By now most companies are realizing the value of having a solid social media strategy, and for many that means spending more and more time and resources on that strategy. It may have started innocently enough where looking at your metrics and posting an interesting article every day was enough, but now more money needs to be spent.
Simply put, understanding and measuring social media ROI can help give you an insight into how much money or valuable feedback you’re really making.
Measuring Social Media ROI
Unfortunately, calculating this number isn’t quite a “simply put” situation. This can be so time consuming that companies are still pushing this task to the side. Not only is it time-consuming, but trying to calculate costs for a project like social media is difficult by nature. It’s tough to know how much money you make off of something that focuses so heavily on brand reputation and connections, not sales.
Nevertheless, it can be done (hint: It’s not about counting up likes or follows). Digital Marketing Consultant Shane Barker gave a detailed article with a few ideas. Below are a few of those thoughts mixed in with some of our own ideas for measuring social media ROI. Remember, no number is going to be perfect, but it’s good to have an idea.
What Are Your Conversion Goals for Social Media?
The first step is simple: Don’t forget to really take the time to think about what you want people to do or get out of your social media efforts. For some the number of followers or likes may matter, but for most this should not be the end-all-be-all. Good conversion goals might include having people click on a link or sign up for a newsletter, for example. It’s as simple as that.
Once you know your goals, it’s important to have a system for tracking your conversions. For major networks like Facebook and Twitter there are already built-in analytics to help you track where your conversions are happening. Things like reach, website traffic, and customers are great metrics to look at to find out more about your conversions. For most companies this is where social analysis stops, but taking things one step further can help give you a better understanding of ROI.
Give Your Conversions Rough Monetary Values.
Knowing the average lifetime value of your customers is important. Ask yourself: How much is a customer worth overall?
This is where Barker offers a great formula with this mentality in mind. Simply take your average lifetime value and divide that by the total number of users. Multiply that number by your number of new customers and you’re set with a monetary value for each customer conversion.
Give a Monetary Value to the Benefits You’re Gaining from Social.
Once you have your number for the value of each conversion, multiply that by however many of them actually complete a conversion. For example, if each conversion is worth $20 and you had 100 customers subscribe to your blog, then your benefits would be 20X100. That’s $2,000 that your social media channel is worth.
How Much Do You Actually Spend on Your Social Strategy?
Another easy step for measuring social media ROI is to be sure to think about how much you’re actually spending on your current social efforts. In the last step you considered the benefits that maybe didn’t have monetary value, but if you have hired a social media expert, paid for ads on social media, etc., then that all needs to be included in your calculation.
Do the Math.
The last and final step to measuring social media ROI is to take all of the numbers and data and then come up with a rough estimate. Take your total profit and then subtract all costs. To get a percentage, take this number and multiply by 100 and then divide by your costs.
Finally, I recommend doing this for each social network separately if looking at your social media as a whole isn’t helpful. Because each social network is so different, you could easily find ROI numbers that are also very different.
In the end, it’s important to remember that just because social media is so important doesn’t mean that it will be beneficial to you regardless. You have to work for it, and if you’re spending more than you’re making then you aren’t really getting any true benefit in the end.
In other words, social media can be beneficial for every single type of company, but only if done correctly. In order to make sure you’re on the right path, calculating and measuring social media ROI is a must.