Trying to measure your social media ROI can seem like an impossible task. While getting 1,000 “likes” on a post or hundreds of retweets is certainly valuable, how do you assign the real value of those actions to your bottom line? How can you tell if the money you’re spending on social is really paying off?Demonstrating a return on your investment for social media is no longer an option. Social has risen the ranks from an experimental outlet for growth to a necessary part of every digital marketing strategy. And if you’re going to be fighting for budget and resources against other marketing channels, you’ll need to justify your place at the table.
The first step in every marketing strategy is setting goals. Even if those goals don’t carry an intrinsic monetary value, you can assign them a value as a part of your end goal (i.e. purchases) and work your way back into finding a numeric value for each completion. Remember when setting goals that generic ideas won’t help. Your goals should be specific, measurable, actionable, and realistic.
Original Goal: Increase Facebook Engagement
Better Goal: Grow Facebook following from 100,000 to 120,000 and increase landing page conversion rate from traffic generated via Facebook 10% to 15% over the next six months.
Before you can measure anything, of course, it is critical that you have social media analytics set up for your website. Comprehensive digital analytics like Google analytics is comprehensive and extremely effective. However, utilizing additional internal tools such as HubSpot or Salesforce can offer valuable insights into the specific social metrics and sales funnels you’re looking to track. Additionally, utilizing UTM parameters in all of your links will allow you to attribute goal completions to a specific medium, campaign, and ad.
Now that our goals are set, the real question remains: how do we assign value to seemingly intangible actions such as likes and free downloads? Neil Patel, founder of Crazy Egg is an industry leader on this topic, so let’s utilize some of his logic here:
The first step is to make a list of every action that is valuable to you. Here are some examples:
Like, Share, Retweet, Pin, etc.
Visit landing page
Spend time on a specific page
Add to cart
These actions can, for the most part, be broken down into five different larger metrics.
Reach - Includes likes, shares, views, impressions – most social media platforms offer this data.
Traffic - Includes visitors to your website as well as any external landing pages you may have set up.
Leads - Leads are what you are hoping a majority of your social spend turns into. Whether it’s signing up for your email list on a landing page, downloading a PDF, or buying something they saw in your post, these users have taken the next step in your conversion funnel.
Conversion Rate -This is the golden number that will tell you which campaigns, landing pages, and social platforms are providing the most bang for your buck. Once you know what’s working and what’s not, you can make adjustments to further increase your ROI over time.
In order to assign value to individual actions on your site, you’ll need to know your customer lifetime value, or LTV. How you calculate LTV is going to vary depending on your business model, but here is a basic guide to LTV for e-commerce sites.
Once you know your LTV and your conversion rate, you can calculate the value of an individual action by working backwards. Let’s say your LTV is $275 and that 10% of people who download a certain white paper become customers. By that logic, each white paper download would be worth $27.50 to your business. Google Analytics will allow you to set up specific goals and assign those values to make tracking your returns that much easier.
But how do you know if the person that downloaded the white paper came from Facebook or Twitter? This is where your UTM parameters come in. While Google Analytics will include referrer information, adding unique parameters to URLs will allow you to track exactly which ad users clicked on before they watched that video or added a product to their cart.
So now we know how to assign value to specific actions taken on our site and how to attribute them back to different social media channels. But what about more intangible value such as likes and shares?
Luckily, HubSpot has come up with a formula to tell you how much value you should be putting on each of those likes.
If you know that a “like” is worth $4 to your business, then you can add this as a value when calculating the ROI of different campaigns and measuring different goals.
Putting It All Together
To calculate a return on investment, we’ll obviously need to calculate our investment first. When compiling social media expenditures, don’t forget to include any social media management platforms you might use (HubSpot, Buffer, etc.), as well as advertising costs, man hours, and any other content you may have outsourced. Then use this very simple formula to see what’s paying off:
(Value – Costs) / Costs
So if you estimated the value of all your likes, downloads, video views, and conversions that came from Facebook at $50,000, and you spent $15,000 on costs then you would have made $35,000 in value, which is 2.33x your original investment or a 233% ROI, making it clear that this is a channel you should continue investing in.
When making these calculations, make sure to divide your costs appropriately across each channel to get a more accurate picture. If any channels are showing a negative ROI, you know it’s time to adjust your strategy in that channel.