How to Measure Your Social Media Return On Investment

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Social Media ROI e1288072860267 How to Measure Your Social Media Return On InvestmentMost business follow a simple rule when it comes to adopting new technologies or paradigms – If it boosts my business’ ROI, it’s worth the investment. Social Media is no exception to this rule. Unless, businesses see value addition from social media, they are not going to take the plunge.

Therefore, as a social media activist, one of my primary responsibilities is to educate businesses on how they can measure their social media ROI. This helps them understand and appreciate the impact of social media on their business. This post explains the various aspects of Social media ROI from a business’ perspective.

Is Social Media ROI Measurable?

Of course, it is. Otherwise the social media world won’t be full of millions of success stories for boosting ROI using innovative social networking tools. Now, that the “If” hurdle has been cleared, comes the all important question of “How”.

How to measure Social Media ROI?

I’ve come across many social media marketers who claim that it’s a challenging task to measure social media ROI because there are no rules/ guidelines to do so. I beg to differ. Though I admit that there are a number of variables and qualitative factors in the equation, measuring the ROI is a critical part of the social media adoption policy for any business.

Simply put, ROI is (Revenue – Investment)/ Investment. Social Media helps boost an ROI because it

1)    Helps in boosting a business revenue therefore increasing the numerator

2)    Requires minimal investment therefore decreasing the denominator

Define Goals & Create a baseline

It may sound difficult to believe but a majority of businesses find it difficult to come up with clear and concise goals for social media adoption. It is crucial to create a baseline with the current status-quo as it helps to quantitatively access the gains from social media.

Jot down your current numbers and your goals. It is equally important to know where you stand now as it is to know where you want to get. No ROI calculation is complete without a concrete baseline.

From a social media perspective, a baseline may involve the following numbers

* Twitter Followers

* Facebook Fans

* Retweets

* Unique Impressions from Twitter & Facebook etc.

Is it just revenue?

While in financial terms, ROI usually relates to revenue and profits, it’s a different proposition when it comes to social media. The gains from Twitter, Facebook and any other social network may not always be measurable in financial terms. They may help boost traffic on your business website or simply spread brand awareness or improve your goodwill in the customer community. Of course, one of social media’s ROI contributors to boosting ROI is the enormous amount of savings. A well-planned social media strategy can help a business drastically reduce its advertising and marketing budgets.

Periodically monitor and Act

Most businesses join the social media bandwagon and are so awe-struck by its sheer powers that they are happy with whatever returns they get. In fact, a majority of businesses end up underutilizing social media when compared with its true benefits.

It is important to periodically assess and review your business’ progress by matching it with the baseline. If your business is not achieving the set targets, there’s time for retrospection and action. If your social media strategy achieved the desired results, do not sit back and relax. It is time you take your social media efforts to the next level.

How does your business measure its social media ROI? Do you think it is difficult to track the business value of social media? Please share your opinion by leaving a comment below this post.

Douglas Idugboe, Digital and New Media Marketing Strategist. Founder and Chief Editor of Smedio! A Canadian Bestselling Author, Marketing Strategist, Speaker and Trainer, Who Loves Technology
  • http://twitter.com/Sjizzle2 Sjoerd de Jager

    Ok, fine: and how would you measure the increased revenue by just jotting down the volume of Twitter followers? Brand image is a concept that is hard to measure, since it has no one-on-one relation with increasing sales and thus hard to quantify.

    I would argue to define company specific measures that show the increased sales through social media activities, hence develop an after-sale app or measurement tool that identifies those purchases initiated by the social media activities of the firm.

    Only by carving out the unique sales generated through social media the real ROI of your social media activities can be measured.

    • http://smedio.com Douglas Idugboe

      Great question Sjoerd. That’s another way to ask, how does a big brand justify its million of dollars expense on radio, television, newspaper, etc., advertising? Simply said – Brand Awareness.

      It’s brand awareness that’d ultimately increase the distribution and sales bottom lines, if your message is well crafted and received. Just like the marketing process not ending with advertising, your social media campaign should be a process of systems that shouldn’t end with the available social platforms. Again, as stated before in response to Sjoerd, the need to cultivate and implement a relational, engagement, and conversion strategies.

  • http://twitter.com/AnikethDsouza Aniketh Dsouza

    I still beg to differ. Measuring Social Media ROI via Number of followers is out of the question. Reason can be… “because my friend told me I like this facebook page, but Im not actually interested in the page and I would like to hide it from my stream.”

    I would suggest having a separate and unique contact us page for the Social Media Execution thus being able to filter how many actually come via social media campaigns.

    To conclude: You cant measure to what extent you are building a relationship with the people who like your brand. According to me, Social Media is all about conversations and building relationships thus creating a fraternity of people promoting your brand for you!

    • http://smedio.com Douglas Idugboe

      Great point Aniketh. While ”followers” are not a proper yardstick by itself, the ‘following’ of those followers is what your measurement should be based on. Hence, the need to cultivate and implement your relational, engagement, and conversion strategies.

    • Anonymous

      I have the same mindset. I’m fairly new to the world of social media but by focusing on relationships I’m becoming known.

      I guess I’ll see what happens when I ramp up the products and services I hope people will buy. Meanwhile I’m enjoying myself making connections, in a meaningful way.

      That’s probably not a realistic approach for large companies, but good for tiddlers like myself.

      I have written a couple of things on this topic, which can be found on my site.

  • http://www.jeffpinkham.com Jeff Pinkham

    Without measurement, investment is a bluff

    • http://smedio.com Douglas Idugboe

      Well said Jeff. Welcome to the Smedio community.

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  • http://twitter.com/anu_reddy Anupama Reddy

    Interesting post Douglas. Check out Terametric (www.terametric.com), where we aim to Marketing ROI measurement and improvement problems. Do let me know what you think.

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  • Richard

    I believe the answer lies with ‘Case studies’. If it worked for a business in the same sector, imagine what it can do for you? But, beware… many business owners who harp on about ROI, can’t or wont put the systems in place to measure where their customers come from!!

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  • http://fanpilot.com NigelMilne

    Great Post!

    Along with the social media community metrics we commonly track website visits and phone calls that come from the different SM channels. We do this by creating unique tracking links for each SM account profile/campaign as well as unique tracking phone numbers.

  • http://twitter.com/philipb4 philipb4

    As I started reading this post, I was relieved to see that somebody finally believed that social media results can actually be measured in terms of a quantifiable ROI.
    Unfortunately, as I got towards the end of the article I realised that the bluff and bravado wasn’t actually backed up with substance. “The gains from Twitter, Facebook and any other social network may not always be measurable in financial terms”? A business invests money in this stuff, they need to measure the return in financial terms as well.
    Whilst I’ll agree that many small businesses don’t have the resources and structures to adequately measure ROI, mid and large size businesses can establish suitable metrics, and would be foolish not to.

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  • Ken

    Measuring ROI is one thing, “how you track it” in order to substantiate the ROI is another…. and the great dilemma that has faced all media for decades. How DO you track ROI for social media?
    Coupon returns? Online purchases? Increased likes and visits?
    Just like traditional media (newspaper, radio, television) social media can be measured by activity, but very hard to track actual results. I’ve yet to see a plan that actually says “my top line (not bottom line) grew because of my social media presence.” The best scenario I’ve found is utilizing traditional media to support the social media, thus a cohesive marketing presence develops business growth.

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    Yup, I still beg to differ too. Social Media is different than SEO or SEM. Those channels bring quantitave results rather than qualitative results. I think for B2B businesses SM works better since lead generation is an important part of the ecuation. However, in B2C businesses everything is about how many acquisitions/sales/transactions you have… measuring those in Social Media is way harder.

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