Forget Followers — How to Calculate Real ROI on Social Media
May 28, 2020
by Lorna Sithole
The current climate of the world has pushed many businesses into unknown and difficult territory. It’s become a game of sink or swim and most businesses’ ability to change and adapt has become their saving grace. Sprout Social recently published “How COVID-19 has changed social media engagement,” highlighting that incoming engagements on brands’ social posts increased by 44 engagements per day on average across all networks and industries. Now, more than ever, consumers are spending copious amounts of their day scrolling on social media. Companies should be capitalizing on this shift by tweaking their social media marketing strategy to build brand awareness, site visits, and ultimately drive conversions.
You may be thinking that most businesses are strapped for cash in these challenging times — how can you convince leadership and senior execs at your company of the benefits of an investment in social? We are going to break down what social media ROI is and why your business shouldn’t be intimidated by quantifying the contribution that social media is making to the bottom line.
What is social ROI?
ROI, or return on investment, is the sum total of all social media actions that create value for a company. Companies spend time, money, and valuable resources on social media and naturally want to know what they are getting out of it. Traditionally, ROI was calculated by a simple and straightforward formula profit/investment x 100. However, this formula is long outdated, not only because no two organizations are the same, but, also, not every organization can attribute revenue directly to social media because their value isn’t always measured in dollars and cents. For example, if your organization’s social media goal is brand awareness, it only makes sense that your success is measured against engagement and reach.
Why do you even need to prove ROI, you may ask? Measuring social media ROI is important because it shows the potential impact that social media can have on your business, and it can also convert various stakeholders and change the perception of social within your organization.
So let’s cut to the chase, how can your company go about measuring their social media ROI?
Measure your social media ROI
- Define clear objectives and goals. Your overarching objectives should be based on customer experience, business conversions, and brand awareness.
Make sure that your goals are realistic – follow the S.M.A.R.T framework (specific, measurable, achievable, relevant, and time-bound) by answering a few questions: Are your goals clearly defined? What metrics and tools will you use to measure them? Can you attain your goals with your given resources? What time frame are you giving yourself to meet those goals? Every organization must ask itself these crucial questions.
- Track your performance and measure. On social, it’s very important to track the right performance metrics. Once you’ve set benchmarks, it’s time to start measuring them. Steer clear of vanity metrics like followers, subscribers and page views. These often don’t translate into bottom-line business objectives. Marketers should instead spend their time tracking metrics like on-platform engagement, relevant reach traffic to website, and conversions. These metrics help your company understand how much of an impact your social media presence is having on your ability to attract, retain, and convert potential customers. By measuring how potential customers engage you’ll be able to develop a far better understanding of whether your marketing efforts are working.
- Keep track of your spending on social media. Once you’ve defined your goals and detailed how you will measure them, the only thing left to do is to calculate your investment. Here are the key things that you should measure your return against:
– Paid advertising. Paid advertising is an investment. If a marketing channel isn’t paying profitable dividends, it simply isn’t worth it. This is why ROAS (Return On Ad Spend) is one of the most important metrics to track. Tracking your clicks and conversion data specifically will indicate if your paid advertising strategy is working or if you need to readjust. Measuring these against your initial goals and objectives will indicate if you’re on the right path.
– Social media tools. Tools such as eClincher, Sprout Social, and Hootsuite have developed significantly over the years, each bringing their own unique benefits to the social media marketing party. But how effective is your chosen tool? Is the cost of the toolset at a reasonable price point? Is it making your social management a breeze? How deep can you track actions taken on and off the platforms? Ask yourself these questions when adjusting your budget.
– Content creation. Although the idea of variety in the content you churn out may seem appealing, the reality is that content creation is not only time consuming but can turn expensive very quickly. From podcasts, to videos and infographics, outsourcing these skills can quickly ramp up your marketing spend. It’s very important to measure how your audience responds to your content and narrow down the avenues worth investing in.
– Labor cost. Social media is an integral part of any organization which is why it’s important to track how much time your social media manager, content team, analytics team etc is spending on the different aspects of their job and if this aligns with your goals. For example, if one of your top goals is to maintain a good online reputation, it would be crucial to invest heavily in community management and online listening tools such as Sprout.Measuring social media ROI is crucial for the success of any business today. Tracking reach, engagement, and conversions give the organization valuable insight into what has worked in the past and what has not. It also gives an opportunity to review and implement the necessary changes for future success.
If you’re stuck on how to quantify the contribution that social media is making to your business’ bottom line, drop us a line at [email protected] or visit our marketing capabilities page. We’re here to help.
About the Author
Lorna Sithole is a Social Media Manager who has 10 years experience in social media, specifically content creation, social strategy, reporting and analytics. She is passionate about helping businesses and charity organizations reach their business goals through their digital marketing efforts.