Calculating ROI for Social Media

MarketingProject Management
Written By Lenka Davis
 
 

Does it make sense to track ROI for your social media? How do you track social media ROI? How long do you want to track it?

By Lenka Davis

“83% of marketers in our [Hootsuite’s] survey reported having some level of confidence in the return on investment (ROI) of social media”
— Hootsuite

So let’s see what we can measure. Being data driven is the only way to know which direction to go.

What is ROI?  ROI - return on investment

“Return on investment (ROI) is the key measure of the profit derived from any investment. It is a ratio that compares the gain or loss from an investment relative to its cost.”

Profit in this case can be income, but it also can be awareness of your brand or product, visits to your website along with other non-monetary results.

Cost can be your time or the actual cost of paying someone to create and post social media posts for you.

Basically, by tracking ROI you will learn IF the amount of effort and budget you are putting into your social media gets you what you want to get out of it. Will it bring you any value?

ROI is generally expressed as a percentage, for example a 10% increase in visitors to your website or a 3% increase in your sales. You do not have to choose to measure how many more sales you made. Instead you can measure the following:

  • Increased number of visitor to your website

  • Generating more potential customers or leads

  • More brand awareness

  • Engaging more with your audience

ROI = (Benefits - Costs) / Costs * 100

Benefits can be a dollar value or an additional visitor to your website, etc.

Costs are your time and anything you pay for (employees, tools, photographers, etc.)

Examples:

Traditional example, if your total costs are $500 and 

your total benefits (sales) are $600

ROI = ($600 - $500) / $500 * 100 = 20%

Your return on your investment was a positive 20%

Or an increase in $100 in your sales

Social Media example, if your total costs are time spent posting on social media, 2 hours,

and your total benefits are qualified leads or interested customers 1 more qualified lead, then your

ROI is a measure of how many more qualified leads you find. These are called Marketing Qualified Leads or MQLs.

What Is A Marketing Qualified Lead (MQL)?

Marketing Qualified Lead (MQL) Definition. A Marketing Qualified Lead (MQL) is a lead who has indicated interest in what a brand has to offer based on marketing efforts or is otherwise more likely to become a customer than other leads.

The big benefit of getting more qualified leads is that you now have a list of people that are more likely to want to buy your product or use your services. In the end this saves you time.


Why do you want to measure your ROI?

Your time is valuable and sometimes, social media seems to be a sunk cost of your time and budget. Startups or small businesses may invest their own time.

“It’s not enough to be busy, so are the ants.  The question is, what are we busy about?”
— Henry David Thoreau

Set your social media goal

But first, a little about your goal.

  • Let’s make it simple. 

  • Start where you are at so ,for example, if you are just starting out then start at the beginning. This means your goal is to maximize engagement.

Steps

  1. Establish your goal

    1. For example, you want to engage more with your audience

    2. Assign a value to your goal

      For example, the value of an additional 10 engaged audience members, such as a Like or Comment on your posts brings in one additional visitor to your site or inquires to your business.


How to measure your social media ROI?

Using your social media goal from above then follow these steps.

  1. Calculate your costs

    Add your time, any costs with social media tools you use, and people who you employ to help you with your social media

  2. Track your ROI by looking at the increase in sales, but also at the intangible benefits such as:

    Comments from your customers

    Likes on your posts

    Clicks to a website or online article

    Shares of your posts

  3. Assign a value to each benefit

  4. Use the ROI formula to see what return you have

Fun Fact

When looking at the return on investment of your social media, find posts or campaigns that you feel could be adapted to your business. The “Shot on iPhone” campaign is a successful, long running and “ridiculously simple idea” for the iPhone. It was started in 2014 and has expanded into video, TV, and all sorts of social media platforms. It was “based on behavior we were seeing with people posting their photos and hash-tagging them in different ways.” The campaign uses user-generated content (UGC), so it involves the users and at the same time demonstrates the phones capabilities. What are your customers doing that you could use for inspiration?

Lenka Davis

Lenka Davis is a Managing Partner at Fly to Soar. She has worked in marketing, managing projects and building tools in the high-tech industry for Fortune 100 companies and also ran her own business. Follow Lenka and the Fly to Soar Team on Instagram @flytosoarcompany

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