How could you calculate social media ROI? What’s the average return on investment for a social media campaign? If you are tired of throwing money into social media campaigns without knowing how effective that spending actually is, you should write this article for sure! In this article, we will break down five tips you can use to measure your social media ROI. because if it’s not boosting ROI, it’s not worth the buy.
What is ROI?
In paid social media campaigns, ROI, or return on investment, compares the campaign’s income to its operating expenses to determine how profitable your ad expenditure was. In a nutshell, it illustrates the return on investment for each dollar spent on advertisements. ROI calculations can direct budget allocations, targeting tactics, and campaign optimization in addition to assisting in determining whether a campaign is financially worthwhile.
ROI stands for return on investment, which is the value you get in return for your efforts. Therefore, the value we look at from social media and marketing in general can be customer lifetime value, customer referral value, customer influence value, or customer knowledge value.
But there’s a lot more value that is gained by social media than just some numbers like revenue minus expenses, and one that’s really often overlooked is information and market research value. That is, if you have a new product that is coming up or if you’re looking for beta testers, you can tap social media communities like Reddit or your Facebook group and ask for new testers, and the kinds of information and feedback that you will get back are pretty much high value. But breaking the bank is not a good reason.
In the 2017 digital survey that Search Engine Journal did, the top metric for social media marketing was engagement, and that’s going to be your number of followers, your likes, comments, and your shares, and we’re not necessarily going to tie that to a revenue figure, but it’s certainly an ROI that you’re getting as a return on your social media investment.
5 Tips to measure social media ROI
1. Expense Tracking
Tracking expenses is the first step in calculating ROI. Without knowing how much you’re spending you can’t measure the return on your investment. It’s like baking a cake without measuring the ingredients. You won’t know if it will turn out right because you didn’t track what went into it. You will need to keep tabs on work hours, agency or freelance costs, social media software and services, content development expenses, and advertising costs, just to name a few. Essentially, everything that you spend money on to bring a campaign to life needs to be accounted for.
To help you keep track, you can use a free reporting template. Feel free to find your own; there are tons available. Just plug in your data to the cost. Add them all together, and you will see the total cost of your campaign. With a template, you can also add your clicks, impressions, and shares to judge overall engagement.
2. Revenue Attribution
Revenue is the ultimate indicator of whether what you are doing on social media is actually helping your business. It answers the question, Did people buy something? Keep an eye on metrics like signups for email, product downloads, and, most importantly, purchases. Different dashboards that are costomized for this kind of services are great. They are an all-in-one tool that lets you keep tabs on how much your social media campaigns are actually generated. One of these dashboards is HubSpot. Just go to Marketing, then Social, and click on Connect account to connect your social media platforms, if you haven’t already.
In your dashboard, navigate to Tracking & Analytics. Then tracking URL builder. Create a tracking URL specific to this campaign. Use this tracking URL in all the social media posts related to this campaign. You can then see how much revenue can be attributed to a specific ad, email, landing page, or even a website. Just navigate to the Performance section of each and you can see a quick view of your revenue for that channel. The result will be if your social media campaign led to 1,000 purchases of a $50 product; that’s direct revenue of $50,000 attributable to social media.
3. The ROI Equation
Once you know both your total revenue generated and expenses, you’re ready for the ROI equation. This is a formula you can use to calculate the profitability of an investment relative to its cost. Just subtract your expenses from the revenue, divide by expenses, and multiply by 100 to convert it into a percentage. So, let’s say your total revenue from a social media campaign is $50,000 and your total expenses are $10,000. Plugging these values into the ROI equation, you’d have a total ROI of 400%. That means for every dollar you spent on the campaign, you earned $4 back.
4. Sentiment Analysis
Besides tracking sentiment, analysis is also a handy tool. Sentiment analysis is just a fancy way of saying you’re checking if people are saying good or bad things about your brand. This info helps you figure out if what you’re doing on social media is making a difference. An easy, quick, and free way to check out your brand with social media is through hashtags. Manually search the hashtag for your business, service, or campaign on platforms like Instagram and Facebook. Check what people are saying to gauge the sentiment.
The advantage is that hashtags put all the mentions into one place for you. You can then measure how these sentiments change before, during, and after your social media campaigns to gauge their effectiveness.
5. Conversion Rate
Your conversion rate tells you how many people are doing what you want them to do, like buying a product after clicking on a social media post. You can calculate your conversion rate by tracking the number of conversions generated through your social media campaigns and dividing it by the number of total visitors. Then multiply it by 100 again to get a percentage. So, if 1,000 people visit your site from a social media post and 50 make a purchase, your conversion rate is 5%. This metric gives you an understanding of how well your social media campaigns are driving desired actions. To see how many prospects are visiting your site, you can use Google Analytics.
Just log into your account, head to Reports, and then Traffic Acquisition. Here, you should see a list of different traffic sources categorized into channels like email, organic search, referral, and direct. By clicking on Organic Social, you’ll see a breakdown of social networks sending traffic to your website.
Bottom-line
A thorough manual for figuring out and maximizing return on investment in social media marketing can be found in “Best Practices for Paid Social Media Campaigns.” The financial return on ad spend, or ROI, is more than simply profit; it also includes engagement measures and insightful information like customer lifetime value and brand perception that add to total efficacy. The article highlights that campaigns might not be worth the cost if they aren’t producing a strong return on investment. It outlines five essential tactics for precisely calculating and improving social media return on investment, ranging from monitoring all campaign costs to assessing consumer opinion.
Businesses should begin with thorough expense tracking to ensure that all costs, including software, content creation, and ad spending, are taken into account in order to compute ROI properly. In order to track the money that campaigns directly generate, revenue attribution is equally crucial and calls for tools like HubSpot. In order to evaluate how well advertising elicits desired actions, the paper also suggests measuring conversion rates, evaluating audience attitude through social media mentions, and computing ROI using a straightforward formula. By taking these actions, marketers may assess the true effect of their social media campaigns and make data-driven choices that increase campaign profitability.