Are you a constantly evolving business that struggles to measure social media ROI?
You are not alone.
With so many platforms to connect your customers to, it can be complicated to make the calculations.
On top of that, it can be challenging to prove the return on investment for something that may or may not be driving direct sales.
Your best bet is to take a systematic approach to measuring social media ROI and constantly implement the lessons learned.
How so?
Let us explain below.
What is Social Media ROI?
Social media return on investment is a measure of the gains achieved by a business from its investment in social media marketing.
Measured as a percentage, it is the quantification of returns against the investment to asses if the profits justify the expenses.
It is calculated by:
Social Media ROI = (Returns - Costs) / Costs
For Social Media ROI, the returns point to the financial gains.
They include leads and conversions and other metrics (awareness, engagement), defined as returns gained from social media efforts.
Costs include all the expenses of planning, execution, and promotion of social media strategies and campaigns.
How to Measure Social Media ROI?
You need a well-defined and structured approach to measure Social Media ROI. Read along to find a nice breakdown of the process in simple steps.
Visit Social Media Goals
The first stage of ROI measurement is to visit the goals and objectives of the Social Media Campaign or Strategy you are about to analyze.
Each business is unique, and so are their goals for social media.
Consider the following points while defining your social media goals
- The goals should be in line with your business goals.
- Goals should cover various aspects of your business’s online presence.
- Define and prioritize goals based on your current needs and stage of growth.
Some examples of social media goals are
- Brand awareness - it aims to enhance the brand’s online visibility, reach, and recognition, for example, “Gain 10,000 followers on X (formerly Twitter) in the next six months.”
- Lead generation - intends to increase the acquisition of potential customers via a desired action, for example, “Increase online form submission by 10% in the upcoming quarter.”
- Revenue - it intends to directly enhance the business bottom line by driving sales, for example, “Drive an additional $10,000 via social media ads in the next month.”
- Customer retention & loyalty - it focuses on keeping the existing customers by increasing customer satisfaction and encouraging repeat sales, for example, “Reduce churn rate by 10% in the current year.”
Linking Goals to Specific Key Performance Indicators (KPIs)
Once you've set your goals, link them to specific Key Performance Indicators (KPIs).
Each of these should have associated KPIs that allow you to track your progress and determine whether you're on the right path. For instance:
If your goal is to increase brand awareness, KPIs could include metrics like follower growth rate, post reach, and social shares.
For lead generation, the relevant KPIs may include click-through rates (CTR), conversion rates on landing pages, and the number of leads generated.
When the goal is to drive sales and revenue, you'll be tracking KPIs such as conversion rates, ROI from paid social media advertising, and the total revenue generated from social media campaigns.
Key Performance Indicators (KPIs)
After you refine your goals, it is time to choose the relevant key performing indicators.
These are the metrics that help you gauge the performance of your social media goals.
It is considerable to choose the KPIs that best demonstrate how your goals are doing.
Once identified, you monitor and track them via social media analytical tools to quantify their performance.
Eventually, they are analyzed to identify how your social media performance is faring compared to your intended goals and objectives.
Identifying Relevant KPIs
Take stock of the KPIs that most closely align with your goals and objectives for your social media strategy.
Run competitor analysis to look for the metrics they use and employ a trial and error method to find the ones that best suit you.
- Likes, Shares, and Comments - often considered vanity metrics, these show that your content resonates with your visitors and contributes to your brand visibility.
However, it is crucial to contextualize the comments and shares you are getting.
Is it because something you posted resonates with your visitors, or are you getting negative engagement?
Also, are you getting engagement from your target audience? - Conversion Rate - it is closely related to social media goals intended to generate leads or drive sales.
Every time a visitor performs a desired action, like signing up or buying something, it gets recorded as a conversion.
A higher conversion rate is a testament to the success of your social media campaigns.
Paid Social Media Metrics
Since paid ads are integral to social media marketing, tracking their performance and impact is critical to assessing your return on investment.
Below, we discuss some of the oft-used KPIs for paid social media marketing.
- Click Through Rates (CTRs) - a vital metric for assessing lead generation, CTRs are also great for identifying qualified leads that you can pursue retargeted marketing.
- Revenue - as the name suggests, it measures the money generated by your social media activities and is a valuable KPI for your social media ROI.
Tracking and Monitoring
You have identified the right KPIs to measure your social media performance; get down to tracking them.
Social Media Analytics Tools for KPI Tracking
Here are some of the most popular social media analytics tools and how they help you.
Social Media Pixels
Several social media websites like Facebook and Instagram (Meta Pixels), X (Twitter Analytics), and LinkedIn (LinkedIn Insight Tag) have their respective pixels.
Learn more about setting up Twitter pixels on your Shopify store here.
It is a tiny piece of code embedded in your website that tracks user behavior, website visits, clicks on a link or an ad, and conversions.
Once installed and working, it populates data into reports on respective social media.
You can rely on those metrics or direct them to analytics tools to dive deeper into the data.
Social Media Analytics Tools
Social media analytics tools help businesses analyze user behavior, engagement, and conversions from various social media platforms in one place.
Some of the commonly used tools are;
- Hubspot - helps businesses monitor how users perceive and engage with their social media content and ads across the platforms.
- Sprout Social - facilitates businesses in analyzing and comparing their cross-platform social media performance.
- Hootsuite - a social media planner, it moonlights as an analytics tool, allowing businesses to identify how their social media strategies are working.
- Mailchimp - primarily a marketing tool, it allows businesses to track the performance of their social media posts.
- KeyHole - it facilitates websites to understand the performance of their social media content, analyze their growth, and help with influencer marketing.
- Google Analytics 4 - a comprehensive analytics tool that connects social media performance metrics to leads and conversions and helps calculate ROI.
One needs to install the UTM tags to their social media to track conversions and leads and find their reports in GA4.
If you have any queries about our analytics services, get in touch with us to let our team of highly professional experts take care of your concerns.
Calculating the Cost of Social Media for ROI Measurement
A fundamental piece of information required to measure social media ROI is an accurate estimate of the costs involved in social media marketing and advertisement.
For this, account for all the expenses incurred during the social media marketing and advertisement lifecycle.
Expenditures of Social Media
Social media costs include the expenses incurred during the planning, execution, and promotion stages. Here are some of the social media expenses.
- Content Creation - the cost incurred on copywriting, graphic designing, and multimedia production.
- Human Resources - it is the cost of hiring content creators, agencies, or freelancers and the value of the time allocated to create and analyze social media posts and ads.
- Tools and Software - it includes subscription fees for the content creation, marketing, and analytics tools and software.
- Ad Spend - the expenses for creating and promoting sponsored posts and paid ads on social media platforms.
- Overhead - the indirect costs of maintaining a social media presence, such as office space, equipment, and other utilities.
Calculating the Returns from Social Media
Quantifying the returns from your social media efforts and campaigns is vital to identifying their impact and effectiveness.
Apart from the revenue generated, as a direct result of social media efforts, other benefits like brand awareness and recognition are also considered.
Revenue and Benefits from Social Media
- Conversions and Leads - these include the sales and leads generated as a direct result of social media campaigns and other efforts that constitute the revenue.
Conversions here are a relatively broad term, where lead generation and actual sales are considered conversions.
The former involves users performing desired actions such as filing a form, downloading a booklet, or signing up for a webinar.
Leads are assigned monetary values after thoroughly evaluating the internal data to assess the returns on lead generation.
- Non-financial Gains - these are indirect benefits, typically difficult to quantify, resulting from your social media efforts.
For example, if your goal is to increase brand awareness through social media, a successful campaign will translate into more likes, shares, comments, mentions, and impressions.
You quantify the impact of these metrics on brand perception and awareness by allocating dollar value to these effects.
Measuring Social Media ROI
You have all the costs and all the financial and non-financial profits earned from social media.
It is about time you calculate your social media ROI.
You calculate your social media ROI using a few methods.
- Use MS Excel templates - you can easily find templates online, where you can add all your inputs involving the costs and returns, and it automatically calculates the ROI for you.
Be careful in selecting a template that closely considers all the factors that go into calculating ROI for your industry.
- Use the ROI formula - rely on the good old formula to measure social media return on investment.
Establish proper protocols for how you collect data and assign values to both financial (revenue) and non-financial costs (time).
- Use Online ROI Social Media ROI Calculators - find an online ROI calculator, like the one offered by Hootsuite to guide you through the process, take the inputs, and perform the analysis.
Analysis and Improvement
Analyze the Results
Once you have the ROI value, contextualize it to understand your social media performance.
Here are a few ways to do that.
- Use Industry Benchmarks - Search the standard social media ROI for your industry. Look for the data in reports or online publications and use them as a benchmark to compare your findings.
- Compare to Competitor ROI - Another good metric for benchmarking would be to use your competitor's ROI to compare the effectiveness of your social media efforts.
- Compare to Your Previous Results - Finally, compare your current social media ROI to the previous quarter or to the same quarter last year to accommodate for any seasonal uptick.
Reporting and Continuous Improvement
When you have the entire analysis down, it is time to create useful visual reports to prove the social media ROI.
Use the ROI findings to set the course of future resource allocation and social media strategies.
Continuous Improvement
- Resource Reallocation - Use your findings to identify the best use of your resources.
That includes allocating more resources to an aspect or a platform or shifting focus away from another.
Use data-driven results to invest in what brings the most revenue and benefits for you.
- Optimization - Once you measure social media ROI, use it to optimize your future social media ads and social media content.
Bank on the identified opportunities and work on the gaps to improve your reach, conversions, and social media ROI.
- A/B Testing - Based on your findings, experiment with your social media strategy a little. Run A/B tests to see what works and what does not work.
Test how tweaking a segment of your graphics, ad copies, and posting time works best for you.
- On-Going Evaluation - Let the evaluation of your social media efforts be an ongoing process.
Keep collecting data that matters, use results to refine the metrics, and keep feeding it into the system for ongoing evaluation and improvement.
Conclusion
To measure social media return on investment (ROI), visit your goals and objectives for social media marketing.
Identify the key performance indicators (KPIs) that best quantify those goals and objectives.
Your social media KPIs should include both financial and non-financial metrics.
Monitor and track these KPIs via social media analytics tools like Meta Pixels, Twitter Analytics, and LinkedIn Insights Tag.
Next, calculate all the expenses of planning, creating, publishing, and promoting your social media content and ads.
These include direct costs like employees, content creation, and software and tools subscriptions.
After this, evaluate all the returns from social media marketing and advertising.
Returns include both leads and conversions and metrics like brand awareness and reach.
You may perform the calculations by using the ROI formula. Streamline the process, establish protocols to collect data, and assign values to relevant metrics.
Or use MS Excel templates or social media ROI calculators.
When you have the results, compare them to industry benchmarks, competitor ROI, and your previous social media ROI.
Finally, use your social media ROI findings to optimize your social media efforts and resource allocation.
Perform A/B testing to find what works and implement a continual improvement process.
Interested in learning more about ROI, read our blogs here.