Most businesses will not try a new marketing medium until they get a rough idea of the likely ROI associated with the new medium. This is natural because if the medium is not bringing in any return whatsoever, what is the point wasting time, effort, and manpower on something that doesn’t work?
I’ve been in the social media industry for quite a while now and have seen many businesses flock to popular social media channels like Facebook, Twitter, Google+, Pinterest, and LinkedIn without any strategy or ways to measure what they are doing. This is totally the wrong way to do it and most of the time, businesses only realise this after they have wasted time on the social web.
Social media is not a nice to have anymore, but a must have. Given the pace at which social media changes everyday, most companies are simply jumping on the social media bandwagon because their competitors are using social media. It’s natural that when everyone around you is doing something, you will join in because you don’t want to miss out.
I have also seen many starting with social media because they had a negative PR disaster before they had the chance to carry out a thorough ROI analysis with social media. Whatever the reason your business started with social media, it’s very likely you or someone in your company has asked the famous question of “What ROI is associated with social media?”.
To answer this question you have to tie in social media with your business objectives. This isn’t the answer people want to hear, but in my opinion, the only correct one you can use at this stage. If you are interested in social media ROI, you need the right metrics to calculate this, and in order to do this, you need to know what your social media goals are.
Here are a few examples of social media goals:
- Increase brand awareness
- Lead generation
- Increase organic SEO results with an AuthorRank strategy
- Increase credibility and thought leadership
- Engage directly with your target audience
- Market your content
- Create relationships with your target audience
- Save recruitment costs
- Brand monitoring (ORM)
- Improve customer service and experience
- Support traditional marketing
Measuring the data
Once you have decided on your social media goals, you need to identify which metrics you are going to use to measure them. Using these metrics alone will not give you any ROI because they are simply numbers which show if indicators are moving up or down.
Here are a few examples of metrics you can use:
- Website / blog traffic — (referral source is a social media channel)
- Website registrations — email marketing campaign
- Increase subscribers, followers, fans, +1s
- Increased engagement score
- Increase positive sentiment
- Organic search rankings
- Increased sales
- Increased leads
- Increase cost savings
- Increase number of mentions
- Decrease customer service inquiries
Working out the ROI
Once you have social media goals and metrics you are going to use, you need to assign a financial value to each of those goals. For example, did your increased engagement score increase any sales for you? Or, did your improved organic search engine rankings increased your leads?
Once you have assigned a value for each of your goals, you need to work out your costs such as the team involved manning your campaign, outsourcing the content, and any other costs involved with your campaign. The equation to calculate ROI: ROI % = (benefits — costs x100) / cost. Using this simple method to calculate the ROI of your social media campaign will give you a strong indication if you are getting any return for your efforts or if you should go back to the drawing board and refine your strategy.