Social Media Marketing: How to Calculate ROI

If you are scratching your head wondering how to calculate the ROI of your recent social media campaign, you are not alone.

According to a Convince & Convert survey, more than 40% of companies say they have “absolutely no idea” if their social media campaigns will pay off financially.

Social media, like all other marketing channels, has to prove its worth in order to be funded. But, with a wide range of social networks, program objectives, measurement sources, data types and differing opinions about how to best evaluate effectiveness, this challenge can seem elusive to digital marketers.  

While calculating the ROI of social media can prove difficult, it is possible. It can also be beneficial. Knowing the ROI of your social media programs will provide you with the insight you need to prove the effectiveness of your digital marketing strategy and obtain executive buy-in and budget for future investments.

Start by setting goals

To measure post-campaign results, you first need to determine what it is you are trying to accomplish. Discuss program goals with internal stakeholders to gain buy-in for your strategy. Ensure your social media goals are aligned with current business objectives for optimum performance.

For example, let’s say a current company initiative is to drive sales for an existing product with declining revenue. After discussing—and mutually agreeing internally—you decide to invest in a social media program to revitalize sales through new channels. Now that you’ve established your goal, you need to determine what methods to utilize to calculate effectiveness.

How will you measure success?

After documenting mutually agreed-upon campaign goals, you need to clearly define how to measure ROI. This is especially true if a third-party vendor funds the program. In this case, you will need to understand what types of reporting metrics they expect in return for their investment.

For instance, should conversion or engagement metrics be used to calculate ROI? It is very important to communicate the method you plan to use before your campaign has launched. Clearly articulate this information to stakeholders to ensure expectations are set early in the process. Following is an overview to get you started.

The value of engagement metrics

Measuring social engagement—or the interaction users have with your brand—is one effective method to determine social media ROI. This is especially true when conversion metrics are not applicable to your social activities (for example, a campaign designed to generate brand recognition or build thought leadership may not include a lead capture element). 

Providing your prospects with relevant, helpful and authentic content will likely encourage measurable behaviors that you can attribute to ROI. 

Key engagement measurements include:

• Volume
• Reach
• Engagement
• Link clicks
• Signups
• Conversions/downloads
• New followers/audience growth rate
• Increased website traffic
• Applause rate/Likes and favorites
• Amplification rate/content shares and retweets

Capturing conversion data

Ultimately, you conduct marketing campaigns to drive new sales, so conversion data is also important. Because many of us in the IT channel do not depend heavily on ecommerce, conversion can take some time.You can measure the conversion of your efforts through some of the engagement metrics listed above, such as downloads and opt-ins.

To calculate quantitative ROI for your campaigns, be prepared for lead nurturing and have a method to track leads—for example, a CRM tool that shows how the leads progress through the sales stages to deal registration and, ultimately, close.

Regardless of the method you choose, your social media campaigns should include an analysis of campaign performance metrics.

Leveraging Key Metrics:

• Create a social media strategy that includes your chosen select metrics to measure results, and closely monitor what performs well in addition to what does not.
• Engage with your target audience members by building out your social platforms with effective content that matches their demographic and geography. Find and follow influencers, groups and brand advocates to further elevate your brand.
• Capture results via the key engagement measurements noted above to measure the success of announcements, marketing campaigns or other new initiatives. Listen to feedback to further customize future content based on performance.
• Track sharing metrics including retweets, shares or replies.  Measure by dividing total exposure or reach by interactions in order to calculate an engagement percentage. Then you can view the total potential audience that engaged in your social content outreach.
• Measure growth and performance for each specific social platform on which you actively posting content. It is important to capture these metrics over a predefined period of time to see how you’re improving.

Learn from your ROI

Measuring the return on your social media investments is just as important as measuring the return of your other marketing channels. It enables you to quickly determine what’s working and what’s not.

Social media marketing is effective because it enables a two-way conversation with prospects. Just as there is no one way to communicate with your entire target audience, there is no single method to calculate the ROI of all social media activity.

That’s why it’s important to obtain buy-in from your organization at the very beginning of a social media program. Agreeing on goals and tracking methods in advance will put the focus on your results—good or bad—and not the methods that were used to obtain them. This will help you understand what is moving the needle and what adjustments need to be made to maximize your investments.