Talk with any marketing consultant, and nine out of ten of them are likely to recommend marketing on social media sites. But you should ask an important question: Is the return on investment for social media worth the time and money? In this guide, we explain the steps to define and measure your business’s social media ROI.
Measuring social media ROI has several benefits. One obvious result is that it can help you squeeze the most from your budget — no matter how tight it may be.
Most of all, measuring ROI can lead to better business results. If you want to grow your business, you need effective techniques — not activities that waste time and effort. There’s an old management saying: “Inspect what you expect.” When it comes to your social media marketing efforts, it pays to inspect (track and measure) what you expect (your goals). This guide shows you how.
What Is Social Media ROI?
Social media ROI is the return on investment for engaging in social media as a form of marketing. Think of what ROI stands for in business, and then apply it specifically to social media activity.
A positive ROI means you are getting back more in return than you are putting in. The actual formula for ROI is:
(return – investment) / investment = ROI
When evaluating ROI, the calculation starts with two elements:
- The return = the business benefit from the activity (often expressed as revenue generated, but could be another measurement).
- The investment = the amount you spend to get the benefit (costs).
If you want to express the return on investment as a percentage, you would multiply the final result by 100.
Social Media ROI Example
Let’s use an example to show how the ROI formula works. Assume your company brought in $50,000 of revenue attributable to social media marketing. However, you spent $15,000 to get it. You would calculate the ROI on social media as follows:
(50,000 – 15,000) / 15,000 x 100 = 233.33%
To explain: You started with your return of 50,000 and deducted your 15,000 investment. Then you divided the net result by the same investment number. If you want it to be a percentage, you multiply that by 100. This gives you the social media ROI expressed as a percentage.
To summarize: By investing $15,000, you got a net return of 233.33% on that money. You netted more than double compared with your expenditure.
Some marketers focus strictly on social media ads when calculating ROI investment, but that’s a mistake. Ad spend is a subset of social media marketing in general. If you focus solely on how much you spend on, say, Facebook ads, you really measure return on ad spend (ROAS). Instead, you want to assess the full range of all social media activities. Measure how much you invest in all social media strategies and tactics, and then assess the benefits you get in return.
Steps to Measure Social Media ROI in a Small Business
Management consultant and author Peter Drucker is famous for saying, “If you can’t measure it, you can’t improve it.” That statement holds just as true with social media as it does with any other form of marketing. The beauty of digital marketing, social media or otherwise, is that you can measure and track just about any metric. But not all are important.
Which metrics you consider depends on the social media you choose combined with your overall business and marketing goals. First, understanding what you are trying to accomplish will determine what metrics you pay attention to.
Measuring the ROI of social media starts with setting goals. It follows by deciding on the performance metrics of the social media channels you use and then calculating the costs of software, labor, advertising, and other expenses.
Here is a step-by-step breakdown of all you need to do to assess your social media ROI accurately.
1. Set Goals
Setting goals is the first step to measuring your social media marketing ROI. Ideally, your social media marketing goals should closely align with your overarching business and marketing goals and objectives. You need to decide why your brand wants to be on social media and what you want to accomplish as a result.
Is it to increase brand awareness? Drive traffic to your website? Service your customers? Generate leads? Boost sales? Regardless, your goals should be S.M.A.R.T. By that, we mean:
- Specific – Set with real numbers and deadlines
- Measurable – Trackable using metrics and analytics
- Attainable – A goal that is challenging but possible
- Realistic – Honest assessment of what you are capable of
- Time-bound – Tied to a deadline
Examples of S.M.A.R.T. marketing goals include:
- Generate 100 new leads from advertising sales during Q4 2021.
- Get 5,000 website visits from organic search in October 2021.
- Achieve 100% sales increase from e-commerce site between January 1 – June 30 compared to previous year.
These goals will not only help shape your social media marketing strategy but also allow you to gauge the success of your marketing efforts. Without first setting measurable goals, you won’t know whether your tactics are worthwhile and contributing to business growth.
2. Decide on Performance Metrics
The next step involves deciding which metrics you want to use to measure social media ROI. In the digital marketing realm, you can track and measure practically anything. But to reach your S.M.A.R.T. marketing goals, you must focus only on social media metrics that matter — those that impact your business and relate to your overall marketing goals and objectives.
However, that may not be as easy as it sounds because each social network has its metrics and built-in analytics — and they are not all the same. For example, Facebook has Insights, a comprehensive analytics dashboard that includes metrics such as Page Likes, Post Reach, Page Followers, and many more.
LinkedIn has Update analytics (to track the effectiveness of your posts), Followers & Visitors analytics (to help you understand follower and visitor demographics and sources), and Talent Brand analytics (to track Career pages). Twitter tracks metrics, such as followers, retweets, impressions, and others.
One way to go about selecting the right metrics is to tie them to the stages of the sales funnel (or customer journey):
Awareness – how many people are aware of your brand on social channels where you have a presence. Useful metrics include things like:
- Number of followers
- Reach or impressions
- Retweets
- Shares or pins
- Mentions
Interest – how many times do people engage with your brand. Metrics at this stage include:
- Comments
- Likes
- Replies
- Favorites
- Website traffic
Conversion – of those who engage, how many take action on an offer. This stage represents the bottom-line impact on your business, so examples of metrics to track are:
- Product sales from social networks
- Leads from downloads, subscriptions, etc.
- Revenue generated from social channels
- Other calls-to-action that have a business impact
Set Key Performance Indicators (KPIs) to track your success and performance. You could choose any and all of the above metrics; just don’t overlook KPIs. They can help you make better-informed decisions about the effectiveness of your efforts. (Visit this article on social media KPIs for a more detailed discussion of the topic.)
3. Determine Social Media Costs
Setting goals and deciding on performance metrics is just one part of measuring social media ROI. Another critical component is determining social media costs. These include the tools you use, the cost of creating, updating, and monitoring content, in-house staff figures, and advertising expenses.
We developed a custom social media budget calculator to help. It contains the following categories to use as line items.
Cost of Social Media Tools
You can manage and measure your social media engagement activities organically to save costs. Still, it’s easier and more effective to use tools designed for that purpose: social media management, analytics, content creation and editing, livestreaming, and more. Most are subscription-based, and you pay either monthly or annually.
Here is a sample list of the kinds of tools we’re referring to, along with pricing:
Social Media Management
Some of the more popular social media management tools are:
- Buffer – $15 – $99 per month
- Hootsuite – $29 – $599+ per month
- Sprout Social – $99 – $249 per month
- Zoho Social – $10 – $300 per month (billed annually)
Social Media Analytics
Most of the social media management platforms come with analytics built-in at no additional cost. Buffer charges an additional fee of $35 – $50 per month, however. Other analytics tools include:
- Brandmentions – $99 – $499 per month
- Keyhole – $49 – $59 per month
- Mention – Free to $450+ per month
- quintly – starts at $300 per month
Content Creation
This list consists of graphics, audio, and video tools.
- Adobe Creative Cloud Express – Free to $9.99 per month
- Bitable – Free to $49 per month
- Canva – Free to $30 per month (billed annually)
- Powtoon – $19 – $99 per month
- Vimeo – Free to $75 per month
Livestreaming
Social networks like Facebook, LinkedIn, and YouTube offer livestreaming for free, but premium tools include:
- Livestream (owned by Vimeo) – $75 per month billed annually
- Restream – Free to $49 per month
- Streamyard – Free to $39 per month
You may also need video production software, such as:
- Ecamm Live – $15 – $25 per month
- Switcher Studio – $39 – $350 per month
Content Creation Costs
The cost of tools is one thing; the costs of creating and editing those videos, blog posts, photography, graphics, and other content to share on social media is another, and have to be factored in. (If you have in-house staff responsible for doing this, do not add those amounts here. We will address that later. This line item should only contain out-of-pocket expenses for creating content, not staff time.)
Those costs can range from as little as a few dollars per hour to several hundred, depending on who you use — an agency or freelancer — and where you find them. Many small businesspeople turn to sites like Upwork, Fiverr, 99designs, Crowd Content, and Freelancer to find talent at affordable prices. Even within those sites, pricing can vary greatly.
Social Media Update and Monitoring Costs
Next comes the cost of scheduling social updates, monitoring replies, engaging with followers, and reporting. If you pay an agency or freelancers to help, include those here. Also, include any payment to influencers who help amplify messages.
In-House Staff Costs
This section is where you capture any activities your in-house staff performs related to social media. You may have employees dedicated to managing your social media outreach or who split those with other responsibilities. In either case, include all staff costs, such as salaries and benefits, etc., for whatever time they spend on those tasks. Include the value of the time you spend as well.
Paid Advertising Costs
The cost of paid social ads is another social media ROI determinant. Most social networks allow bid-based pay-per-click advertising, so if you do Facebook advertising for small business (or advertise on any other social network), include the out-of-pocket expenses of Facebook ad campaigns, boosting social posts, and so forth. Don’t add the price paid for Google or Bing ads, just those related to social media.
4. Measure Your Social Media Performance
Along with measuring social media marketing ROI, you need to measure the actual performance of your social media campaigns and engagement efforts. Aside from the analytics components built-in to Facebook Pages, LinkedIn Company Pages, and Twitter accounts, there are tools aplenty that can help. We’ve already listed several.
Sprout Social has a comprehensive analytics dashboard that measures “throughput” performance. That is, it monitors engagement activity in near real-time to give you a clear picture of the activity taking place on your social channels. You can see data from all your connected social profiles in one location and know, at a glance, whether you’re moving the needle in the right direction.
Similarly, Hootsuite lets you analyze your performance across all your social networks and create custom reports to show the brand’s bottom-line impact. The platform includes what Hootsuite calls “Impact,” a tool designed expressly to help businesses understand their ROI by demonstrating how their social media channels and campaigns drive leads, conversions, and sales.
Zoho Social includes in-depth social media metrics covering elements like the audience, posts, engagement, and reach. It puts everything in one dashboard, and users can output reports detailing social media performance.
Google Analytics is foundational to just about every other form of measurement. It’s free and is useful for measuring endpoint metrics related to conversions, such as visits to a website from a social network or the dollar value of products sold where social media played a role.
5. Calculate ROI
With everything in place — S.M.A.R.T. goals, KPIs based on the customer journey, the cost calculator, and social media performance tools — you can finally calculate your social media marketing ROI.
Let these examples inspire you to act.
Customer service consultant Shep Hyken, writing for Forbes, reported companies that use Twitter as a customer service channel saw a 19 % increase in customer satisfaction. Also, the average cost of a Twitter response is $1 versus the average cost of interacting with a customer through the traditional call center, $6.
Vamplets, a small business that makes baby vampire dolls (yes, there is such a thing), began using Facebook ads to drive revenue. The tiny ad budget of $250 generated an additional $1,000 in income, directly tracked to the Facebook ads themselves, giving them a positive ROI of 300%.
IBM developed a social media strategy for its inside sales team. The company trained the sales team to nurture online relationships and drive prospects to team members’ websites. This focus on social sales resulted in a 400% in sales.
Additional Tips on Measuring ROI
Here are some more tips to help you get started measuring social media ROI.
Use the same approach toward social media marketing as you do when gauging the effects of more traditional online marketing. Think first about your goals and objectives, then figure out which forms of social media would be useful to reach them and what KPIs would be applicable relative to those.
Schedule your social media posting activity to ensure consistency and achieve better results. This social media calendar template can help.
Conduct a competitive analysis to benchmark your use of social media against your competitors. Learn what tools they use, how often they post, their number of followers, and their engagement level.
Create an ROI report weekly or monthly to gauge success toward goal completion and your conversion rate. Make changes based on the results.
The days of “touchy-feely, warm-and-fuzzy” thinking about social media marketing are over. Social media marketing is still marketing and, therefore, subject to statistical scrutiny. As a business owner, you need to know if social media can prove a positive return on investment. Use the information in this guide to start tracking the success of your social media campaigns.
Image: Depositphotos
