There is a lot of conflicting advice available regarding the need for measuring social media.
What is ROI and how is it calculated? ROI (Return on Investment). The bottom line is that every business has different goals that it hopes to achieve through the use of social media. These different goals often result in different needs, different expectations and different procedures for measuring ROI.
ROI stands for return on investment. It is generally calculated as a percentage of the investment made to generate the return.
ROI = ($ sales - $ invested)/investment X 100%
Depending on your goals for your business’ social media use, this calculation may or may not provide you with any useful information. If your goal for social media is to convert more leads into sales, then this calculation of ROI will tell you to what extent you are meeting that goal. If your main social media goal is providing customer service, then this may not be a particularly useful calculation.
Should I be measuring my business’ social media ROI?
Just because the calculation of the financial ROI from your investment in social media does not offer you the information you seek, does not mean that you don’t need to measure the effectiveness of your business’ social media use. You still need to know if your investment in social media is worthwhile and if you should continue with this investment.
The first step to achieving a useful measurement of your business’ use of social media is to clearly identify your social media goals. If you have more than one goal, identify the relative importance of each goal as well.
How do I measure the ROI of my social media use?
The answer to this question depends greatly on what your social media goals are. If your goal is to convert leads into online sales, you can measure sales to customers originating from social media platforms using web analytics tools. Similar tools and cookies can be used to determine if your social media page is effectively funnelling traffic to your website.
Promotions or sales that are available only through your social media platforms can be the best way to track sales to customers that have visited that particular social media page.
Other goals, such as providing fast and effective customer service, maybe best measured by surveying customers.
What can I learn from these measurements?
You likely want to know more than whether or not you should continue to invest in social media. Are you using social media to its full potential? Should you increase your social media budget? What is the quality of lead that is generated through social media?
What you want to know will likely depend on the needs of your business. The best way to get meaningful measurements relating to your social media use is to discuss your expectations with your social media marketing team (whether they are in-house or consultants) to ensure that the answers you get correspond with the questions that you have.