Ask any social media marketer what their biggest struggle is, and they’ll tell you it’s evaluating social media ROI.
What is social media ROI? And how do you measure and prove social media to your boss?
We’ve got the answer to those questions and more in the social media ROI FAQ below, so you’ll feel confident enough to make return on investment an integral part of your strategy.
Table of contents
ROI stands for Return on Investment. It’s a performance measure used to evaluate an investment’s efficiency or compare the efficiency of several different investments.
The return on investment formula is as follows:
ROI = Current Value of Investment − Cost of Investment / Cost of Investment
In other words:
ROI = Profit / Cost of Investment
Social media ROI is a key performance indicator that reflects the impact of your social media strategy on your company’s goals.
You can apply ROI in marketing to all types of “investment”, not just money, including:
It aims to calculate whether the investment is well spent and that the brand is seeing adequate returns on what it puts in.
As a marketing team, your investment is almost always the time and cost of creating content, plus the cash spent on the budget for your social media campaigns. Depending on your company’s size, this will often include:
Pretty much anything you spend on making your social media strategy work.
What counts as a return is dependent on your company’s goals for social media. Possible metrics include:
Justifying the ROI of social media is key to securing your budget for the next year, as well as understanding and refining your strategy.
Yes, absolutely.
In today’s competitive social media environment, measuring social media ROI for your business is no longer optional. The growing costs of reaching your target audience mean it’s necessary to increase your budget, spend it in the most efficient way, and demonstrate its impact on your business.
Most importantly, looking into your ROI can provide you with valuable hints on how to fine-tune your social media strategy, which can effectively put you ahead of the game.
There’s no one-size-fits-all method of defining social media ROI for your business. Different brands have different goals. For example, some brands focus on brand awareness, while others focus on customer service.
To define social media ROI for your business, you need to identify your goals and objectives, and understand what return you want.
When it comes to defining a good social media ROI for your business, there’s no universal number that’s an indicator of success for any company. You should instead determine what’s a good value for your own business.
For example: Value / Investment (people hours, ad budget, etc.) X 100 = Social media ROI (as a percentage)
Value depends on your organization’s objectives; e.g. brand awareness, revenue, customer satisfaction, etc.
If you want to measure ROI on social media, you need to combine the built-in platform analytics with Google Analytics to get a complete picture.
You can use each platform’s built-in analytics tools to measure social media metrics, such as engagement, likes, and shares. For example, there’s Facebook Insights, LinkedIn Company Page Insights, and Pinterest Web Analytics.
You can use Google Analytics to measure how your social media actions affect the bottom line or contribute to conversions.
Its social reports can show you the impact of social actions, which social networks yield the best results, which content is most popular, and how social can result in conversions.
Social media ROI is what you get back from all the time, effort, and resources you commit to social.
In simple terms, you can measure ROI on social media as follows:
ROI = (Return – Investment) / Investment
The formula above has two parts: Return and Investment.
Here’s how to calculate each of the two values on social media:
“Return” is one of the trickier elements of social media ROI because it can mean different things to different marketers.
It comes down to what you want to achieve and how much these actions are worth to you.
You’ll need to measure your investment:
Proving social media ROI is tough.
According to eMarketer, 61% of social marketers said evaluating ROI is their toughest challenge:
Furthermore, LinkedIn research found that 58% of digital marketers have to prove social media ROI to get approval for future budget requests. But only 37% were “very confident” in their ROI metrics.
Here’s how to measure and prove social media ROI for your business.
Start by defining what value, in terms of social media results, means to your brand. Clear social media objectives help you define how social actions align with business and departmental goals.
Social media investment might create value, like:
Once you’ve established clear objectives that link your social media ROI to real business results, you need to set goals.
For example:
Note: be clear about how much value each goal brings to your brand.
You need to track social media metrics to determine whether you’re achieving objectives and meeting your goals.
So-called “vanity” metrics – such as likes, comments, and shares – get a bad press, but they can have value. They should only be considered “vanity” metrics if they don’t align with your business objectives. So, if you generate tons of “likes” but “likes” don’t align with your objectives, then it would be a vanity metric.
Other metrics you could track to prove social media ROI include:
When deciding what metrics to use, ask yourself:
As a marketing team, your investment is almost always the time and cost of creating content, plus the cash spent on the budget for your social media campaigns. Depending on your company’s size, this will often include:
Pretty much anything that you spend on making your social media strategy work.
Here are some tips for creating a social media ROI report.
There are two ways (at a high level) you can maximize social media ROI:
Here’s how to do both of them, so you have a lean, mean ROI-generating social media machine…
You can transform your blog posts, podcast episodes, YouTube videos, infographics, product photos, client case studies, and customer testimonials into original social media updates for minimal time and effort.
Sales are the most direct form of ROI you can get. And a great way to increase your sales from social media is by tagging products that feature in your updates.
Setting this up is pretty simple:
Once completed, just tag the product in your image, and all of your followers can click directly through to the product page.
You can read more about Social Commerce in our guide.
When you plan your social media tests, focus on the single variable you are going to change – e.g. frequency, timing, content type, etc. – and assume every other variable will stay the same.
This allows you to create a quasi “if this, then that” hypothesis for your test.
For example, if we change the post timings to before 08:00 CET, then we will see an increase in European engagement.
With this hypothesis in place, you have defined the one variable you are going to change, and gained clarity about the result you are expecting to see.
Double down on the channels where you can have the most impact, and remove any excess from your strategy.
By doing this, you can:
All of which positively impact your ROI and enable you to create a targeted, effective strategy that produces greater results.
One of the most controllable ways to improve your social media ROI is to save money on implementing your campaign
Research shows that 20 to 30 percent of a company’s revenue can be wasted on inefficient workflows.
To fix this, and free up some extra cash, you should consider implementing an efficient social media workflow that’s approved and understood by all the team members involved.
The more data you can have to inform the future of your strategy, the better.
One way to gain insights and understand the intent and actions of your audience is by tracking link clicks. For instance, with Loomly & Loom.ly:
Ideally, you should be tagging every link used in your social media profiles and updates so you can:
You can set this up for free using UTM parameters in conjunction with Google Analytics.
However, doing this with Google Analytics can require you to juggle lots of different links and campaigns, so we have created a way to simplify it.
With Loomly, you can track all of your links in one easy-to-understand dashboard, alongside the rest of your social media analytics.
Planning your content – i.e. a minimum of two-to-four weeks in advance – comes with a lot of great benefits:
These elements all help to improve the ROI of your social media strategy by saving you money on fixing problems and giving you ample time to make data-driven decisions.
In other words, you spend less time putting out fires and stressing about tight deadlines, and more time creating an optimal social media strategy.
It’s one of the reasons we created Loomly, along with this step-by-step guide on how to create and manage your social media calendar.
Your social media goals are what determine your metrics. For every goal, you need a related metric that helps determine if your social strategy is hitting the mark or not—[See previous section: How to prove your social media ROI].
All metrics have meaning. It’s about interpreting what that metric tells you and translating that back to your business goals. Some of the most important social media metrics include:
If you’re looking to improve your social media ROI, here are the things you must pay attention to:
Craft, schedule, & auto-post content to all your social channels, then track analytics and manage interactions from a single, easy-to-use dashboard.
The concept of social media ROI can appear a tough nut to crack. But once you break it down, and align your business goals and objectives to your social media metrics, then you can measure and prove the value of your social media investment to your boss.
Follow the guidelines above to prove your social media ROI once and for all.