Measuring social media ROI is crucial to proving that your social media marketing efforts are paying off.
As a marketer, demonstrating that your social media strategies are generating positive results is necessary to be able to safely secure your social media budget or earn a contract renewal.
And if you’re not seeing a positive ROI, that’s a hint to you that you should shift your social content strategy.
In this blog, we’ll cover the ins and outs of calculating social media ROI, including social analytics tools that will make your life easier.
Table of Contents
- What is ROI (Return on Investment)?
- What is Social Media ROI?
- Why You Should Calculate Social Media ROI: 6 Benefits
- How to Calculate Social Media ROI
- 1. Align Social Media Goals with Business Objectives
- 2. Set Quantifiable Targets for Each Goal
- 3. Identify the Relevant “Return” Metrics
- 4. Calculate Your Social Media Costs
- 5. Calculate Your Social Media ROI
- 6. How to Report on Social Media ROI
- Start Tracking Your Social Media ROI
What is ROI (Return on Investment)?
ROI stands for Return On Investment.
ROI is a ratio of the net profitability or loss of an investment relative to the cost and effort put into it.
In simpler terms, it’s how much revenue you gained relative to your costs. The goal is to find the investment with the highest ROI.
The basic ROI formula is:
ROI = Net Return on Investment / Cost of Investment X 100%
Or, formulated in another way:
ROI = (Revenue – Costs) / Costs X 100%
Let’s go over a quick example:
Imagine you run a lemonade stand and you earn $30 of revenue in one hour. It cost you $20 for the ingredients and an hour of labor.
Plugging that into the formula:
ROI = (Revenue – Costs) / Costs X 100%
ROI = ($30 – $20) / $20 X 100%
= $10 / $20 X 100%
In our example, we’ve earned an ROI of 50%. This means for every $1.00 we spend, we earn a profit of $0.50.
Compare that to a bake sale, where our revenue is $50 but our costs were $40. In that case, our $10 profit meant an ROI of only 25%, so were better off selling lemonade!
For more sophisticated ROI calculations, check out Investopedia’s ROI guide.
What is Social Media ROI?
ROI seems like a simple enough concept. How do we translate it into social media terms?
Social media ROI is the benefit you gain from a social media strategy relative to the costs of that strategy.
But when it comes to social media ROI, it isn’t as easy as calculating dollars in and dollars out.
There are some cases where calculating social media ROI is cut and dry. For example, for paid social media ad campaigns, you can track revenue from eCommerce sales relative to your ad spend and the cost of creating the ads.
But most cases are more nuanced.
How do you calculate the revenue earned from gaining a new Instagram follower? Or 100,000 views of your latest viral video? Not every social media action you take will be directly attributable to revenue.
That said, we can’t give up completely on calculating social media ROI, because we still have to compare the value of one strategy against another.
Therefore, we need a slightly looser definition of social media ROI that allows us to take longer-term or more indirect benefits into account.
That’s why we’ll use the slightly modified social media ROI formula:
Social media ROI = (Social media returns – Social media costs) /
Social media costs X 100%
For this formula, we’ll use success metrics other than revenue to calculate social media ROI.
The key is to choose metrics that align with your greater business goals like reach, engagement, followers, clicks, downloads, or newsletter sign-ups, and then compare them to your costs, like labor, training, tool subscriptions, or advertising budgets.
We’ll return to more detailed calculations and comparisons below.
Why You Should Calculate Social Media ROI: 6 Benefits
There are an infinite number of social media marketing strategies you could adopt.
Your goal as a marketer is to identify the strategies and tactics that will have the most gains relative to their cost.
And as much as you can manage it, those strategies should be backed by data.
By taking the time to think through how you’re going to measure ROI, how you’re going to track it as you go, and then how you’re going to report on it, you’ll be much better equipped to develop powerful social media strategies.
By calculating and tracking social media ROI, you will:
- Plan more thorough strategies
- More easily convince stakeholders of the value of your strategy
- Show a measurable impact of your actions
- Show that you’re conscious of costs and returns
- Identify which strategies provide the most value
- More easily identify when a strategy isn’t working
How to Calculate Social Media ROI
Here are the steps you need to take to measure your social media ROI.
1. Align Social Media Goals with Business Objectives
You’ve run a social media campaign before with your only goal being “growing awareness.”
It’s okay, we all have.
That may have been enough back when there were two or three viable social media platforms, or only a few tactics you could realistically take.
But now, there are so many platforms to deliver our message, so many different formats to communicate with our audience, and so many tools to track and measure our performance.
While this allows for greater potential and more creativity, it also necessitates clearer planning and goal setting.
It’s more crucial than ever before that you align your social media goals with your business goals.
Your business goals likely fall into categories like:
- Grow brand awareness
- Improve customer perception
- Improve the customer experience
- Grow revenue
- Generate leads or win new customers
- Retain more customers
Sit down with leadership and identify the goals that matter most.
2. Set Quantifiable Targets for Each Goal
Then, set specific, measurable targets for each goal.
At this stage, the goals may not even be tied to social media. What we’re doing at this stage is creating targets that we will eventually use to build our social media strategy and calculate ROI.
For example, if your objective is growing brand awareness, you could set goals like:
- Grow social media followers by 10% within 6 months
- Increase social share of voice by 20% by next year
- Increase organic searches of our brand by 15% by next quarter
Or if your goal is generating more leads, your goals could be:
- 50 eBook downloads per month
- 20 new newsletter subscriptions per month
- 10 service inquiries per month
Or if your goal is improving the customer experience, your goals may be:
- Improve customer satisfaction scores by 10%
- Reduce average response time to 11 minutes
- Improve customer sentiment by 5%
The key is to create goals that relate directly to your business goals that can then be leveraged to not only educate your social strategy, but also evaluate your strategy.
3. Identify the Relevant “Return” Metrics
At this step, we identify the business and social media metrics that are most closely correlated with our goals, or may lead to us achieving our goals.
If your goal is brand awareness or lead generation, you should track visibility metrics like:
If you’re evaluating what type of content resonates most with your audience, you would interested in engagement metrics like:
- Average engagement
- Average engagement rate
If your target customer is a certain demographic, you may measure audience metrics like:
You should of course also include business-related metrics like:
- Social media conversions
- Website traffic
- Leads generated
- Form submissions and sign-ups
- eCommerce purchases
- Revenue generated
- Customer service ratings
- Online reviews
Once you’ve listed out the metrics you want to track, you should re-evaluate them against your business goals and measurable objectives.
Make sure they are truly a measure of success that makes decision-making easier, and not just another data point. Sometimes, less is more.
For example, if your goal is lead generation and your campaign creates tons of reach and engagement, but no leads, would you still consider that a success? Perhaps reach and engagement aren’t worth tracking in that case. However, they may be a clue as to which content is best-suited for your audience.
Make sure you choose metrics that you do have the capacity of tracking and reporting on and actually integrating into your day-to-day or week-to-week workflow.
4. Calculate Your Social Media Costs
Cost is an often overlooked aspect of a social media campaign, but a key variable in the social media ROI equation.
Some of these expenses may be shared across campaigns, so be sure to allocate the relevant portion of the cost to your campaign.
Your potential social media costs may include:
Internal Employee Time
This is the most hidden cost of social media.
Research, planning, meeting, creating, publishing, reviewing—all of these steps take an enormous amount of time.
In some cases, an imperfect social strategy that takes half as much time to execute may end up providing more ROI than a perfectly polished campaign.
You should estimate and track the amount of time spent by each team member and associate that time with a cost.
And don’t forget to take individual hourly wages or salaries into account. You may be able to improve ROI by offloading tasks to freelancers or lower-cost employees.
Most social campaigns will require videos, blog posts, graphics, and copywriting for the actual posts.
Some of this cost will be accounted for in your internal employee time, but you may have also hired freelance writers, videographers, or graphic designers to create that content.
Tools, Software, and Platforms
If you’re investing heavily in social media and content creation, you likely have several tools or software subscriptions to make your life easier.
This may include:
- Social media publishing tools
- Social media analytics tools
- Marketing automation tools
- Content creation tools and programs
- Website modifications
Most social media campaigns will include budgeting for boosting posts or running social ads. This cost should also be accounted for.
5. Calculate Your Social Media ROI
Now that you have your success metrics and your cost metrics, you’re ready to calculate your social media ROI.
But because your investments and returns aren’t all in dollars, it won’t be as easy as punching numbers into an equation.
However, you can still use a rough ROI calculating in your planning and reporting stages.
When planning, predict your returns based on the metrics you identified and evaluate them against the costs. How does this line up compared with other potential strategies?
In the reporting phase, lay out all of the actual gains relative to your costs. In most cases, the relative ROI will become clear.
6. How to Report on Social Media ROI
Now that you’ve chosen which metrics and costs you’re going to track, it’s time to track and report on them on a regular basis.
Keep in mind that you may have several audiences here. You may be reporting to your marketing team, decision-makers in your organization, or a client.
Here are a few recommended best practices when reporting social media ROI:
Include Business Objectives
At the beginning of your reports, include the key business objectives that you’re working towards.
This way, everyone will be on the same page when digesting the data included in your report.
Keep it Simple
Don’t overwhelm yourself or your audience with data or marketing jargon. Use simple language and report only on the key metrics that relate most closely to business goals.
Keep it Consistent
Choose a reporting period and keep it consistent. For example, present a report every two weeks, or on the first of each month.
This way, you and your audience will develop a comfortable cadence and become more comfortable discussing the results.
Understand and Communicate “The Why”
Data for the sake of data doesn’t help anyone make smarter decisions. When creating reports, make sure you can explain the why behind every data point, and back up why it was included.
Use Industry Benchmarking and Third Party Data
Some metrics will be fairly meaningless on their own, without some type of comparison or baseline.
By using benchmarking data or third-party research, you’ll be able to provide more context for your audience.
Automate Your Reporting
Your reports will only be useful if they are convenient. Make sure there isn’t a huge manual effort involved in pulling in the data from lots of different sources.
That will allow you to check your metrics as often as you need to.
Use a Social Media Analytics Tool
A social media tool like Keyhole can simplify your social media ROI tracking and reporting.
It keeps all your data on one easy-to-read dashboard and allows you to link in data from all your social platforms.
For more analytics reporting tips, check out Analytics Reporting for Marketers.
Start Tracking Your Social Media ROI
You now have all the necessary pieces to complete your social media ROI puzzle!
While tracking ROI isn’t always simple, knowing the impact of your choices will help you better advocate for your social media efforts.
To start tracking and reporting your social media ROI, start a free Keyhole trial today.
Keyhole is a real-time conversation tracker that provides keyword + hashtag analytics and social media analytics across platforms such as Facebook, Twitter and Instagram. Get started for free here.