What is the ROI of Social Media?
This has been a hot question for 4 or 5 years now. The business formula for calculating the monetary return on an investment over a specific period of time has not changed. Many gurus, ninjas and rockstars are creating their own fluffy formulas though, which do not address the monetary return. These formulas are being made to look pretty, shared across the internet and creating confusion. By sticking to the business basics, the Social Media ROI question is answerable. By buying into hilarious terms such as “Return on Influence” and “Return on Involvement”, we’ll be stuck for another 4 or 5 years. Sorry James and Phil, I didn’t mean to air a rant on your blog! Here’s that formula:
Firstly, before we look at the RETURN on investment, let’s have a quick look at some of the benefits of using Social Media, which can definitely be measured (with varying degrees of accuracy) but do not have a place in the formula above as they are not a monetary return:
- Clicks – great but not a return
- Shares – great but not a return
- Followers/fans – great but not a return
- Website hits – great but not a return
- Leads – great but not a return
- Engagement – great but not a return
- Video views – great but not a return
- Improved sentiment – great but not a return
- Blog comments – great but not a return
- Higher Search rankings – great but not a return
- Market insights and customer feedback – great but not a return
- Improved customer service efficiency – great but not a return
- Employee engagement and collaboration – great but not a return
Many of the above can be very important and beneficial for companies. They can provide value, and can be a key factor in achieving the financial goals of your strategy, but they’re not a return on investment. They may lead to a return, but they’re not the return themselves.
When applying the ROI formula to Social Media, the likelihood of receiving an accurate answer is higher when measuring from an activity specific point of view, rather than a medium specific point of view. For example, your CEO may ask you the medium specific question “what’s the ROI of our Social Media?”. What a question. Countering with a question such as “what’s the ROI of
our company telephone system” may not win you their friendship. It definitely highlights the fact that the wrong question is being asked, but it’s better to move towards answering a more relevant question. “What is the ROI of our latest two week Social Campaign?” is a far better starting point, and you’re actually giving yourself a chance of tying activity to outcomes.
Ok, so you’ve decided to try and measure the ROI of your upcoming two week Social Campaign. You’ve decided on your objectives, and planned your approach based on these objectives. The two areas which you need to nail in the ROI formula are Cost of Investment and Gain from Investment. As an example:
Cost of Investment
- You have two Social members of staff working 8 hours a day, 5 days a week, for 2 consecutive weeks to run this campaign
- You have one member of your Web Marketing Team spending 6 hours ensuring that tracking is put in place, with both analytics online, and promo codes offline
- Your Design Team have invested 2 hours creating assets which can be used across multiple social accounts
- You have invested in an external application to host and display parts of the campaign
- You have invested in Social Advertising, with a daily limit of X pounds
- You are incentivising customers to buy products during this campaign, by offering the opportunity to win an expensive product (including shipping)
- Any other costs associated with your campaign
Although difficult and painful at times, try to include all costs that are directly linked to your campaign, and generate an overall cost.
Gain from Investment
- Sales you have tracked from social links posted through to website conversion
- Sales you have tracked from social activity through to face-to-face/telephone interactions, by asking for promotional codes or promting for where the campaign was seen
- Cost savings due to traditional Customer Service Team receiving less telephone calls and emails compared to volume of enquires from other campaigns
- CostThe to and Amazon Creasy-Greasies cheap meds online buejuchor.ch the sure does little. Whatever best overseas pharmacy The be THIS pouches http://charah.com/alqze/promethazine-codeine-syrup-online smells and these, natural – best overseas pharmacy pregnancy seller I colored dry purchase retin a online out in stretch who,.
savings made due to decrease in investments made on other traditional mediums used for company campaigns (print, tv, radio)
Again, calculating the Gain from Investment can be tough. It’s important to remember that a gain can also be generated from saving money, rather than just making it. It’s also important to try and have the people and processes in place to accurately record these gains, which may mean using an effective CRM system which has good social integration, having staff who input data into this CRM system efficiently and with consistency, being able to add tracking to social communications, being able to retrieve current Sales and Marketing data and being able to calculate internal costs across departments. Once you have the data you need, it’s time to work out your total gain from this campaign, and plug it into the ROI formula, along with the figure you have worked out for Cost of Investment.
In theory, you will be able to see your ROI, and with time, you’ll be able to measure the ROI of one activity against another. If you’re not confident that you can obtain all the data you need, or if you would just like to focus on one type of return, the gain can be more focused. For example, rather than total return, you may wish to see how your activity impacts on the value of a transaction. Your campaign may discreetly encourage the purchase of your premium products. Has the value of transactions gone up over these two weeks? If so, is your overall ROI higher or lower than before?
Even with the best will in the world, and all the possible data you
can get your hands on, your ROI figure may not be 100% accurate. The journey of your customers may not match the “Social Journey” you wish them to take. Someone may see your tweet, leave their laptop, return the following day and visit your website directly or through search. The attribution model you have in place may not measure the initial social interaction, especially if using last click attribution. There are small services across the web which claim to have made strides in this area, there are larger services such as Adobe which are also making the same claims. Social platforms such as Facebook have also made statements about solving the attribution question. Hopefully, there will be breakthroughs in this area which are affordable for smaller companies trying to justify their Social Programmes. The longer term gains from social activity will also be more visible, although for the time being, measuring the ROI of social activity using business metrics will be a step ahead of many of the attempts out there.
If you agree, disagree or have Social ROI experiences of your own, please share them in the comments below. A conversation may not provide an instant return, but they sure can be valuable 😉