Unfortunately most businesses don’t have a working knowledge of how to calculate the ROI of their social media investment. Most businesses simply don’t invest enough in social media full stop.
To improve the market share of your business and the mindshare of the wider public, social media is the go-to tool. To maximize your social media (SM) presence the decision making process needs to be systematised to eliminate inefficiencies from your SM strategy.
One of the first steps in calculating social media ROI is to have quantifiable goals to aim for. Whereas keeping a check on the costs of running social media requires less initial brainstorming though lots of measuring.
Why ROI?
The basic benefits of keeping a tally of your SM-ROI are as follows: 1) you get to see where your SM strategy could do with improvement, 2) you get to change and concentrate your efforts across platforms depending on which platform performs the best, 3) and you can oversee the impacts of the changes you make.
Defining your Goals: Actions
When defining your goals they should be quantifiable and linked to certain actions and/or campaigns. Examples of the types of actions that can be quantified are Email list sign-ups, contact form inquires, purchases and downloads of whitepapers and/or e-books. While tracking social media shares and the number of followers you have can be helpful, tracking these narrower metrics are just as important.
Measure per Campaign
The reason campaigns are so valuable for generating data and understanding your market reach via SM is because campaigns can be traced using Google’s ‘URL builder’, which can be included in your Google Analytics reports. This way any activity initiated by a campaign on a certain platform can be identified and tracked.
Google Analytics:
The easiest way to track your social media goals using the Google Analytics dashboard is to go to ‘Acquisition > Social > Conversions’. Then if you haven’t got any pre-designated goals, you’ll be prompted to create one via ‘Set Up Goals’.
Destinations Setting:
When inserting URL destinations it is best to enter an un-indexed URL destination. The problem with a page designed to give you conversion data being indexed by Google is that access from other links will corrupt the analysis pegged to a specific goal; therefore, entering un-indexed URL destination makes sure that your data is accurate.
Value Setting:
Here, you have the option to set a dollar value to each conversion or the lifetime rate of each converted customer. For example, in terms of selling specific items online all you need to do, is to approximate the average value of each sale you anticipate to make and then set a number as to how many units you aim to sell over the time of the campaign.
Funnels:
On the Conversion page is the ‘Funnels option, which represents a pathway to conversions through a series of pre-designed backlinks. Funnels give more in-depth insight into your conversions than the goals alone, according to the inputs specific to your business.
Expenses:
The main two expenses you should focus on are man-hours and content. So, each man-hour evaluation needs to be per-campaign and the amount of time spent standardised and documented. If you have spent any money on the content of your social media presence then these out-sourced expenses need to be accounted for too. In addition, any additional advertisement costs attached to the campaign should also be figured into the overall equation.
The Maths:
Finally, all you have to do, after adding together all these campaign specific costs, is to deduct them from your earnings, then multiply them by 100 and further divide that number by the total costs:
(Earnings – Costs) x 100 / Costs
To understand the returns you are making from a particular platform you just have to segment your expenses and costs by each campaign across the channels you use and apply the same formula.
Article Sources: How to define an actionable social media ROI for your business
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