How To Measure Your Social Media Marketing ROI

Data shows that most businesses are still not measuring social media marketing return of investment (ROI) and how it is affecting their bottom-line objectives. This is not entirely shocking given that calculating social media ROI encompasses many components and is difficult to get right.

Implementing this practice into your reporting comes with many advantages, such as:

·      Proving the value of social media marketing to your company, thus, defending the budget required and spent on those channels.

·      Identify what works and what doesn’t work in order to attribute budget and resources accordingly to improve results.

What is social media ROI?

Put simply, social media ROI is the value generated from your social media efforts and investments. How that value is defined comes entirely down to what the business objectives are, as it isn’t necessarily always monitory gain. Thus, first, it’s important to have clear business goals laid out to understand how social media marketing can produce relevant value.

When measuring social media ROI by revenue or value generated, a simple formula could look something like this:

Profit or value/investment (content production costs, agency cost, employee work hours, media spend, etc.) X 100 = your social media ROI (as a percentage).

Example: $1,000 generated in revenue from social media on a $500 investment, your profit is $500 (remember: profit = revenue – investment). $500 profit / $500 investment X 100 = 100% return on your investment.

It is important to recognise that using profit or revenue isn’t a relevant formula for all businesses for proving social ROI. Firstly, not every organization can attribute revenue to all their social media activities, and secondly, not all organisations using social media have revenue objectives, thus, they don’t measure value in dollars.

Business social media objectives may instead be:

·      Business conversions (such as lead generation)

·      Brand awareness or perception

·      Building user relationships and brand advocates

·      Security and risk mitigation

·      Employer branding and applications

If the business goal is to drive brand awareness, measuring success against metrics such as reach and engagement is the better way to go.

Measuring long term vs short term ROI

Given that social media marketing can work extremely well across the full marketing funnel (depending on the specific business), from driving awareness, engagement to developing leads and acquisition, we need to acknowledge that social media marketing should be looked at and leveraged also as a long-term relationship strategy. But how are these long-term benefits measured?

It's notoriously difficult to measure how your online campaigns are translating into long term benefits. For example, your social media efforts might not drive last click conversions today, but the user who saw those ads have become more familiar with your brand and this familiarity puts you one step ahead of an unknown competitor. There are steps we can take to ensure we capture as much of the user journey as possible i.e. having the necessary pixel tracking setup, customer relationship management systems and attribution models in place.

Social Media ROI tools

Google Analytics: track website traffic, conversions, sign-ups and purchases from social media campaigns. Google Analytics, as a reporting platform, provides a wealth of on-site user behaviour and insights as to how users navigate the site before converting.

Facebook Pixel: implementing this piece of HTML code into the website will allow you to track conversion events that happen on your website — everything from leads to sales that measures the impact and ROI from your Facebook ads. 

Social media built-in analytics: this provides marketers with the ability to measure their social media performance by tracking engagement, likes, shares, etc. These social media performance insight tools are effective in measuring content and general performance on the platform itself, however, it cannot track how social activities are impacting the bottom line which happens off-platform.

A practical example of how it all works: With the Facebook pixel added to your website, it will allow you to see how many users landed on specific pages e.g. blog, eBook, newsletter sign up etc. In addition, by also inserting the pixel, let’s say, to the newsletter sign up thank you page, this will track the volume of users who signed up to the newsletter i.e. leads generated.

At this stage, we have managed to capture users halfway down the marketing funnel. The next step is to understand whether these users went on to purchase after subscribing and receiving the newsletters.

In order to find out, we would add UTM parameters to the hyperlinks within the newsletter that lead to pages on your website where users can buy the product/service. Through Google Analytics we can then see how many users purchased. 

Attribution modelling to measure ROI

It’s important to recognise how a user journey looks like when a consumer considers making a purchasing decision. Maybe the consumer decides to do some personal research by reading other reviews, talking to their friends, visiting the website and reading blogs, videos on YouTube, or asking questions via online threads or social media groups. Each consumer varies widely in terms of what and how many touchpoints they are going through in their journey, but data indicates that its rarely just a first click and buy process.

When using the default attribution model in Google Analytics, this is set to last click conversion, meaning it only tracks the users if they clicked on the ad and made an action straight away. As we’ve seen there is so much more to that as a user generally goes through a number of interactions over a longer period of time to convert. For example, a user may have seen a number of ads, engaged with your posts, watched your videos etc over weeks, even months, then decided to visit your website directly where they converted. This means that your social media efforts have not been given any credit to that conversion.

In order to effectively attribute credit to your social media efforts, in most cases, you will need to lengthen the attribution window. To make the process easier for determining how large your attribution window should be, make an educated guestimate of how long a user typically takes to convert and then double it in order to ensure you are capturing all anomalies. If you determine that users take between 7-14 days to convert, then by setting your attribution window to 30 days means that you will track them without loss of any data.

Now that the contextual learning is out of the way, let's go into some practical steps you should take when measuring your social ROI.

Step 1: Define your business objectives and align them to relevant social media KPIs

As I have touched on, determining the social KPI’s is largely dependent on the business objectives, where those objectives fall on the marketing funnel, and even the price point may play a role on how you as a business leverage social media. For example, when is the last time you remember making direct purchases from social ads for high priced luxury items such as a car, property or even expensive watches or phones? Pretty rare, right?

Social media advertisements may work particularly well for the lower-priced products down the funnel, but the network platforms true strength lies in its ability to develop brand identity, awareness and build relationships through engagement, and ultimately creating leads and advocates. Generally, for this to happen your social media efforts should focus on building trust and providing value in the form of expert opinions, white papers, e-books, tips and advice, entertainment, knowledge etc (that’s another blog entirely). The idea then would be that those generated social leads, through the help also of other digital activities such as email marketing, will be transformed into conversions/sales.

There is a good deal of confusion as to where social media sits on the marketing funnel for each different business, hence, first understanding how social media should be leveraged to serve the needs of your business will help you adopt relevant key performance indicators to determine success.

Some questions to ask when deciding what metrics to use for your business:

1.    Does it align with the business objectives?

2.    Does it help make decisions (what is working, what is not working, etc.)?

3.    Is there a capacity to measure it effectively?

Depending on what the business objectives are, some of these metrics will be more or less important to prove ROI:

·      Reach

·      Audience engagement

·      Site traffic

·      Leads generated

·      Sign-ups and conversions

·      Revenue generated

Step 2: Know how much you're spending on social media?

When we think about social media marketing spend, we generally tend to attribute this to ad spend on our digital channels such as Facebook, Instagram, LinkedIn or Google AdWords. However, there is a whole host of costs that we need to account for that goes into digital marketing down to internet access, electricity, office, website, software and tools and employees – all of which are affecting your bottom line and need to be accredited in order for you to determine whether you are getting a good return of investment.

A few key factors to measure to know how much you are spending:

Cost of tools and platforms – social media management and analytic tools such as Hootsuite, Buffer, Sprout Social, Sprinklr, HubSpot and Socialbakers offer premium versions with monthly subscriptions and depending on certain packages, these can rake in hefty bills.

The budget allocated to your social media ad spend – this will be the simplest cost to track and is displayed within the social media platform ad manager dashboards. If you are running ads across multiple social media channels and are using a social media management tool such as Sprinklr, then this can be calculated together within that single dashboard.

Content creation – this will likely be a substantial figure given the need for quality social media content. Whether it be calculated from agency costs, or freelance / in-house writers and graphic & multimedia designer hourly rates, these need to be inputted. Opportunity costs can also be measured here if time went into the ideation and creation of the content as this took away time that could have been spent elsewhere.

Social media management team – the salaries paid to the team that dedicates 100% of their time to social media management, promotion, content creation etc – all adds up and is essential to understanding your social ROI.

Once all of these factors have been effectively added up and calculated, you will need to measure it against the business goals and defined KPI’s.

For example: if your social media goal is to develop quality leads to support the business objective in attracting new customers, you will need to determine the cost of each lead by using the mentioned formula – Profit (in this case leads generated via social) / total investment (tools, employee, content, ad spend etc.) X 100 = ROI (as a percentage).

Step 3: Know how much revenue is earned from social media?

This is where most marketers have a difficult time in tracking and measuring how their efforts are contributing to the company earned revenue. This is largely down to a lack of understanding, lack of data (no pixel integration on the website), lack of proper attribution models.

It goes without saying that if you haven’t developed these key concepts in measuring revenue earned, you can’t therefore calculate social ROI. Often marketers’ default to something much simpler like return on ad spend (ROAS), which fails to consider all the costs of earning the profit such as the expenses we covered in step 2. ROAS is simply your earned divided by your ad spent; which is an entirely different formula but is one which people confuse with social ROI. Similarly, company executives will often ask the marketing department for the ROI on a specific campaign, and in most cases will just be looking for the results i.e. what was the number of reach, link clicks or leads generated.

While not taking away from the effectiveness of measuring ROAS which allows us to understand the performance of the ads campaign, if we ignore content, agency and employee costs, the business might in fact be losing money. Hence, when looking at just ROAS numbers, it is often important to be generating a high percentage figure to allow for the other associated costs and still yield profit.

Step4: Reporting on social ROI

Finally, you need to translate all these findings, calculations and measurements into a language business owners or company executives understand. Speak to the business objectives.

This is why defining the business goals right from the get-go was essential. Focus on demonstrating how social media contributed to them specifically without throwing around marketing terminology that makes you sound like a shady salesman.

To support your case, compare industry and competitor benchmarks to determine the difference between an unhealthy ROI and one that is adding value to the business. This will not only help you understand whether social media is contributing to the bottom line, but it will help you strategize and optimise to put your effort and spend your money where you can get the best possible returns.

At this point, provided you have enlisted the tactics laid out in this article, you should be in a good position to defend your next social media campaign.