Sweety Rai
Social Media Marketing

What's the ROI of Social Media - and How Do I Measure It?

Aug 14, 20136 min readBy Sweety Rai

# What's the ROI of Social Media - and How Do I Measure It?

ROI is perhaps the most important word in marketing. It's the reason we try new strategies, it's the reason we shamelessly abandon them when they don't lead to growth. The role of a modern day marketer is becoming increasingly challenging as new ways to communicate are often perceived as difficult to measure and even harder to prove returns on. So how does a professional like you determine the ROI of social media?

I find this issue interesting, because it's a common critique of innovative marketing tactics, but is actually the root of the failure of traditional marketing efforts. Let's take a look at how we might measure the ROI of a television ad campaign:

I find this issue interesting, because it's a common critique of innovative marketing tactics, but is actually the root of the failure of traditional marketing efforts. Let's take a look at how we might measure the ROI of a television ad campaign:

  1. Track costs of campaign creation
  2. Track costs of media buying
  3. Include call-to-action in campaign prompting viewers to purchase our product
  4. Watch sales drop or rise, assume it has to do with the ad spot
  5. Measure profit or loss in relation to investment

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Of course, this could be labeled an oversimplified way of looking at advertising, but I'm not totally off base here. The inherent problem with yesterday's marketing is that its success is often impossible to measure.

And despite the assertions of many board room leaders and public figures, social media marketing is not.

How can we do it? By being smart.

One of the hallmarks of smart people is their innate ability to find simpler or more concise ways to accomplish complex tasks. That's exactly what you'll do with these basic steps for establishing, measuring, and proving social ROI:

  1. Set goals
    You can't measure whether or not something works if you don't know what it means to "work". In order to measure the value of social media, you need to determine what you want to accomplish with clear goals which signify growth. Technically, every part of your social strategy should be analyzed in contribution to these goals.Examples of these might be: increase website traffic, boost online word of mouth, bring customers into the store, create online community of evangelists, etc.Once you have these core concepts outlined, you can determine which metrics are relevant to their attainment, and start tracking them.

  2. Understand the difference between builders and driversThe majority of your social media participation will fall into the "builder" category of Inbound marketing, which focuses on differentiating your services and building reach to be seen by relevant prospects. These campaigns are not as easy to measure, but they are critical nonetheless to your success. The ROI here is theoretical, it's the increased postive perception and awareness of your brand.Alternatively, driver campaigns are the "get it done" component of your strategy. These promotional facets require actual action on behalf of the audience, and are what lead to an actual purchase.For example, let's say a cupcake shop wants to promote on Twitter. The shop could schedule Tweets with pictures of cupcakes, set up a blog about company happenings, and create a great website for people to visit. These would all be builder facets. They could also send out a Tweet with a discount cupcake promo code, which would be a driver campaign.

    It's obvious which one can be more easily measured for ROI, but that doesn't make either one more important. If all the shop did was send out hard sell content day after day, their social accounts would have little personality or value.Think of builders and drivers as a Ying Yang – you can't have one without the other.

  3. Use the tools at handEven if you don't have a big budget or access to marketing software, there are plenty of resources available to guide your measurement of social media.Start by making sure your social participation is primed for performance. A great tactic is to find out the best times to participate on your social networks, and put effort into being present then. This can be accomplished with free resources like HootSuite's AutoSchedule. This nifty feature will recommend times for you two schedule messages which have shown the greatest engagement from your audience in the past.When you're ready to track how your social performance affects your website, Google Analytics is a 100% free tool which can transparently show your traffic sources.To find out, simply set up Advanced Segments and monitor your incoming traffic from social sites.In the report below, you can see how Savvy Panda's social traffic behaves, and which networks provide the highest visit rate.

    Although some of us are nervous about Analytics and data tracking, Advanced Segments are actually a really easy and, dare I say, fun tool to use. Check out this article to learn how to set them up.

  4. Act on data
    With these tools in hand, you're ready to bridge the gap between social followers and paying customers. To do so, you have to utilize the information in front of you to dictate social strategy.

    This seems logical, but it's amazing how many brands ignore data and site performance when outlining strategy. Intuition often works in real life, but winning in the digital realm sometimes means you have to abandon your instincts and focus on facts.

    For example, if you're enjoying using Twitter 15 hours a week and focusing less on other networks, but Twitter is sending visitors to your site with a 99% bounce rate, you're not getting a great return on the time invested. You should either be changing the way you interact on Twitter, or investing your time elsewhere.
    Data is critical to proving the legitimate outcomes of social participation, so don't overlook it as just numbers on a spreadsheet.

  5. Demonstrate concrete valueMany social media measurements will focus more on online presence than monetary contributions. However, there are platforms available for tracking how your social interaction directly affects your bottom line. If you can afford it, services such as HubSpotcan literally count exactly how many paying customers come from each specific social media outlet. This can be admittedly costly, but it may be the missing puzzle piece for companies desperate to bridge a real gap without investing substantial time.