What's The ROI of Social Media?
Social media is the best marketing tool in the history. It can completely explode your organisation if you do it correctly, but so many people hesitate to invest in it because they can’t see an immediate return on investment (ROI). It’s such a common obstacle, so in this article I wanted to talk about how to track the ROI of your social media efforts.
2 Types Of Campaigns
‘Social media’ is kind of an umbrella term — there are so many different things you can do and strategies you can run on all sorts of different platforms. It totally depends on what you want to achieve. To make it easier to understand I like to break it down into two different types of campaigns.
Generating Income
Objective
A social media campaign that is focused on generating leads or sales. Lead generation is where they leave their information and a salesperson calls them. Sales (like eCommerce or accepting donations) is where customers buy online.
Lead Gen Metrics
With lead generation, you measure each step of the funnel and calculate how much it costs to acquire a customer vs how much that customer is worth. Example:
Ad spend = $1000
Total leads = 20
Cost per lead = $50
Lead conversion = 10%
Total customers = 2
Cost per customer = $500
Avg. value of a customer = $2000
Total revenue = $4000
Return on ad spend = 300%
eCommerce Metrics
eCommerce is the easiest to track because they buy directly from the ad and it’s easy to track. Quick example… let’s say you have an eCommerce store. You can run ads for $100, sell $300 of products and double your money and have a 200% return on ad spend. It’s very easy to see your return on spend in terms of dollars.
Total Ad Spend
Total Revenue
Return On Ad Spend (Revenue – Ad Spend / Ad Spend)
Building Awareness
Objective
An awareness campaign is all about getting in front of as many people as possible with your message. Awareness is a little harder to track because you’re not directly investing in money-generating activities. You’re buying people’s attention, and you can’t immediately monitor the impact of it. For example, if you bought a billboard, you can’t look at a chart each day and see how much money it made.
On top of that, you may not actually be selling anything, you’re just getting your name out there. Therefore, you can’t measure it on a dollar-for-dollar basis. However, there are metrics to tell how well it’s working, and what you’re getting in return for your money.
Metrics
Reach — how many individual people saw your brand
Impressions — how many times it was seen in total
CPM — how much it costs for 1000 eyeballs (lower the better)
Engagement Rate — what % of those people like/comment/share
No. of of new followers per month and the follower growth rate
Percentage of website traffic that comes from social media
Why We Love Awareness
We love building brand awareness and sharing useful content for a few reasons:
1. It has Lasting Results
The results of a brand awareness campaign last even after the campaign is over. A lead gen or sales campaign might generate revenue, but once the campaign is off, everything is off. Your reputation and increase in followers last a lot longer.
2. It Helps Organic Growth
Sponsored content drives more people to your brand and social media pages, which will also increase your organic results. You’ll be attracting more followers, and they will start seeing your content even if it isn’t sponsored.
3. Customers come to you
Building a brand means customers will start coming to you. Not only that, they’ll feel like they already know you, and will be much more receptive to your offers since they’ve already been following you for a while. On the flip side, if you’re doing cold outreach to someone who has never seen you before, it’s going to be an uphill battle.
Measure It Annually
If you want to ‘try’ social media for a month or two, don’t bother. It takes time to get it rolling, and that’s not enough data to get decent information. Look at your social media investment vs return each year so you can see the impact.
You won’t have an exactly dollar or percentage figure, but you can as a whole whether social media had a positive impact on the business based on growth, customer interaction etc. Calculating ROI can be simple if you know 3 things:
What you want to achieve (e.g brand awareness)
What that metric looks like (e.g reach + engagement)
How much you’re comfortable paying for it.
Hopefully this article has helped you see the value in social media and the different ways it can generate a positive return on investment. If you’d like to explore setting up your social media strategy, get in touch with me and my team and we’d be happy to help you out.