Determining the ROI of Social Media Marketing: What It Could Be Worth to Your Business

Get Prospero
Sep 4, 2018 · 5 min read
“bird's eye view photography of high-rise buildings” by Fahrul Azmi on Unsplash

We’ve talked a lot about the benefits of social media in recent blog posts, but how do you determine exactly how much value your social media marketing efforts bring back to your business? Thousands of businesses have already tackled that very same question, and they’re often able to answer it in terms of dollars and cents.

Of course, not every return on investment (ROI) for social media has to be monetary, but it should always be tied to your goals. Getting out more than you put in is, of course, an admirable goal, but some businesses are more concerned about getting their name out there. Or, they might want to boost attendance for a big upcoming event using social media event promotion.

No matter what, you can’t just take social marketing performance for granted.

According to one recent study, 44 percent of business marketers admit that they don’t have a specific measure of positive impact that social media provides them. 36 percent say that they have some idea of these benefits, but only from a qualitative sense, not a numbers-based one.

Whatever your goal is, you can define it, set it, measure it, and then put those results under a microscope to determine exactly what your social media ROI would be. You can use the following tips and techniques to help make all that happen.

Set Social Media Marketing Goals That Provide Concrete Business Benefits

Your first step when calculating social marketing ROI is to decide exactly what your “returns” are going to be. They can be dollar value returns, which can be calculated using conversion ratios, as we’ll reveal later on. Or, they can be non-tangible returns, like turning social media into a megaphone for your promotions.

Common business goals for social media use include:

  • Improved brand reputation.
  • Better customer service through social media connectivity
  • Increased traffic to particular web pages.
  • Increased redemptions of a particular offer.
  • Higher volumes of app downloads or course signups.
  • Promotion of other marketing assets, like new videos or blog content.
  • Social proof of strong brand relationships in comments or reviews.

No matter what goals you set, make sure they connect to actual specific business benefits. Don’t just aim for “lots of followers.” If your goal is to have lots of followers to effectively broadcast your latest sale or blog post, then what you really want are larger groups of followers within segments whole will actually respond to these posts.

Every goal should be tied back to a measurable marketing metric. Again, try to drill down into what your business wants to do rather than take a goal for granted.

For example, you may want to reach a large number of users who redeem a certain coupon code you provide. In that case, your goal can either be a set limit of redemptions, say 2,000, or it can be a high rate of conversions from seeing an ad for the coupon compared to redeeming it, say that 16 percent of all impressions turn into redeemers.

The goal you set affects how you approach your campaigns and the methods you use to adjust them in order to improve performance. Keep your goals SMART and always have specific numbers in mind.

For Direct Dollar Value Social Media ROI, Chart the Customer Journey

Let’s say you are specifically interested in how much money social media marketing or advertising brings back to your company. This calculation would represent your true ROI, and it can be figured with just a few minutes in a spreadsheet.

Start by tracing the customer journey and how social media is involved with it. Since very few people buy things directly off of social platforms or book appointments from it, you are instead going to need to imagine all the steps they would take between seeing your social marketing materials and giving your business money.

Here’s an example customer pathway to consider:

Each step represents a conversion rate. Tens of thousands of people may see your ad, but only 10 percent of these might actually click to see more. And of those, maybe only 20 percent visit the provided link. And of those landing page visitors, perhaps 14 percent will commit to buy.

If a membership costs $240 a year ($20 a month), then the business has a break-even point for how much each ad impression should cost based on the overall ratio:

$240 x 14% x 20% x 10% = $0.67 per impression

Based on this calculation, a campaign that converts just 0.28 percent of impressions will still result in a net profit, as long as each ad costs less than 67 cents to serve to a user. The campaign can also try creative ways to raise the conversion ratio between steps, such as serving different car photos to people based on the brand pages they follow.

For unpaid campaigns, businesses simply have to substitute in their cost of running social media rather than an ad budget. A business that pays an employee $673 a week to spend an hour each day monitoring or posting to social media can determine their organic costs as:

(5 hours/40 hours) x $673 = $84.13 a week

Again, it all comes down to defining your costs, calculating your returns, and structuring your campaigns so that the latter works out bigger than the former.

Calculate Your Social Media ROI and Improve With the Help of a Social Media Marketing Strategy Team

You can put a real value amount on your social media marketing campaigns with no added effort when you partner with a social media marketing agency like Prospero. We have helped our clients become social media stars while empowering them to prove the ROI of every post they create.

Get deeper insight into your social media ROI and help make it bigger when you connect with Prospero today.

Get Prospero

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Get Prospero is a social first marketing agency. Experts in developing and elevating your brand in the digital realm.

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