27 Jul How Do You Quantify The ROI From Social Media Marketing?
Social Media has come a long way since its arrival. What used to be a digital marketing channel solely reserved for the biggest brands as a way to generate awareness and increase brand value, it is now an essential marketing tool for business of every size, shape and background.
From single-person businesses and sole traders to larger business and organisations, Social Media can be an invaluable tool not only for brand awareness but to generate sales, leads and enquiries as well (for more on this subject, read Routes 4 Media’s popular benefits of Facebook advertising article).
But, this doesn’t mean you should simply pump every spare pound in your marketing budget into your social media marketing campaigns. Just like any other expenditure in your business the results need to justify the expense.
But how exactly, do you quantify the ROI from social media marketing? I thought that wasn’t possible?!
Well, that is exactly what we’re going to answer in this blog post.
The Process Of Quantifying ROI From Social Media Marketing
You need to know what you hope to achieve in order to decide whether a campaign has been successful and made a good return or not. In other words, you need to first define what success aka a positive ROI may look like before you can determine if/when that has happened.
There are several parts to this:
Set Your Objectives
You to need to know if a particular social media marketing campaign is intended to boost sales, generate leads, generate brand awareness, business conversions, the general customer experience or even designed to improve the security of your data; inspiring more customer confidence.
You need to set an objective or a number of objectives to be able to assess whether the return has been positive or negative.
Goals Of Social Media Marketing
Goals are generally longer term and deal with the overall direction of your firm. For example if you wish to improve the level of customer service you can quantify the current level on a scale of one to ten.
Then establish what you believe would qualify as 10 on the same scale. This is your goal; all you have to do then is decide the timescale in which you want to reach that goal. Every social media campaign should then be moving you closer to that goal.
Tracking The Metrics In relation To Your Objectives
The metric you use to assess the ROI will depend on the objective you have set. But the first step must be to track the social media marketing campaign and collate the results.
If you’re looking to build brand awareness then you’ll want to see an increase in followers; tweets and re-tweets (aka engagement). This will illustrate how many people you are reaching via your campaigns.
You could also look at the number of additional subscribers you have generated onto an email list. These can be linked to specific campaigns to help you judge the level of response and hence the increase in brand awareness.
Or, you could also monitor the number of visitors to your website and go as far as to set a target number of visitors based on your current conversion rates. In this way you would be able to financially quantify the return that you hope to get and what you actually got.
You should be able to track your leads and conversions which come through your website or sites. If you’re running multiple campaigns then you can add voucher or code numbers to specific offers; this will enable you to track which campaigns are producing the best results.
Of course you should also be able to see an increase in sales for a particular product or line; in relation to your campaign. If you don’t see this, it may be a sign that your marketing campaign isn’t quite helping you accomplish the goals you set for it.
If you’re using social media as a way to directly sell to your customers than you’ll be able to use the Google analytics tools to monitor visitors, how they got to your site and how much they are spending.
You want your customer to have the best possible experience. This will increase the likelihood of them returning and perhaps even justifying a higher price tag for your product or service.
You can track your results by establishing a quick survey. It will need to be short to keep your customer interested. You may even choose to have a click chart stating how satisfied they were with the experience on a scale of 1 to 10.
You can then quantify where you want the average experience rating to be in order to state that the investment was worthwhile.
Putting A Value To Your Metrics
The only way in which you can really decide if your social media marketing campaign was successful; or whether you should have used another digital channel such as SEO or PPC is to put a monetary value to your results.
You’ll then be able to see if you have made more money than the campaign cost you; or not.
It is worth noting that successful social media marketing means creating a profit; even if this is just 1 cent. As soon as you can report you’re achieving this you’re likely to see the marketing budget increase.
Here’s how you assign a monetary value to your statistics:
Lifetime Customer Spend
You should be able to work out how much your average customer spends with you over their lifetime.
- Start by taking the revenue for a set period; a year is advisable. Then divide this by the number of purchases made in the same period.
- Separately divide the number of purchases by the number of new customers in the same period.
- Multiple these two values together to get the customer value.
- Then work out the number of years a customer spends on average with you; your database should be able to tell you this.
- Now wimple multiply the customer value by the average years to get a lifetime value.
If the lifetime customer spend is going up your campaign is working.
You can take the lifetime value and multiply it by your current conversion rate to calculate how much every new visitor is likely to spend with you.
Average Sale Value
An alternative way of assessing the monetary value of a visit is simply to look at the average spend by a customer when visiting your site.
Again you can combine this with your conversion rate to work out how much each customer is worth to you
Cost Of PPC
You can also look at how much it would cost through a Pay Per Click (PPC) campaign to attract the same number of customers. This will help you to decide if the social media marketing campaign was worthwhile or if you should have simply used PPC or SEO.
Being able to put a monetary value on each visitor will enable you to assign a rate of return for every customer. You can then assess the cost of a campaign and compare the potential income earned to decide if the social media marketing was worthwhile or not.
Don’t forget, to calculate your investment cost you need to consider the advertising spend, staff costs, social media costs, time and any cost associated with the production of your product.
The first step in your journey is to quantify the ROI. You can measure the return simply by how much revenue a particular marketing campaign raises. This is as simple as dividing the profit by the investment, (the cost of supplying a product including advertising); multiplied by 100.
This will give you an ROI percentage.
Unfortunately, this can be difficult to calculate accurately and it doesn’t take into account other returns; such as improved brand awareness. It is more difficult to quantify the gain you make as a business on a non-financial basis; but it is important to understand what impact your social media marketing is having.
Why You Should Monitor Your ROI
When you create a calculation that allows you to work out the return from specific marketing campaigns you’ll have a standard which all marketing efforts can be compared to.
This is important to assess whether they have achieved their goal and to enable you to report to both the board and your employees. It is easy for people to see social media marketing as a bit of fun. Quantifying the results will allow everyone to see the benefits it offers to the business.
This will help your sales and marketing teams to work together.
The Bottom Line
We hope this article will go a long way in helping you quantify the ROI from your Social Media efforts and whether it is paying off. The key when doing this is to be consistent in your approach; this will ensure you gain a real understanding of what works and what doesn’t when marketing your business and increasing sales.