No longer can Social media marketers shy away from putting a dollar value to the customer engagement that happens on social media. It is high time they put a number to the returns on their social media campaigns. It is important to have a ROI calculation in place before they can advocate investments on social media.
However, ROI calculation is not as simple as it seems. Calculating returns or quantifying the ‘customer engagements’ and ‘higher brand awareness’ is not easy.Moreover, the numbers need to be pulled out from various sources – blogs, social media sites, browsers companies and even their own servers have to be analysed thoroughly to ensure companies have the required numbers first to get to the measurement part.
The Marketing Plan should cover all aspects of Social Media strategy; right from where the money is going to be invested to how we are going to calculate the returns. Companies should essentially look at the following steps towards this –
Define the campaign goals.
What does the company ultimately want the social media campaign to do for them? Is it making the customer purchase something online, register or signup for a newsletter, spend time on the website, share or follow or like, view content, etc.
Track the interactions
This involves using Google Analytics and a host of other services that can be done at offsite (Facebook, Twitter, etc.) and/or onsite (at the client side or server side) depending on the need and budget.
A lot of metrics can be collected and analysed to know the success of the campaigns.
- Traffic – Number of visitors to the website
- Reach – Number of people the campaign reaches. The more the number of fans, followers or group members, the larger is the reach
- Leads – Number of potential customers or users that show interest or can be targeted depending on the action taken
- Customers – Number of leads that become actual customers
- Conversion Rate – Ratio of actual customers to the number of visitors or number of people reached by the campaign.
The conversion rate is the success rate that highlights the number of people that perform the actual action intended by the company (as defined in the first step – defining campaign goals)
This can be done by calculating the increase in sales or customers and assigning a monetary value to either of them. Calculating the sales brought in by each social media platform is relatively easy. Alternatively, if a customer’s life time value is known along with the number of new customers added, then the total value or returns of the social media campaign can be calculated.
Add up all the investments/costs such as people costs, agency costs, etc., per platform to come up with the total cost of the campaign
ROI = (Returns-Costs)*100/Costs
ROI for each social media platform can be calculated separately to know the efficiency of each platform. This can help the Campaign Manager or Marketing Manager to allocate further investments depending on the success rate of each social media platform
To conclude, calculating ROI on the social media marketing is an important step whose details need to be thought through during the planning stage. It might be difficult to pin down the exact benefits of a social media strategy. However, it is often possible to measure certain aspects of social media ROI for specific campaigns. Additionally, companies should also take a more holistic look, that justifies the spend on the social media campaigns and helps in knowing the efficacy of each dollar invested.