At the face value, social media ROI shows you how effective your social media marketing efforts are. You can calculate it using the formula:
Profit/Investment x 100 = Social media ROI
However, the implications of this term go beyond the monetary value. Social media marketing is not only about sales. It is a tool for brand awareness and customer loyalty. Of course, in case of customers, you can calculate their lifetime value and, by applying various mathematical filters, find out how much of this value comes from your social media efforts.
But how do you quantify a glowing testimonial or product review that brings you dozens of new customers? Or the effect of positive brand mentions on cold leads who decide to follow your social media pages?
Many Marketers Find Social Media ROI Challenging
If you are confused by the overreaching implications of this metric, you are not alone in this. A recent survey by Sprout Social found that 55% of the respondents found the measurement of social media ROI challenging.
The survey further found that the lack of a clear understanding of their social media ROI is accompanied by a lack of understanding of what consumers expect from brands on social media. Thus, while 72% of consumers are looking for a freebie or a special discount, 72% of brand posts are about teaching something, 58% are brand stories and 53% are inspirational.
So, if it is so complex and confusing to determine with precision, does social media ROI really matter? Yes, it does. Even if you do not reach a clear-cut number, knowing how well your social media activity performs will give you valuable insights.
Here are some of them:
1. Do You Invest in the Adequate Social Media Platform?
Many brands see Twitter and Instagram as the most active platforms, because there is a high dynamics in posting, sharing, liking and commenting. Some businesses are, indeed, very successful there. For instance, restaurants and fashion brands are winning at the Instagram game with their crisp photos and video snippets.
But Facebook™ is the place where you find new leads through careful advertising using custom audiences and lookalike audiences. Local businesses are also more successful on this platform, because they can perform detailed geographical selections of ad audiences and benefit from lead ads for quick conversions.
Once you identify a serious lack of proportion between your social media efforts and your results on a certain platform, this is a warning sign. Maybe you need to rethink your strategy. Or maybe you should focus on another platform.
2. Do You Focus Too Little on Certain Metrics?
We firmly believe that social media success for brands is a mix of being social and investing in paid ads. We know that Facebook™ ads work and we encourage you to track the metrics telling you how well your ads perform.
But you should not forget about the so-called “vanity metrics”: likes, mentions, tags. They are important for your social media ROI because they show the impact your posts have in the cyber world. A strong impact translates into increased brand awareness.
3. Are You Aware of Market Trends?
Customers set the trends of the market in any industry. Thus, if you are spot on and give them what they want, you have their loyalty (and their money). But how do you know what they want? How do you know how happy they are?
The answer is on your social media pages. As we showed above, many companies are out of touch with their followers’ expectations. The consumers want special offers and they get brand stories and inspirational quotes instead. A low engagement on your posts and an even lower traffic level on your website coming from the social media means that you are not giving your followers what they want.
4. Are You Spending Money for the Right Goals?
All businesses want more sales as a result of their social media marketing efforts. But if you are set on getting the sales straight from day 1 of opening your social media pages, your social media ROI will not look very good. In fact, it will look terrible and may discourage you from continuing your promotional efforts on these channels.
But if you set out with the goal of making prospects aware of your business and what it can do for them, you will see positive results. People take time to trust a business with their money. During the period of getting acquainted with your business and growing confident that it is a good fit for their needs, you need to nurture them with valuable content and with ads.
5. Are You Aware of All the Social Media Costs You Incur?
When you look at the bigger picture, you will discover that your social media ROI is not simply a result of money spent on ads divided by revenues you get from them. Creating ads takes time – and time is money. Hiring photographers, copywriters, assigning social media moderation to one of your employees – all these are costs of your social media marketing.
Being aware of them will help you optimise them and realise that being successful on the social media is a matter of many variables, some of them outside your control. However, you should do your best to keep in check those that you can control.