Return On Investment (ROI) For Social Media Marketing

One of the most frequent questions we get asked as a social media marketer, is “What will be the return on my investment?” This is not a two minute question that we can instantly answer for you on the spot, because the answer is dependent on your own business, your social media customers and the behaviour of your customers over a period of time.

Assessing all social media engagements over multiple platforms can seem like a really daunting task, especially if you do not know what you are looking for. It is, however, possible to determine the ROI of your social media marketing efforts if you create measurable goals, assign a value to specific customer actions on social media and calculate the total cost of all your social media efforts.

Let’s break this up into easy steps for you!

Step 1 – Defining measurable social media goals

Why are you using social media in the first place? Do you hope to increase your sales? Are you aiming to build up brand awareness? Generate more leads?

When you have decided upon your GOALS, link each goal to an ACTION. These should be a small number of specific measurable actions that you want your social media audience to take, by which you can gauge success. Some examples of measurable actions are:

1) Click-throughs to a landing page on your website

2) Views on a specific piece of content

3) Number of online purchases

4) Number of newsletter sign-ups.

Step 2 – Give each action a value

You now need to assign a value to each action, this is the trickiest part!

What is the lifetime value of one of your customers who have reached you via social media worth? (you can look at newsletter email subscribers, followers of your Facebook page, website visitors etc).

What will one person spend with your business in total? Do your customers tend to just buy from you once? Do they buy once a fortnight? On average do they buy for X amount of years and then disappear?

What is the price of your products or services which you are promoting via social media? Work out a typical individual spend for a customer and an average order size from social media and website referral.

In order to answer this question accurately you will need some amount of time, experience and practise!

Likes, comments and shares sadly do not connect to revenue in a way that you can easily measure. For a clearer picture of how revenue is connected to social media, you need to track click-throughs, sign-ups to your newsletter/email list or website visits.

Increased likes, comments and shares are still very useful though as they increase page interaction and lead to better page visibility, which ultimately will increase brand awareness and website/social media referral. They should not be used alone to ascertain whether you are getting a return on your investment.

Step 3 – Calculate the cost of your social media

Work out the total amount of money that you spend on your social media efforts. Include your own time, your employees wages and any costs associated with promoting your social media accounts/posts. Make sure you also include the cost of hardware, software, website and hosting costs. If you pay a third party to write content for you or manage your social media accounts on your behalf, don’t forget to factor this cost in. Lastly, include any expenses which are related to social media, such as conferences and subscribing to image and graphics databases.

Step 4 – Calculate the ROI

Now comes your favourite part…the maths!

(Total revenue from social media – total costs of social media) x 100

Then divide your answer by the total cost of social media

= Social Media ROI %