What is social media ROI?
No business wants to put money and resources into something that doesn’t pay off. Will the results from the channel make the effort, time, and cost worth it? How will you prove this? Is there content that will perform better and show a higher ROI? How is this going to be measured?
As you can see, measurement is key and you’re going to have to define and prove the importance of social media in terms of ROI. As with most measurement elements, a definition of social media ROI is subjective to the goals your organization has set. Social Media Examiner offers this broad definition: “Social media ROI is defined as a measure of the efficiency of a social media marketing campaign.” Supplementing this definition, the general formula provided for calculating out your social media ROI is given as follows:
Social media ROI = (SM return – SM investment) / SM investment percent.
Like any formula, the math is easy if you have all the variables. The investment, the gain, and the return must be measured in the same currency (the unit of measure of the investment, the gain, and the return must be the same in order for the ROI equation to function), only a financial outcome can qualify as a proper gain or return. In other words, financial outcomes are the culmination of any investment. This is where return is always measured.”
But what if your objectives aren’t easily quantifiable? As social media marketers know, the success of a campaign is not always measurable or quantifiable. To account for this, non-financial outcomes tell the story by capturing changes in human behavior. What kinds of things did your target audience do after exposure to your campaign? Did these actions align with your goals? Where did they fall short? How can they improve for next time?
If you need another way to consider your social media ROI, think about the ratio between cost and gain. Costs are anything being invested in your social media efforts, with some examples being:
- Social technology
- Agencies and consultants
- Paid media
- Business overhead
For estimating the gain from certain consumer actions (purchases, page views, downloads, email list signups, etc.) You can refer to your internal analytics to better understand the conversion events that happened while social media was running.
These are all areas that can help you define your social media ROI and prove the value to your organization and brand.
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