How to calculate the Social Media ROI?

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Many companies use social media for marketing; few, however, calculate the real economic return on investment in activities on social.

“Not everything that counts can be counted, and not everything that can be counted counts” (Albert Einstein).

And investments are not only the money spent on advertising or sponsored post, but also the time and resources spent on free activities, such as post and share content, respond to comments and questions, manage brand pages or corporate account.

So “what is the ROI (Return on Investment) of an activity on Social Media ” is a question, and, at the same time, a challenge to be faced every day.
The argument is not one that can be quickly dismissed with a simple percentage or through a complicated mathematical formula.It is a theme to be addressed from different points of view. Let’s find out some of these.

WHAT IS ROI?

ROI stands for “Return on Investment”.

return on investmentBasically it serves to realize how invested in advertising campaign returns in terms of income.

It is a purely financial metric easy to calculate if you can identify the elements that compose the numerator (profit, i.e. the gross earnings less investment cost) and the denominator (investment cost).

Internet is the only media that allows you to calculate precisely the ROI.

THE SOCIAL MEDIA ROI

If the ROI’s formula is more easily identifiable for the activities relating to traditional marketing and based on the measurement of the final turnover, for the activities carried out through social media does not always it is a mathematical formula based on quantitative data.
It must sometimes make use of parameters uncertain and could also easily happen that social media is not the last referrer (the last stage) on a path that leads to “convert,” i.e. the last click is necessary to undertake or conclude action (therefore easily measurable) is not done on social media, but it could be one of the moments of a dynamic decision-making process, in which are used more incentives and, therefore, not necessarily linear.
So this is a financial metric that exclusively can’t take account of the qualitative aspects of our activities in the field of social media such as brand awareness, reputation, risk reduction, trust, loyalty, differentiation, innovation.

social-media-drop-bubble-wave

Therefore, companies, already in the design phase of a campaign of social media marketing, they have to plan what are the objectives to achieve, define metrics to be monitored to measure the results and determine the ROI’s formula. So before you ask what the ROI we will talk about what it can do social media marketing for your business.

Goals: what I want to get out of my business, sell more of a particular product? Improve awareness? Have more fans / followers?

Activities: what are the activities to be online and offline field to achieve my goal?

Result effects: how long will I sell more to achieve my goals? What will be the number of additional new contacts?

Indicators: I will have to compare the results obtained with indicators that allow me to assess, in the same period of time, the performance that had no SMM activities.

HOW TO CALCULATE THE ROI?

hombre-con-la-lampara-y-formulas-matematicasOnce you have identified the goal to be achieved, whatever it is, the company will have to define which metrics incorporate into its own formula of ROI calculation to measure the results of social media marketing.

We can distinguish three types of metrics, according to the source from which we must draw for extracting data:

  • parameters available directly on social media involved in the digital marketing plan;
  • parameters drawn from the web / blog site, when the schedule of different digital activities are to generate traffic to the site or the company’s blog;
  • data obtained from sources of a different kind: think for example the brand awareness or the repositioning of the brand, to measure which the company will have to do a market research before and after social media marketing activities, to calculate the deviation generated by, or, if the goal was to acquire customers or generate interest in your product / service, you might make use of quantitative parameters such as the request for information, the outlets of appointment or request for quote.

Generated traffic – monitoring and control of traffic generated by sources “referral” and discoverable through Google Analytics, you can measure how many visitors converge on your site from social media; an increase in traffic originating from these channels will be a good indicator of a campaign of social media marketing.

Lead – the analysis of the traffic generated from social channels, enabling the company to measure how many of these visitors were then transformed into contacts.

Customers – continuing along this line in the ROI calculation, you can measure how many leads (visitors landed on your site from social channels) they have become customers. The measure of real customers is an indicator of how the resources invested in social media marketing have a fairly high intrinsic value.

Conversion Rate – if the company wanted to make a comparison of traffic generated by the different social channels provided by the digital marketing plan, to see which is the one that generates the most leads, use should be made of the percentage value, which allows assess the quality of a specific social media than other channels. The company also has available other parameters to use to create your own ROI formula drawn from each social media:

Penetration – is the number of Followers on Twitter, a fan on Facebook, members of groups on LinkedIn acquired and attributable to the campaign carried out on the company. The higher the number, the greater the basin potentially exposed to our content, the greater the number of possible shares and, therefore, increases the ROI. The company has to care for and monitor the number of its followers on various social media, to verify the trend: if the graphics suffer a crash or a fall, should be immediately reformulate its strategy of social media marketing;

Integration – in the calculation of social media ROI, the company may rely on a number of metrics based on interaction, distinguishable:

  • degree of interaction / applause: number of favorites / like for each content to post impressions (flow rate);
  • level of conversation: Number of responses / comments to post impressions;
  • degree of amplification: the number of retweets / shares to post impressions.

Now it’s your turn! Also calculates your own Social Media Roi!

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