In some of my past posts, I’ve discussed how social media marketing differs significantly from conventional marketing communications. However, when it comes to measuring Return on Investment (RoI), there is no real rocket science that social media marketers need to learn and apply. Following the basic tenets of cost accounting and financial RoI measurement, they can evaluate what kind of bang they’re getting for their buck.
To recap the basic RoI equation, RoI = (Revenue – Cost) * 100 / Cost
Let’s now understand and apply a 6-step process to obtain the cost and revenues to plug into the above equation.
Step 1: Set the objective of the campaign
What is it that you wish to achieve with your campaign? A 20% increase in sales revenue? A 35% increase in number of ‘active’ fans on your Facebook page? Getting 250 fans to sign up for a special promotion? Having a goal with a measurable benefit is the first step towards calculating your campaign RoI.
Step 2: Track conversions
There are various ways to do this on various platforms. Google Analytics, MailChimp analytics, etc. are examples of tools that give you the desired metrics on your campaign. A good number of third party apps are also available for this purpose.
Step 3: Assigning monetary value to the conversions
Using historical data (or in some cases, an educated guess), we can calculate how much monetary benefit the conversions are bringing us. This constitutes the Revenue part of the RoI equation.
Step 4: Tabulate monetary contribution channel-wise
Take the required analytics from each of the channels or social media platforms you use. Tabulate these in an Excel sheet and thus compute the revenue delivered by each,
Step 5: Calculate what you’ve spent
Take the fixed costs of having a social media presence (for instance, salaries of employees involved in the process, agency fees, etc.) and the variable costs (social media advertising spends, creative development, etc.) and thus obtain the Cost part of the RoI equation.
Step 6: Plug these into the RoI equation…
… and voila! You have a fix on how much value your social media initiatives have truly delivered to the brand.