Social media is an important part of any marketing strategy. It can help drive your brand awareness. If you use social media for your small business, you need to be able to track your ROI (return on investment). This will help you as you plan out your marketing strategy because it shows you which campaigns were successful. Here’s how to measure ROI for social media:
What is Social Media ROI?
ROI means return on investment, and this refers to the value of social media activities divided by investment. The formula to follow is: return – investment made / investment made x 100 = social media ROI.
If the ROI value is more than 0%, your campaigns are effective at bringing in profits. If it’s lower than 0%, you are losing money from your campaigns.
How to Measure ROI for Social Media
Measuring your ROI for social media will depend on your goals. You’ll need to track costs, returns, and goals. There are many goals to aim for like conversions, click-through rates (CTR), or new followers. Important website metrics to track include engagement, reach, or leads. Once you figure that out, you can begin tracking your ROI.
1. Set Up a System
An easy way to implement a system is to use a site like Google Analytics. Google Analytics allows you to set up goals and event tracking. Not paying attention to analytics is a common mistake when using Google Analytics. If you want to track things like shares and mentions, try Buffer or Ahrefs.
2. Assign Monetary Value to Determine Values
The best way to assign monetary value is by using historical data. Start with calculating the lifetime value (LV) of customers. In other words, how much revenue, on average, does one customer generate for your business?
Then, take a look at the LV (lifetime value) and your conversion rate. This can tell you how often someone converts into a customer and how much each potential visit might be worth to your business’s bottom line.
If your conversion rate is 10%, this means about 1 out of 10 people who see your content become customers. Using customer lifetime value, you can add potential monetary value to these conversions.
So, if your paid promotion reaches 100 people, at a 10% conversion rate, 10 people become customers, you can calculate an average potential value of what those visits would be at $1,000. This can help you set targets for what gains on social media could potentially be worth for your business and what to aim for in order to see an ROI on your campaigns.
Another way to calculate this is by estimation. This isn’t the most reliable but can work if you don’t have historical data. Start by finding what the average purchase through your site is or what your PPC budget for social ad conversions is and use those numbers to assign monetary value until you have better data you can use.
3. Calculate Social Media Spend or Investment
To calculate ROI, you’ll need to know how much you spent on creating and executing these social media campaigns. An example of these costs includes your time or your marketing team’s time. It takes time to put together a social media marketing campaign and that needs to be accounted for.
Another example is money spent on social media ads. Take into account your weekly or yearly budget when calculating money spent. You also need to be aware of the cost of the software you may be using, and content creation. If you outsource to agencies for any of these services, you must also include that expense. These things are important expenses and need to be counted.
Measuring your social media ROI is an important tool as you navigate social media marketing. It will help you budget wisely and create better content. These steps on how to measure ROI for social media will also help you as you plan for future marketing campaigns.