How To Calculate The Roi Of Social Media Marketing Campaigns

Being able to calculate the ROI of a company’s social media initiatives has been a big debate within the industry. What is social media ROI? How do you know if your sales are stemming from sites such as Facebook, Twitter, or your blogs? These are questions that keep many businesses on the fence of starting to use social media for marketing practices. Of course, there are returns that are not necessarily financial, but let’s face it; all Chief Marketing Officers need to see what will happen to their bottom-line figures. Today, we will take a more in depth look at how marketing executives should be measuring their ROI.

The first step in the ROI measurement process is to form a social media marketing plan that directly correlates to all corporate and branding strategies, without only focusing on the ROI. This means, figure out what your strategic priorities are. Do you want your social media marketing to increase traffic to your sites, improve brand awareness, or improve your search rankings? Do you want to see lead generations or are you planning on using social media as another form of customer service? There are different ways to measure the ROI depending on the strategies you choose. For example, using social media for customer service reduces costs associated with that department, which in turn increases the financial value of your strategy. Refer back to last Monday’s article to see how that is done correctly.
Measuring Value: Different types of businesses need to pinpoint what exactly they should be measuring in terms of ROI. B2B businesses should base their ROI on the value of qualified leads that they obtain from social networking, while B2C companies need to focus on the actual value of sales. Unfortunately, it is difficult to connect every social marketing tactic to a financial return, but that does not mean there isn’t a way to value your strategies.

Depending on how mature your company is in the social media marketing industry, you may place a different amount of emphasis on certain values. For example, some companies may focus on quantitative social metrics such as their number of fans or subscribers. Some may emphasize the value of brand sentiment. When these values are used to determine the ROI, the calculations must include the reduced costs of customer support and customer acquisition. In other words, if social media has helped your company gain a follower, it could help reduce costs of another marketing initiative such as running a print ad campaign.

Measuring Costs: Now you need to figure out the different costs in order to calculate your investment. Companies that are mature in social media marketing greatly understand that the biggest cost is the allocation of their marketing staff. In order to run a successful social media program, employees must put in a significant amount of time in order to engage customers. Additional costs include any advertisements for social media, licensing/subscriptions to social media applications, use of social media marketing agencies, and outsourced content. Once you have determined the value your social campaign will provide for your company, your business will be more willing to pay for these kinds of expenses.

Calculating the ROI: Now that you have come up with your social strategy, placed a value on your returns, and figured out your costs, you are able to calculate your ROI! The equation is SIMPLE: subtract the cost of investment from the value gained by your investment, and then divide that number by the cost of investment. That is how you will get your social media ROI. It still may be difficult to understand your returns on your social media strategies as a whole, so try running this equation on a specific social media campaign first, (for example, a giveaway.)

Still don’t believe that social media is capable of producing any sort of return for your business? Let’s look at some statistics from 2011…

62% of organizations believe social marketing is promising and eventually produces ROI.
20% of organizations have already seen an ROI from social media marketing, and will continue to invest in this channel.
Organizations in the most mature phase of social media marketing are more than 4 times as likely to produce ROI than those companies in the beginning phases.
The promise of social ROI for 70% of businesses in mid-level social maturity and 60% of those who are still in trial, is enough to drive reinvestment in their strategies.
More than two-thirds of companies are increasing their social marketing spending in 2011, and 50% of those are increasing by at least 20%.
An insignificant amount of companies are planning on decreasing expenditure this year.
The overall average ROI reported by CMOs is 95%.
Thankfully, the perceptions of social media ROI are changing greatly in favor for the implementation of social media marketing strategies. The three main concerns for starting a social initiative are inability to track success, ROI uncertainty, and how to allocate employees. Hopefully, this article has helped you to understand that ROI is a reality in the social media world. If you need assistance valuing your goals, or are looking to hire an outside agency because you do not have the human resources needed