Social media management platform Hootsuite defines social media ROI as “a measure of all social media actions that create value, divided by the investment you made to achieve those actions”. While that sounds simple enough, calculating the ROI for social media can actually be a daunting task. How do you measure something that’s hard to quantify and more difficult to attribute credit to?
For organizations with limited resources, it may be hard to justify investing in social media without the data to show how it’ll benefit their company. It’s also challenging to define what creates value on social media vs. the amount of time, money and resources invested in it.
To break down social media ROI, it’s important for organizations to set clear objectives and goals.
A quick differentiator: objectives are where you want to go and goals are how you get there.
An objective is something general, e.g. increasing brand awareness or revenue, whereas a goal is specific, e.g. generating a certain number of leads. Goals should be S.M.A.R.T.—specific, measurable, attainable, relevant, and timely.
Both your objectives and goals should be appropriate for your company and based on industry benchmarks. For example, if you’re a business that sells handmade pet goods, you’ll have a much different visual feed and competitor market than a business that provides accounting services. You can hire an agency specializing in social media to run an industry benchmarks report for you, or you can check industry benchmark reports from companies such as RivalIQ or SproutSocial.
Social media can bring revenue or traffic to both businesses—but the way they set their objectives and goals, and measure the success of those objectives and goals, will be different.
The next step after deciding on specific objectives and goals is to start measuring.
You can use Google Analytics to track specific website actions (clicks, downloads, etc.) and most website platforms have their own metrics built in as well (reach, impressions, etc.). Analytics allow you to assign a monetary value to each data point, such as the lifetime value of a new customer or the average sale generated through a new lead.
A common mistake made when measuring social media ROI is measuring too soon. Ideally, measurements should be taken at least six months after a consistent social media campaign, or the results may not be accurate. According to a LinkedIn report on ROI, most digital marketers "are measuring [social media] impact long before a sales cycle has concluded. Meaning that many marketers are likely not measuring ROI at all."
As the LinkedIn report points out, ROI is what happens at the end of a sales cycle.
Part of the reason why digital marketers try to measure ROI too soon is the pressure to prove the value of social media and possibly secure a higher budget for their campaigns.
Short-term measurements often prove to be not only inaccurate but also detrimental to campaign success. As LinkedIn writes: “About half (53%) of those who measure ROI in the short term reallocate spending within a month; whereas, less than one-third (32%) of long-term marketers reallocate over that same time frame”.
While it’s important to be monitoring success regularly—in order to allow for adjustments and optimize your campaigns—trying to measure the value of social media too soon will not yield accurate results. It’s similar to a magazine advertisement. If you were to try to measure the success of the ad you took out before the magazine had been fully circulated, the results wouldn’t be accurate.
When social media ROI is calculated and measured intentionally and effectively, you bet it’s important.
Having a social media presence is increasingly essential for many brands and companies, and being able to justify the resources going into that is important, too. Measuring ROI means accountability. It also means improved performance for your social media campaigns.