any marketing activity must be able to demonstrate significant ROI to the business or it’ll be canned pretty quickly. This is all the more important for social media activity, which can be difficult to measure at the best of times.
With this in mind, we’ve put together this guide to measuring social media ROI. But before we begin, here’s a quick recap on ROI.
What is ROI?
Return on investment is calculation used to measure what you get out of doing an activity (using advertising) versus what you actually get back from it. It’s usually expressed as a percentage. The formula is as follows:
Revenue – investment / investment x 100 = ROI
So for example, if your company made £20,000 last year which can be attributed to social media, and your social media spend was £5,000, your ROI would be:
£20,000 – £5,000 / £5,000 x 100 = 300%
Meaning you’re tripling your investment, which is pretty good.
Sounds pretty simple, right? But how do you decide exactly what your spend was? Or what monetary value can be attributed to social? Here are 6 steps you can take to start measuring social media ROI.
Identify goals/KPIs
There’s no common goal for businesses using social media – you might want to use it raise awareness, improve brand perception, or you might be looking to close deals and earn some cold hard cash. Before you invest serious time and money in social, you should figure out exactly what you want to get from it – whether that’s engagement (likes, shares, retweets), click-throughs or an actual revenue figure. These goals should have numbers against them too – avoid saying “we want to get more followers”. There are a number of ways to calculate what we call SMART goals, but you can follow this quick guide for a brief introduction.
Align social media goals with wider business objectives
Like anything in marketing, don’t just do social media for the sake of it. The number of times we’ve heard “we set up a Twitter page because someone told us it would be good to have one”, you wouldn’t believe. Your social media activities need to be serving some higher objective, just like everything else you do. If you set out your goals for social media in the way we’ve described above, you should be along the right lines. But whether you’re setting your goals or doing the actual activity, always think to yourself “is this helping the wider business? Or am I just doing it to keep busy?”
Identify the best tool to track your goals
What the best tool or tools for measuring your social activity, engagement and return will depend on a number of things. It depends on what your goals are (i.e. what you actually need to measure), your budget and what tools and systems you have in place already. If you’re already using a big-ticket marketing automation system like HubSpot, which has an inbuilt social media management platform, this will take care of all of end-to-end reporting for you, from click to conversion. Everything you need to know about who’s engaging with your posts, and where they go after that will all be held in one neat place.
If you don’t have the budget to invest in a marketing automation platform of that scale, you might need to take a more inventive approach. Tools like Buffer and Sprout can help you manage and track social posts on an engagement level, but you’re going to need to plug them into something else if you want to track conversions. For things like Facebook ads, analytics and data like clicks, conversion rate, and costs are built into the Facebook platform, but they might not make sense arbitrarily. You can consolidate data from various platforms like Buffer, Sprout, and Facebook in one place with a tool like Google Analytics.
Remember, having the right tool is just part of it. You have to dedicate the right people do learning, mastering and developing the tool. That’s going to mean skilling up internally, or investing part of the money you could spend recruiting to establish a partnership with an agency (hint).
Find the best platforms for you and your business
This can be a tricky one, and we’ll cover it in more detail in a later article, but finding the best and most successful platforms for your business, industry and customers is key to measuring and demonstrating ROI. There’s no point expecting thousands of clicks from LinkedIn if you know for a fact your contacts and customers don’t hang out there in great numbers. That’s why it’s probably best to look at ROI from social both as a whole and from each platform you’re using, so you can make sure you’re not wasting your time.
Figure out what part social plays in driving conversions
Without going too deeply into this pretty complex topic, digital marketing has a number of models for attributing value to each marketing channel or “touch-point” as part of a conversion path. This basically means different ways of assigning credit to each activity or interaction as part of the path to a sale or whatever you define as a conversion.
You might for example, identify that social is most successful at drawing people into your business, and they will convert later on down the path using a different channel like organic. Or conversely, you might discover that social is really good as the last interaction before a conversion. For example, if a prospect has found your business via search (organic), and then a few days later sees a Facebook ad for one of your products, clicks on it and makes a purchase. Determining the part that social plays in your sales cycle will really help you determine whether it’s delivering ROI.
Assign value
If your social media ROI goals are centered around sales, this can be pretty easy. Take the total amount you made from sales that can be attributed to social, divide by the investment in social, and voila, you’ve got an ROI. This becomes more tricky if your goals are centered around things like brand awareness, or if you’re not directly attributing sales to social (as above).
In terms of brand awareness or perception-based goals, you might want to look at metrics like customer lifetime value (here’s a handy calculator), or lifetime value x conversion rate (how much is a potential visit worth?). This will enable you to identify how much a follower or an engagement is worth to your business.
Measuring ROI is key to not only getting internal buy-in for investment in social media but also to help you make more informed decisions about where to best spend your time and resources. Without knowing what you’re getting back from it, it’s difficult to justify to yourself and the wider business that social is worth your valuable time.
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