Did you know, people spend around 145 minutes each day on social media? This poses a big opportunity for businesses as this brings your consumers closer. At the same time, this also accelerates competition in the industry. In this kind of situation, it is now even more important to develop the perfect social media strategy than it was before. But, only planning will not give anything to you. You need to calculate the social media ROI of your campaigns to see how it is working.
Social media adds value to your business, and it is essential to measure that amount of value. Now, you might ask why do you need to evaluate the return from your social media activities? And most importantly, how to calculate it? Well, you will get the answers to these questions in this article.
Before going into details, let us first go through what this article is going to cover-
What is social media ROI?
According to Investopedia, ROI, which is the short form of ‘return on investment’ is a performance measurement metric used to evaluate the profitability of an investment or compare the efficiency of two or more investments. It directly measures the amount of return from any investments.
Just like ROI, social media ROI also measures the amount of value generated from social media investments. You can evaluate the return on investment from the money, effort, and time allocated to your social marketing campaigns.
Why is it important to calculate social media ROI?
In the business world, each minute, every penny, and even an ounce of effort matters. It helps to keep everything on record. Then, why won’t you keep track of the time, money, and effort invested in your social media operations?
According to Statista, 91.9% of marketers use social media for marketing purposes. But only 15% evaluate their return from social media. That means they are not concerned about the assets they are devoting to social media. In the long run, this will affect any business.
“When I hear people debate the ROI of social media? It makes me remember why so many business fail. Most businesses are not playing the marathon. They’re playing the sprint. They’re not worried about lifetime value and retention. They’re worried about short-term goals.”Gary Vaynerchuk
If you want to sustain and become successful in your business, you need to plan a long-term, sustainable plan that will lead you to success. For that, you need to compare the cost and return of each and every investment, including your social media contribution.
“The ROI of social media is that your business will still exist in 5 years.”Erik Qualman
The benefits of evaluating the return from social media are endless. Let us have a look at some of them-
- Design detailed strategies
- Point out a weighable result of your effort
- Evaluate the cost and return of the campaign
- Select the best strategy by assessing them
- Discontinue when a specific strategy isn’t working
Now that you know how important it is to calculate ROI let us see how you can compute it.
How to measure social media ROI?
The basic formula to calculate ROI for any investment is pretty simple. You can easily find your ROI by subtracting the initial value of the investment from the final value and dividing it with the total cost of the investment. The number you will get will be less than one, and you just need to convert it into percentage by multiplying it by 100. Now, isn’t it easy?
Well, computing your regular ROI is pretty simple as you have access to all the numbers. But, this is not the case for social media ROI. You need to go through a lot of steps to forecast your ROI from social media contributions. But don’t panic, we are here to help you with it!
Let us go through the steps that are required to measure your social media ROI.
- Step-1: Fix your desire social media objectives
- Step-2: Set SMART goals
- Step-3: Define performance measurement factors
- Step-4: Track time spent on social media
- Step-5: Prepare the ROI report
Step-1: Fix your desire social media objectives
Before going into details, let me ask you a few questions first. What is your current social media objective? What do you aspire to gain from your different campaigns on social platforms? If your answer is only “increasing awareness”, then these following few lines will change your perspective.
Social networking sites give you access to billions of audiences. You can use different forums to communicate with the audience in various formats. Coca-cola successfully used this opportunity to increase its brand awareness. It launched “#Shareacoke”, a user-generated content campaign that saw a huge success with 500,000 photos being posted by the customers in the first year.
That’s why it is now even more essential to plan your social media strategies effectively and efficiently. For that, you need to set your objective for your social media campaigns so that it can gain some value for your business. For instance:
- Conversion rate
- Increase brand awareness
- Customer loyalty
- Consumer experience
- Employee satisfaction, and so on
While setting the objective of your campaign, you need to focus on your audience. Otherwise, you are not on the right track.
Step-2: Set SMART goals
The most challenging part was to determine the objective of the campaign. As you have figured that out, now it is time to set goals to reach your specific objective.
Sephora, a French multinational retailer for beauty and skincare products, wanted to establish a smooth customer experience through social platforms. They started to sell their products on Instagram along with selling them through their website. This helped them attain their goals and establish brand loyalty and increase brand awareness. Now Sephora has over 20 million followers on Instagram.
A snap from Sephora Instagram Page
It is very important to determine SMART goals. Make sure they are: Specific, Measurable, Attainable, Relevant, and Timely. If you set them smartly, you’ll be unstoppable.
Step-3: Define performance measurement factors
Once you have decided the objectives and goals of your campaign, you need to determine the perfect performance measurement factors. In the past, the most used, simple metric was to count on the number of likes, followers, engagement rate, etc.
But with the change of time, these metrics need to change. You need to find out related factors so that you can evaluate the progress of your campaigns. There are hundreds of factors starting from likes, followers, reach, impressions, engagement rate, social review, and so on. But, the main task is to co-relate these factors with your objective. For instance, let’s have a look at the picture below:
Before even setting the measurement metrics, ask yourself again and again whether the factors will help make any decisions, whether the factors align with the objectives and goals perfectly, and whether you can evaluate them effectively. If the answers to all these questions are yes, you have the perfect measurement factors in computing your return.
Now that your list of related factors is made, you should continuously re-evaluate the metrics. Make sure they reflect your business objectives and smart goals in them.
Step-4: Track time spent on social media
This is the only level where you can determine the cost of your social media campaign. The cost is the most important factor in calculating your social media ROI. So, be very careful while evaluating your expenses.
Let’s find out how can you track the expenses for your social media campaigns:
To retain your customers, you need to share amazing photos, videos, GIFs, and other content on your social platforms. But, the question is, who creates them?
If you have a graphics designer specially assigned for creating content for your campaign, then their time and effort spent on the design need to be included in the total cost of the campaign.
Time of employees
Every project needs lots of research, planning, meeting, content creation, reviewing, and whatnot. Your designated employees are doing everything to pull off every project and campaign with their ideas and hard work. They spend a hefty amount of time doing all these.
And guess what? You should include all these in your total cost. Find out the individual average time spent in a week of each team member and allocate a value for that time. Remember to include their hourly salary in it as well.
Software and tool
A successful campaign requires a lot of effort and a lot of software and tools. Most social media platforms are free, but you might need to purchase a few for more advanced management purposes.
You will also need different plugins for different purposes. Starting from:
- Managing different social networking platforms,
- Looking after your social reviews,
- Embed social feeds on your website
- To communicate with your customers on your website
- & many more
However, all of these could be done with just one simple social media plugin: WP Social Ninja.
If you think you have to be a tech person to do all this, be assured. You do not have to do a single line of coding for any of these. Just simply follow the simple instructions, and you will be able to connect all your desired platforms with your website.
Social Advertising Spend
Tracking social advertising expenditure is the easiest one. The money you invest in promoting your ads on different social media platforms is the advertising spend, or ad spend. You just have to include it in your total cost.
Step-5:Prepare the ROI report
Since you have determined the total cost of the campaign and your total return on hand, you can now easily calculate your ROI from social investment. It might be challenging to calculate in numbers as all of them might not be in currency format, but you can still compute it.
And once you have your ROI in your hand, you have to prepare a full report to display all the numbers and facts to the management. Make sure you include your objectives, goals, measurement factors, and all the financial data in the report. Your report should be simple, clear, concise, and connect all the dots to help your management make a decision. Try to compare your result with the industry benchmark and determine how you can improve your results in the next campaign.
Why is it tough to measure?
According to Peter Hughes- the CEO and founder of APEX Group, 44% of businesses cannot measure social media ROI. It is not only brands that are having this problem. Some marketing agencies are also facing the same issues. So, why is it so hard to measure return on investment from social media?
It is true; you cannot measure all the returns of social media. There are just too many benefits of social media marketing. That’s why you need to devise your social media strategies in a way that covers a wide range and has a good impact on your business.
Measuring your social media ROI can be tricky, but you will be amazed by how much this benefits you once you start calculating it. So, don’t just waste your time. Research, plan, execute and measure your social media activities to succeed in your social media campaign. After all, the return from social media is the secret ingredient that motivates you to plan a successful social media campaign.