How to Measure the ROI of Your Social Media Marketing

Nov 6, 2014

Social media plays an important role in helping drive customers to all businesses regardless of the size and industry. If your company is either actively involved in social marketing or contemplating taking the social media plunge, you need to establish an ongoing system for tracking the results of your efforts in order to reap the most benefits from your social marketing.

how to measure social media roi

Setting the Right Goals for Your Social Media Campaign
You need to remember that most effective marketing campaigns are based on the delivery of a basic sales message through multiple channels and tactics that complement and reinforce one another. While it’s not impossible to single out the contribution of social media to an overall marketing campaign, it does require the careful selection of conversion goals and performance metrics that are both achievable by, and readily attributable to, your social media efforts.

Whichever set of goals you decide on, create a landing page where your fans and followers can be converted into a customer. Some of the most frequently selected conversion goals for social media marketing include having your prospect fill out a contact form, sign up for your company newsletter, download a special report or whitepaper, watch a video, visit a specific web page, make an online purchase, or engage with a share, like, or follow.

Make Sure That Your Company is Using the Correct Social Platforms
Conduct a simple survey of your current customers to determine the most important platforms that you need to include in your social media outreach efforts. Don’t make the mistake of spreading yourself too thin – pick two or three social platforms that are the most relevant to your target market. It’s better to do a good job of engaging with your audience across a select few platforms than it is to do a mediocre job of trying to be everywhere.

Set up Your Social Campaign Tracking Tools
The most widely used tools for measuring social media success include

  • Google Analytics – this is one of the best analytic tools available and it’s free to set up and use. You can even generate custom social media reports that offer additional insights into how effective your social media channels are at driving website traffic.
  • HootSuite offers free as well as paid versions that allow you to schedule your posts for multiple social platforms and generate more than 30 useful tracking reports.
  • Facebook Insights provides a full range of analytic data for your Facebook page.
  • Twitter Analytics has an analytic dashboard that allows you to see which tweets were favorited, retweeted, or replied to.

Calculate Your Social Campaign ROI
Multiply the amount of your average sale by the length of time a typical customer stays with your business. This figure represents your Customer Lifetime Value or CLV.

The next number you need to calculate is the Customer Acquisition Cost or CAC, which should be about 10 percent of your CLV.

Take the number of new customers typically generated by your overall marketing efforts and multiply it by the percentage of your total marketing spend represented by social media. This gives you the number of social media conversions that you need to reach your goals.

At the conclusion of your social media campaign, take the number of social media conversions and deduct the CAC to determine the effectiveness of your social marketing efforts.