23 Feb, 2018
10 min read
The best possible return on investment (ROI) has become a holy grail of the social media marketing world. No wonder: high social media revenue can be great proof of the success of your strategy.
If you’re still wondering how to calculate it, here’s everything you need to know about measuring your social media ROI:
1. What is Social Media ROI?
Social media ROI is a metric showing how much value you generated with your social media investments. It is usually a sum of money, but some companies view ROI as a non-monetary value such as comments or newsletter signups. What social media ROI means for your own business depends entirely on your objectives.
2. Why do You Need to Measure Your Social Media ROI?
There is a number of reasons why measuring social media ROI should be a priority in your business . Keeping an eye on social media revenue can help you to:
Demonstrate the value of social media marketing to your company
Prove that your social media marketing strategies are effective
Identify areas of your strategy that are particularly successful to shift more budget towards them
Pinpoint aspects of your strategy that aren’t working and fix them
Support social media budget requirements
3. How do You Properly Calculate Social Media ROI?
The most basic social media ROI formula appears as follows:
Profit / Investment x 100 = social media ROI %
Profit – the money you’ve earned from your social media marketing efforts
Investment – the total cost of your social media marketing efforts
While it’s easy to apply this formula to calculate your monetary profit, things get more complicated when your investments bring intangible results – for example social media mentions or ebook downloads.
Of course, you can stop here and assume that 10 ebook downloads is what you got from investing $50 in your Facebook ads. But you can also dive deeper to find out how much money you generated through the ebook downloads.
How do you do that?
You need to take a closer look at the marketing funnel and monitor your audience’s customer journey.
Start by establishing how and where users discovered your ebook in the first place. Let’s say you’re running two simultaneous CPC campaigns advertising your recent publication on Facebook and Instagram. To determine how many users clicked on your ads on each of the platforms, add a special code snippet called Facebook Pixel to your ebook’s landing page. Then, head to Facebook Ads Manager to see the number of users who visited the ebook section of your website.
Easily Calculate Your Social Media ROI in Real-time
Next, also add Facebook Pixel to your download Thank-you page to track the volume of users who actually got your ebook.
Events such as ebook downloads, newsletter signups, or trial registrations are often labeled as “micro-conversions.” They are basically small checkpoints along the marketing funnel that users hit before turning into customers. The volume of micro-conversions can help you make a rough estimate of the number of the final macro-conversions, such as product purchases.
At this point, you’ve monitored users halfway down the marketing funnel. Now it’s time to find out how many of those who got your ebook went all the way to the bottom and became your customers.
In order to do it, you need Google Analytics and their conversion tracking tags, called UTM parameters. Add these to the hyperlinks within your ebook that lead to pages on your website where users can buy your products. This way, you’ll find out how many people made a purchase and how much money they spent.
This is it: now you know exactly how your audience went from clicking on your Facebook and Instagram ads to converting. As you can see, monitoring the customer journey and your revenue can’t be done without integrating your social, digital (web), and business data and analyzing it in one place .
Let’s do some social media ROI math:
Assuming you’ve spent $100 on your Facebook and Instagram ads, got 20 ebook downloads that eventually helped you sell your products to 5 customers, you know that each download cost you $5 and each customer was an expense of $20. Knowing that each customer bought $50 worth of products in your store, you can easily calculate the revenue:
5 customers x $50 – $100 = $250 – $100 = $150
Your revenue is $250 (ROI of 150%), and your profit is $150.
This is, of course, a very simplified version of the customer journey. There can be many more stages, depending on the complexity of your marketing campaign. But regardless of the number of stages users have to hit before becoming your customers, paying attention to how they transition down the marketing funnel towards converting will allow you to calculate your social media ROI.
Social media ROI is not only about your sales profit, but also about the lifetime value of your customer. If your customer retention is low, you’ll need a significantly higher ROI to justify your investments. If, on the other hand, your customers stay loyal to your brand, you can afford to spend more on your social media marketing activities.
4. What You Need to Calculate Your Social Media ROI
The right tools are as important as the right method of calculating social media ROI. Here’s what you can use:
Facebook Ads with Facebook Pixel – add Facebook Pixel to your website’s key pages to see how many people interacted with your Facebook ads and which ads led to to conversions
Google Analytics with UTM parameters – add Google Analytics UTM parameters to your social media ads’ URL to find out how much traffic and conversions your social media marketing efforts are generating
Socialbakers Ads Benchmarks – measure your social media ROI in context by understanding how the return on Facebook ads investment is fluctuating day-by-day across regions and industries
5. How do You Identify Good Social Media ROI?
Determining the difference between a good social media ROI and a bad one can be challenging. After all, there’s no universal number that would stand for a desirable social media ROI and a revenue that’s sufficient to sustain your business might be too little to put you ahead of the game.
To understand how good your social media ROI really is, you need to benchmark it against the market. This way, you’ll know how much your competitors are investing in their social media marketing efforts, what they’re getting in return, and how your own revenue stacks up .
Monitoring your social media ROI in the context of the market has one more important benefit – it enables you to detect and act on bigger trends. The social media landscape is constantly evolving: there are algorithm changes , seasonal campaigns and new competitors – all of which can impact your revenue. Keeping an eye on the revenue fluctuations within the market will help you determine whether the changes to your ROI fall within the benchmarks or if you’re the only one seeing an impact and should make strategy adjustments.
6. Calculating Social Media ROI – 3 Case Studies to Inspire You
We know calculating the return on social media investments might be tedious – but it’s worth it! We rounded up three brands’ social media ROI examples to show you that the revenue from social campaigns is not only measurable, but also significant.
1. Foiled Cupcakes
Foiled Cupcakes , an online cupcake company, was originally launched on…Twitter. Back in 2009, when the business first started, they had no official website or brick-and-mortar store. Instead, Foiled Cupcakes focused all their marketing efforts on Twitter and other social media channels, such as Facebook, Pinterest, and LinkedIn.
The company’s social media strategy was straightforward – they were actively engaging in building relationships through conversations with their followers. Despite its simplicity, the approach turned out to be hugely successful in generating revenue.
Within the first three weeks of social interactions, the company gained 3,000 Twitter followers. They also received orders for a total of 40,000 cupcakes, and exceeded the revenue forecast by 600% in the first year.
2. AJ Bombers
Similarly to Foiled Cupcakes, the restaurant AJ Bombers decided to leverage Twitter to promote their business.
The company is using the platform mainly to raise awareness of their restaurant and provide customer service. However, they also frequently tweet about seasonal and daily offers – often in a fun way, with a sprinkle of creative hashtags.
AJ Bombers’ clever use of Twitter paid off – within the first year of joining the platform, the company’s weekly sales increased by 60%. Additionally, they managed to build an impressive American food-loving community of more than 20,000 followers!
Blendtec , a blender manufacturer, wanted to boost brand awareness of their products in a creative way.
In order to achieve their objective, Blendtec focused on creating a series of YouTube videos. These weren’t any ordinary videos, though, but clips showing different objects being shredded to pieces in the company’s blenders.
The videos, organized in a series called Will It Blend, hit it off with the YouTube community. Within five days of posting, they received 6 million YouTube views! The videos also drew the attention of major news outlets, including CBS and Discovery Channel, and skyrocketed Blendtec’s sales 700%.
7. How do You Report on Your Social Media Revenue?
You’ve calculated your revenue and now have to report on it. Are you wondering where to start? Here are a few simple steps you should follow to create an insightful social media ROI report :
Analyze each social media platform , ad format, and ad placement separately to assess the biggest contributor to your revenue
Align metrics you want to include in your report with the company’s marketing objectives
Measure and present data stretching over a period of time that’s long enough to demonstrate the impact of your social media marketing activities
Don’t focus on just talking numbers and instead present key insights that accurately describe how your marketing efforts contributed to the business’s bottom line
Identify areas of your strategy that were profitable and those that fell short and explain why
Map out the future strategy that will allow you to generate even more social media ROI
8. State of Revenue Measurement: 9 Essential Social Media ROI Statistics
Are you wondering what tracking revenue looks like for other marketers? Here are nine social media ROI stats that will add context to your ROI measurement efforts:
56% of marketers think they’re unable to track their social media revenue
58% of businesses measure ROI in terms of engagement, such as likes or shares
16% measure amplification (share of voice)
2% measure customer service metrics
The most-tracked metrics for paid social campaigns are audience reach and growth, clicks to site/page, engagement, and conversion rate
Social media advertising budgets are predicted to double by 2023
Facebook boasts almost $20 average social media ROI per user
Instagram users spend the average of $65 per referred sale (that’s $10 more compared to Facebook and $19 more compared to Twitter)
9. How do You Improve Your Social Media ROI?
An improved social media ROI is the goal of any social media marketer. The question is how to achieve it.
Improving your revenue starts with social media optimization (SMO) . In practice, this means spending money where you can get best possible results in return. Here’s how to use your social media budget in a more efficient way:
Don’t rely on your gut feeling when choosing content to promote or put money behind all of your posts. Instead, be smart about using your budget. Use your social media management platform of choice to keep track of performanceand selectively invest in posts with the biggest potential to drive results .
Publish your content when your audiences are online and most likely to respond . This way, you’ll maximize your chances to receive interactions and make the most of all the resources you’ve put into creating content.
Look into the content your competitors are promoting, find out when, and how effectively to make more strategic decisions about which posts you should be boosting to be one step ahead.
Social media marketing has matured to a point where measuring ROI has to be an aspect of the day-to-day agenda of any marketer. It’s easy once you know where to start. So next time your manager asks you how much revenue your latest Facebook campaign generated, you’ll know exactly how to find the answer and demonstrate that your strategy is successful.
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