Social media ROI's definition depends on the objectives of your organization. Your social media presence could have goals that drive brand awareness, revenue, customer satisfaction, etc. In general, social media ROI is the sum of all social media actions that create value for your business. It is the return of time, money and resources in social media.
Profit / total investment (people hours, ad budget, etc.) X 100 = social media ROI (as a percentage)
For example, you have made € 1,000 or revenue from social media where you have invested € 500, your profit would be € 500 (where profit = revenue-investment). To compute for your ROI, your calculation would be € 500 profit / € 500 investment x 100 = 100% return on your investment or ROI.
However, this is not a formula that can prove ROI for your social media investment. Value can not always be measured in dollars or cents. Using this formula can prevent you from identifying the different pay offs of your investment in social media. For example, if your goal is to drive brand awareness, measure your success against metrics such as audience reach and customer engagement and not profits.
If you want to measure your social media ROI, think and ponder on the ratio between gain and cost: labor, training, development, social media technology, agencies and consultants, social media advertising budget and business overhead. To estimate gains from various consumer actions, like purchases, page views, downloads, email list, sign ups and others, look into analytics to be attributed to social media. By doing this, you will be able to define your social media ROI and prove its value to your business.
Measuring social media ROI changes the perception or social media in your organization. It also shows the potential impact that social media can have in your organization beyond marketing. It also helps you find and use your resources. It helps in identifying gaps in your overall strategy , key messages and content. Finally, it helps you to understand customer perceptions, preferences, conversations and motivations.
The value of your social media efforts is important for your business. Based on a CMO survey, 11.7% of total marketing budgets or businesses were allotted for social media in 2017. 20.3% of marketers say that they are able to quantitatively assess the impact of social media.
You may base your social media ROI on objectives like: business conversions (such as customer acquisition or lead generation), brand awareness or perception, customer experience to security and risk mitigation.
Social media goals are determined after your objectives have been set. In goals goals use the SMART principle. SMART stands for goals that are specific, measurable, attainable, relevant, and timely.
For example, if you want to improve customer service on social media, set a numerical value and deadline for answering inquiries. This could be speeding up your response time by 10 minutes by the end of a month or two.
Be sure to audit your existing social media performance to set baseline targets and set goals for improvement.
Metrics that shows social media is helping your business objectives include: reach, audience engagement, site traffic, leads generated, sign-ups and conversions, and revenue generated. You may also ask questions like: are they aligned with my objectives, do they help in making decisions and do not do business?
For your business, you need the conversion of funnels, track consumer actions, analysis data and report results. You may use the following tools:
Google Analytics: This tool helps in website tracking traffic, on-site conversions, and sign-ups from social media campaigns.
Hootsuite Impact : This tool helps measure ROI or social media from paid, to owned and earned social channels. It also connects and integrates social data with the rest of your business metrics. It also helps in producing executive reports and simple-language recommendations that could help you optimize your social media strategy.
Facebook Pixels: It will help you track conversions from Facebook ads, from leads to sales.
UTM parameter: These are short text tags that are related to a URL that could help track important data about website visitors and traffic sources. It can help provide a detailed picture of your social media success when used with Google Analytics. It could show which networks are doing better and smaller details such as the most traffic to a specific page.
Hootsuite Insights: This tool helps in identifying conversations and trends in your industry. It can also identify brand reach, sentiment and more. It is supported by 100 million data sources, real-time results and built-in interface.
Best practices for reporting social media ROI are: using templates, using plain language, checking metrics on a daily basis and maintaining a time-frame for reports to your inbox.
Best practices for presenting the ROI or social media to executives include: speaking about what is meant to be your chief executives, talking about your limitations, using third-party insights that can be persuasive to stakeholders. Finally, you may propose a low-risk pilot program that the company could invest in.
To keep up with the fast paced environment in social media, and in order to measure your social media ROI goals, you need to update and adapt your strategy constantly. Go back to the drawing board if necessary. Learn, test and gain more.