How to define social media ROI for your business
There is no disputing that social media greatly benefits your business. But you must first invest in it: you need to produce quality content, hire a team to run your accounts, and spend hours interacting with your followers. So the question arises – is social media worth the investment? In business, the answer to this type of question is expressed in terms of return on investment or ROI. High ROI campaigns are those that bring in significantly more than what you invest. Low ROI campaigns are those that end up costing you about as much as they benefit you. But it’s not that easy to measure ROI when it comes to social media. After all, social media pays off in ways beyond financial gain. So before you can determine how well you’re performing, you need to define social media ROI for your specific business.
What is social media ROI?
Typically, ROI is calculated like this:
- First, you measure your investment (the amount of money you put into the project) and your return (the profit you gained from the campaign).
- Next, you subtract the investment from the return.
- Then you divide this new number, the net return, by the cost of the investment again.
- Finally, you multiply this by 100 to get a percentage – the higher the percentage, the higher the ROI.
However, it can be difficult to apply this formula directly to social media because, for the most part, social media returns aren’t financial. Businesses use social media for all sorts of things – promotion, customer service, market research. However, most don’t earn directly from their social media activities. So there needs to be a different way to calculate ROI for social media. And make no mistake: this is important. If you plan on staying in business for a while, you’ll need to know how to use social media well because it is not going anywhere. In fact, it is only expanding – there’s even talk of an Instagram for kids. With more and more platforms appearing every day, it’s in your best interest to learn to recognize if and how they’re paying off for your business.
How can you define social media ROI?
Social media is constantly evolving. Soon enough, you may be able to monetize your business on Twitter and calculate financial returns from it. But in the meantime, a slightly different process is necessary.
Start by defining the purpose social media serve for your business
The first thing you need to ask yourself is how social media is benefiting your business. As an individual, you might use social media to stay in touch with friends, read the news, or even get some extra cash. Your options are just as varied when you’re using social media for business. You might be on social media to increase brand awareness, encourage customer interaction, provide customer service, run targeted ad campaigns, improve subscription rates, drive traffic to your website, or a million other things. In fact, you’re probably using social media for at least a few of those things. So choose one of them to invest in.
Set actionable goals
Once you’ve decided which aspect of social media you’re going to focus on, it’s time to determine what exactly you’re trying to achieve. Do you want to reach a certain number of followers? Or maybe increase traffic to your website? Do you want to improve your click-through rates, get more subscriptions, increase sales? Whatever you decide, remember to be realistic. If you are a small business on social media, you will not gain a million followers in a week. Your goals should be something that you can actually achieve.
Come up with operational measures
Since social media returns are not usually financial, you need another way to measure your success. In some cases, the measure of success is obvious: when your goal is to increase your number of followers, then the number of followers you gain is your measurement. But it’s not always that simple. If you’re trying to improve conversion rates, you’ll need to track how many people arrive at your website from your social media accounts and then how many of those people convert. If you’re trying to improve brand awareness, you might measure your success in the number of likes, shares, and comments you receive. It all depends on your goals.
Track your expenses
When calculating ROI for social media, one thing doesn’t change: you need to invest in your campaign. This investment includes the time you put in, the money you spend on hiring experts, the cost of any tools you’re using, the costs of running paid marketing campaigns, and more. Calculate all of your expenses across the duration of your campaign to get the most accurate numbers.
Monitor your progress
In order to figure out ROI, you need a numerical value for your returns. So the final step is figuring out how to calculate your returns. You can translate goals like brand awareness and follower counts into numbers. How much does a conversion that came from social media earn you? How much are you saving on marketing when you go viral on social media? Are the profits from paid ads worth the cost? Remember that social media pays off more the more you use it. The more followers you have and the more brand recognition you gain, the less you’ll need to invest and the better your results will be. So if things don’t seem to be working out at first, try a different approach and start a new campaign. It’ll get easier with time.
Define social media ROI for each campaign separately
Different social media platforms pay off in different ways. You might be using Twitter for brand awareness and Facebook for paid ads, for example. Since different campaigns have different goals, the way you measure returns on them will also be different. So it’s important to define social media ROI anew for every campaign. Otherwise, you might be getting bad results because you’re using the wrong measurements.
Nick Djurovic (Author)
My success in the field is an uncanny product of having a Bachelor with Honors in Mechanical Engineering, Psychology, and Psychotherapy. With all these skills under my belt, I turned my focus to understanding and mastering Programming & Developing, as well as improving other processes. In 2019 I co-founded digitaldot.us, a digital marketing agency based in New York. I adore WordPress and I’m dedicated to a loving relationship with search engines and social networks.