Social Media ROI: What to Measure

Measuring social media return on investment (ROI) is one of the biggest grey areas when it comes to this emerging market, so what is important to look at when it comes to measuring social media ROI?

Social media return on investment is constantly a point of concern for executives and skeptics when it comes to launching a social media program. The irony, however, is that many of these skeptics claim that there is no means of measuring social media ROI when the fact of the matter is that, unlike many forms of marketing, every aspect of a social media program can be monitored and measured. The complexity of social media ROI factors in when one cannot decide how one wants to measure the success of a campaign (e.g. monetization of a fan base, growth of a fan base, increase in traffic, etc.).

There are several angles from which one can look at social media ROI, and what we describe below are just a few. That said, we think these are some of the best ways to measure the success of a social media program.

Social Media Cost-Benefit Analysis

In the field of Economics, a Cost-Benefit analysis is one of the most common ways of measuring the return of a program. What is important to note is that a C-B analysis looks not only at what might be gained from taking an action, but also what one stands to lose by not taking said action.

Say, for example, you calculate that an unattended social media PR crisis costs your business $10,000 in lost sales, brand tarnishing, etc., and that your brand unknowingly suffers two to three of these crises per year. That’s a calculated loss of $20,000-$30,000 every year as a direct result of not attending to your customers on social media. Now, say that you put together a social media program designed to engage with dissatisfied users and help them solve their issues on the very public sphere that is social media. The result is not only the retention of a customer, but the build up of brand loyalty through social media.

Now, it would not exactly be feasible to suggest that social media engagement in the time of crisis will mean retaining every calculated dollar lost from not engaging on social media, but if you retain half of those lost earnings ($10,000-$15,000) and you are spending $700 per month on a small, customer-oriented social media program, you are looking at a yearly return measured as follows:

While this is a very black-and-white example, measuring a social media program’s ROI can be as simple as a C-B analysis.

Setting Social Media Goals

On the less technical front, you might want to consider measuring your social media success through the use of established goals that you lay out at every stage of the program. These do not necessarily have to be monetary returns. In fact, one way of measuring the success of your social program is by measuring the growth and extension of your network. Effectively, the growth of your social network translates into the growth of your pool of leads.

So when building your social media strategy, create a set of goals that you would like to achieve and measure your returns by the growth of your networks. From there, once your networks have grown to your satisfaction, you can consider this next form of social media ROI.

Return of Campaigns

You may be focused entirely on the monetization of your social media program. That’s fine. Businesses aim to be as profitable as possible, and there’s no better way to measure profit than with monetary gains. So the final and most straightforward way you can go about measuring the ROI of your social program is through the monitoring of returns from your campaigns. Be careful, however. There is something that a lot of people overlook when it comes to measuring the monetary returns from converting a client. This once again factors into a Cost-Benefit analysis.

Say you have managed to convert a lead into a client on social media. Well done! Now let’s say that this client has a lifetime value (LTV) of $120 with three $40 purchases. Then let’s say it cost you $50 to convert this client (between time, resources, expenses, etc.). You’re looking at a healthy lifetime profit of the converted client with a value of $70. Way to go! Now, let’s look at the alternative – this is where people often lose out without even realizing it.

Let’s say you spend that same $50 to convert a lead into a client on social media, but now, a client’s LTV is a one-time purchase of $40. This means that for every client you convert, you are losing $10. So the more conversions you see, the more money you lose.

It is extremely important that we measure not only how much we are making when it comes to social media, but how much we are spending. And this includes time (our most precious resource), expenses, opportunity costs, etc. If we are only measuring the returns and not the costs, we are missing the entire concept of profitability. So keep that in mind when you are measuring the success of your social campaigns.

How do you measure the ROI of your social media programs? Tell us in the comments below or on Twitter!