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Social Media ROI Made Simple – What You Need to Know to Understand

Social Media ROI Made Simple – What You Need to Know to Understand

Social Media ROI


Measuring the effects of a Social Media marketing campaign isn’t always a clear-cut procedure, unlike sales where you have a direct cause and effect – social media marketing requires a more complex understanding, and a specifically targeted approach to understanding your data analytics and actually making use of them.

Measuring ROI requires you to have a clearly defined digital strategy and digital solutions in place so your marketing strategies are working at their best for you. Effective brand management is vital for getting ahead, and understanding exactly what your ROI is, will help you.


Lots of companies struggle to understand the financial impact that Social Media is having for them, and quite often find themselves losing money and return customers because they don’t know how to properly handle their channels. There are many different reasons why these businesses are struggling to understand, some of the most widely experienced are:

  • An inability to tie social media to business outcomes (56%)
  • Lack of analytics, expertise and/or resources (39%)
  • Inconsistent Analytical Approaches (35%)
  • Unreliable Data (30%)



Companies get bogged down in social media metrics such as ‘likes’ and ‘follows’, and don’t look at how their performance measurement is affecting their financial situation. There is more to tracking social media than just keeping an eye on the numbers – after all, any data is useless if you don’t understand it and then make use of it.



What Actually Is Social Media ROI?

Your Return on Investment (ROI) will depend on what your goals are – whether this is generating brand awareness, delivering a better customer experience, or increasing your profits. But all of these elements are linked together by one simple truth – your Social Media ROI is the total of your online actions that create value.


You need to look at the time, money and effort that has been put into your social marketing and determine what the return has been.


If you’re looking at increasing your orders and bottom line, you could simply look at the amount you’ve spent on your social channels, and deduct it from the revenue that those channels have generated – giving you a straightforward calculation, for example – if you’ve made £10,000 revenue from a £5000 investment, your profits would be £5000. This means £5000 profit divided by £5000 investment x 100 would equal 100% ROI.


However not every calculation will be so simple. Value isn’t always measured in monetary terms. If the goal of the digital marketing campaign was to increase brand awareness, then you’d need to look deeper into the analytics – audience reach, engagement, etc.

Your Social Media ROI

Why Do You Need to Measure Your Social Media ROI?


Defining your Social Media ROI will allow you to see whether your current marketing strategy is working, and allow you to quantify and prove the value of it for your business.


Once you know what is working, and how much value it is bringing to your business, you can further optimize your marketing plans, and look to assigning a monetary value.


There are a number of different methods you might decide to choose from:

  • Pay Per Click (PPC) Costs – Look at how much you are spending on social media and what you are getting in return. Then work out how much it would cost you in PPC Ads to achieve the same results.
  • Average Sale – What is the average amount people are spending through your site?
  • Lifetime Value – How much do you earn from each customer each time they visit, working this average out will give you a benchmark for their lifetime value to your business.
  • Lifetime Value x Conversion Rate – How much is each potential visit worth to your business?

Giving your metrics a financial measurement could allow you to work out whether the money you are spending is seeing a real ROI, or whether your marketing strategy needs to change.

To be able to work out your ROI, you need to know how to calculate your investment – this doesn’t just mean the money you are setting aside from your budget, but other considerations as well.


To work out your investment you need to look at:

  • Your Time – How many hours a week are you spending on your Social Media channels? Multiply this amount by the hourly rate of pay for your worker/s to obtain your labour costs for the job.
  • Your Tools – Make a list of all the tools and services you are using to smoothly run your social media channels, and add up the total cost of these. Depending on the time frame you are using (weekly / monthly / yearly) to work out your costs – you may need to divide or multiply these figures depending on their payment schedule.
  • Advertising Costs – Finally look at what you are spending on advertising – whether this is direct, PPC or something else.

Add these three costs together to find out what your total investment is, then – once you know this figure, you can start to work out what your ROI really is.

How Should You Be Defining Your Social Media Goals?

The goal of your campaign will vary depending on what you are trying to achieve, but no matter what the end result – you need to demonstrate that your marketing strategy has value and that your objectives compliment your existing business, ethics, voice, and over-all brand goals.


Your strategy must represent what social media will do to help your brand. Once you’ve identified your goals – you need to identify benchmark points and decide on a timescale for how and when you want to achieve these.


For example – it’s great to have a goal of ‘improving customer service’ – but if you’ve got no benchmarks or targets in place, you won’t be able to determine success or failure, and could end up wasting your investment. Rather than generalise, get into specifics that can be measured – such as ‘by the end of Q1 we want to see a 10 minute decrease in the time it takes to answer a customer query’ or ‘By the end of Q2, we will be monitoring our performance on review sites daily, and responding within 12 hours to all feedback.’


Whichever goal you set for yourself, it’s vitally important that you work out what your current performance rates are and then set appropriate targets for improvement.


How to Track and Measure Your Social Media Performance

Metrics are used for measuring your performance and presence, and when properly maintained, collated and used – will inform you of how well you’re doing, what is working – what isn’t working, and where you can do better.

Social Media Metrics such as ‘followers’, ‘likes’, ‘comments’ and ‘shares’ are also known as ‘vanity metrics’ – but they are important and have their own roles to play in your strategy, so you mustn’t dismiss them as unnecessary, they help you gauge the health of your social presence, allow you to measure yourself against your competitor (to some degree), and show what your audience think of your content.


The metrics that directly relate to how your social strategy is helping you achieve your goals include:

  • Reach
  • Site Traffic
  • Sales and Revenue Generated
  • Visitor Engagement
  • Lead Generation
  • Sign Ups and Conversions

When deciding on what metrics your brand needs to use going forward, it is important to ask these three questions:

  1. Will it help me make decisions?
  2. Does it work with my current objectives?
  3. Can I measure it effectively?

Social Media and your approach to it is a constantly evolving process, what may work for one campaign – might not work for another. You need to be open to what is going on in the business world around you, and what your customers are expecting from you.