Social media has been around for more than a decade, yet it remains difficult to understand the real return on investment (ROI) of harnessing today’s many social channels.
That’s not because the formula for social media ROI is confusing – the simple way to think about it is (Earnings – Costs) x 100 / Costs – but rather because the process of collecting and analyzing the necessary data can be arduous and difficult to begin.
With that in mind, here are some basic steps for measuring the ROI of your social media efforts.
Assessing the ROI of social media typically begins with identifying goals with a numerical value that you can track and measure. Instead, narrow it down to the most transactional business outcome that you can count, such as the number of:
People who sign up for your mailing list
Inquiry forms completed
Ebook or whitepaper downloads
Free trials initiated
Conversions from free trials to paid users
Purchases, either in transaction volume or dollar figures
Customers accumulated over a certain period of time
You can often track your progress using free tools like Google Analytics to measure traffic. Remember to use Google’s URL builder to assign trackable links to each of your social media campaigns and posts. And overlay these analytics against the native insights of each of the social networks for a more detailed view of your performance.
Think About Costs
Your performance figures become more valuable when you factor in your expenditures. All too often, social media marketers only track their spending on ads, which can result in a limited view of a campaign’s success.
To make a more accurate assessment, you’ll want to add to your expense tracking a tally of spending per campaign on:
Content creation, from copywriting to artwork, infographics, and video
Human effort in terms of billable hours
Software used to create, publish and analyze the performance of social media content
For sharper metrics, break down your measurements of spending and earnings by individual campaigns and social networks. This will enable you to assess which tactics are working and which ones need to be improved or abandoned altogether.
Use a Spreadsheet
Most people end up doing social media ROI calculations using Excel or another spreadsheet, inputting data from web and social media applications.
There are roughly 200 applications that include at least some form of social media analytics, but in practice, calculating ROI requires you to fill in missing pieces of data on both the cost and earnings side of the equation.
Remember to choose the most quantifiable goals that are relevant to your business so that you don’t have to approximate anything – or at least so you can keep any guessing to a minimum.
Don’t Give Up
While you might feel frustrated by having to do a lot of the ROI calculations yourself, don’t give up or you’ll miss out on the rewards of optimizing your performance.
If it’s any consolation, the challenges of calculating social media ROI are essentially an extension of what marketers face in cost justifying other types of promotions, including traditional advertising and public relations. The only difference here is that social media is newer – and increasingly important by the day.