This is an updated version of a post originally published in April 2014 by Evan LePage.
Measuring the return on your social media investment is no longer optional.
To secure executive buy-in for social marketing strategies—and larger, dedicated budgets—digital and marketing leaders need to confidently demonstrate how social media efforts are contributing to an organization’s broader business goals.
Maturing from an experiment to a core business strategy, social media is now an impactful marketing channel that needs to compete against other channels—for budget, resources, and respect. This means that social, like other channels, has to prove its return on investment.
However, beyond simply proving the impact on the organization, measuring and tracking social media return on investment (ROI) accurately also lets marketers put more time and resources into what’s working, and improve the tactics that aren’t delivering real value. To help you evaluate your social media ROI, we’ve put together the following guide.
What is social media ROI?
No business wants to put money and resources into something that doesn’t pay off. Will the results from the channel make the effort, time, and cost worth it? How will you prove this? Is there content that will perform better and show a higher ROI? How is this going to be measured?
As you can see, measurement is key and you’re going to have to define and prove the importance of social media in terms of ROI. As with most measurement elements, a definition of social media ROI is subjective to the goals your organization has set. Social Media Examiner offers this broad definition: “Social media ROI is defined as a measure of the efficiency of a social media marketing campaign.” Supplementing this definition, the general formula provided for calculating out your social media ROI is given as follows:
Social media ROI = (SM return – SM investment) / SM investment percent.
Like any formula, the math is easy if you have all the variables. In his book “Social Media ROI: Managing and Measuring Social Media Efforts in your Organization,” author Oliver Blanchard explains that the ability to measure financial outcomes by a dollar value is significant because, “The investment, the gain, and the return must be measured in the same currency (the unit of measure of the investment, the gain, and the return must be the same in order for the ROI equation to function), only a financial outcome can qualify as a proper gain or return. In other words, financial outcomes are the culmination of any investment. This is where return is always measured.”
But what if your objectives aren’t easily quantifiable? As social media marketers know, the success of a campaign is not always measurable or quantifiable. To account for this, Blanchard explains that the non-financial outcomes “tell the story by capturing changes in human behavior.” What kinds of things did your target audience do after exposure to your campaign? Did these actions align with your goals? Where did they fall short? How can they improve for next time?
If you need another way to consider your social media ROI, think about the ratio between cost and gain. As Pagemodo explains, costs are anything being invested in your social media efforts, with some examples being:
- Social technology
- Agencies and consultants
- Paid media
- Business overhead
For estimating the gain from certain consumer actions (purchases, page views, downloads, email list signups, etc.) Pagemodo suggests you “refer to your internal analytics to better understand the conversion events that happened while social media was running.” These are all areas that can help you define your social media ROI and prove the value to your organization and brand.
Why is measuring ROI important?
If you want your efforts to be taken seriously, it’s crucial to prove their worth. Talk is cheap, so while you could tell your stakeholders or clients about the value of social media campaigns and why you need to dedicate resources to said campaigns, nothing will convince them more than being able to actually show results through ROI. Everything is taken more seriously when there are measurable and specific outcomes, and this is especially true for social media ROI.
Measuring your social media ROI is important for countless reasons, including, but not limited to:
- Proving the value of social media to your organization’s overall goals and business objectives
- Allowing you to clearly see where efforts and resources are being used efficiently
- Enabling you to evaluate where resources are being wasted, or not used as efficiently as possible
- Allowing you to recognize gaps in strategy, key messages, and content
- Showing where your social media budget is being used most effectively, and showing areas where it can be pulled back
As was shared in a social media pro panel, “If your role is to generate sales or leads through social media or your website, then it’s important to track where they are coming from. Being able to track whether organic social media is bringing in more sales than owned social, and vice versa, allows you to evaluate how good or bad your social media efforts are. If you see that organic social media is bringing in more sales than owned, it’s not a bad thing. It just means that your content is sticking, people are wanting to share it more, and it will allow you to know where you need to focus on.”
Now that you know what social media ROI is and why it’s crucial for your business, it’s important to set some goals. As mentioned above, before you are able to measure your social media ROI, you need to know what metrics you are actually measuring. When pitching your boss and trying to get buy-ins to your strategy, the key is to set social media goals that complement existing business and departmental goals.
If you have set a specific number of leads you’re trying to attain this quarter, set the number of leads you want to specifically be driven by social media. If one of your goals is to increase landing page conversion by 10 percent, ensure that you’re tracking the conversion rate of people who land on the page through social channels. Audit your existing social media performance to establish baseline targets, then set appropriate goals for improvement.
The brand awareness created by social media—seen in vanity metrics including “likes” and “+1s” and “Retweets”—is valuable, but it is not enough. According to Altimeter, only 34 percent of businesses feel that their social strategy is connected to business outcomes. To demonstrate social media’s value, you need to measure social media ROI as it relates to your broader business goals.
Key examples of social media metrics to track include:
- Site traffic
- Leads generated
- Sign-ups and conversions
- Revenue generated
It’s important for social data to be relevant to stakeholders within your organization, not just social media practitioners. Tying social media to the big picture by linking it to organizational and departmental goals will help you achieve that.
If you need some help determining goals, we recommend using the S.M.A.R.T goal framework. Explained in more detail through our piece Don’t just create social media goals—reach them, you want to ensure that the goals you are setting are specific, measurable, achievable/attainable, realistic/relevant, and timely. For example, rather than simply saying that you want to increase your engagement, set a numerical value and a deadline for this, such as aiming to have 50 customer interactions per week by the end of your first quarter.
As outlined in our post The Social Media Metrics That Should Matter to Small Businesses, the following are specific social media goals, and the metrics to measure for each, to get you on the right track with your social ROI efforts.
Goal No. 1: Increase social media engagement
Social media metrics to measure: Likes, Shares, Comments, Retweets, Mentions, Favorites
Goal No. 2: Increase customer acquisition on your website
Social media metrics to measure: URL clicks and traffic from social media
Goal No. 3: Increase brand awareness
Social media metrics to measure: Follower growth rate, percentage change over time in followers, Twitter sentiment, reach by region, clicks by region
Validate your ROI
While it’s great to set social media goals and act on them, your job isn’t done until you’ve proven the value of your efforts, which is a challenge for many social media and content marketers. As Moz explains, “according to The CMO Survey 2014, just 15 percent of marketers are able to prove their social media marketing activities has a clear, quantitative impact on helping them fulfill their overall marketing objectives.” Furthermore, an independent study by Altimeter revealed that many organizations avoid focusing on social media ROI because of:
- 56 percent: an inability to tie social media to business outcomes
- 39 percent: a lack of analytics, expertise and/or resources
- 38 percent: poor tools
- 35 percent: inconsistent analytical approaches
- 30 percent: unreliable data
While it may seem difficult at first sight to prove these hesitations wrong, there are numerous tools available to help you. Once you’ve established your social media goals, you’ll need to identify and implement these tools and processes required to measure the ROI on your social media. This may involve adding tracking codes to URLs, building custom landing pages, and more.
There are a variety of social media analytics tools which service to track the diverse metrics you are after. Here are some to consider:
Google Analytics: Track website traffic, on-site conversions, and sign-ups originating from social media campaigns.
Salesforce: Add Salesforce tracking codes to the links you share on social networks. When paired with marketing automation software like Marketo, you’ll be able to track sales leads back to specific campaigns or social messages.
Hootsuite Analytics: Hootsuite offers a variety of analytics tools to help you track your reach, conversions and more. A few noteworthy examples are:
- Hootsuite Insights will help you identify conversations within your industry, your reach, brand sentiment, and much more, with 100 million data sources, real-time results, and an intuitive interface.
- Custom URL parameters allows you to track which social networks and social messaging did or did not drive traffic to your site, blog, or landing page.
- Hootsuite Analytics Reports offer quick snapshots of your reach through metrics like follower growth, total daily URL click-through, and per-post stats for Facebook, Twitter, and more
Calculate your social media ROI
Once you’ve set your goals and chosen your social media analytics tools, it’s time to actually track your social media ROI. The ability to track should be built into everything you do on social media, so you’re never left scrambling to try and prove the success of a campaign.
Creating analytics templates will allow you to track your desired metrics without having to build out custom reports for each campaign. These reports will also present the data in an easily digestible way, allowing you to simply and effectively share your ROI on social media with higher ups in the organization.
You should check your various social media metrics frequently—often daily—to ensure that your social media goals are being met. The lifecycle of social media campaigns is often very short, so you need to stay on top of the data as it happens. Choose a timeframe that works for you, and stick to it. You can often have reports sent to your email inbox on specific days of the week so you don’t even have to remember to pull reports yourself.
Once you’ve identified what works and what doesn’t work for your organization on social, it’s time to adjust your strategy. The point of tracking your social media ROI isn’t just to prove your social campaigns are valuable, it’s to increase their value over time. Go back and take a look at the goals of your specific campaign and evaluate how they tie-into the organization’s overall goals.
Due to the short lifecycle of social media campaigns, a failing campaign should be changed and improved as soon as possible. Social media is never static. To meet your social media ROI goals, you’ll need to update and adapt your strategy constantly, taking into account the analytics data you’re tracking. Think about whether your data needs adjusting after calculating your first round of social media ROI, and get back to the drawing board if necessary. The setting of business goals and calculating your social media ROI is not going to be a black and white, one-time event, but rather an ever-changing and evolving process. However measuring your social media ROI gives your organization a valuable insight for not only measuring the success of past campaigns, but in planning for the future.
Discover how to measure and grow your social ROI at Connect via Hootsuite, our virtual social media conference. Register for free to learn new ways to transform your business with social.
Connect via Hootsuite takes place September 7, 2016 at 9 a.m. SGT (Singapore Time)/11 a.m. AEST (Australian Eastern Standard Time).