Tools and tips for calculating the ROI of social media
Marketers tend to go where their target audience is. There are 2.8 billion active social media users globally in 2017, an increase of 21% on 2016’s figures.
To put that in context (if such a figure even needs context), 3.8 billion people use the Internet worldwide. If you’ve got Internet access, chances are you use social media.
That makes social media cat-nip to modern marketers, especially now that it’s about more than just sharing cat videos. Social media ad spend looks set to exceed $35 billion globally in 2017, with Facebook taking the lion’s share (around 67%) and the likes of Pinterest, Instagram, and Twitter hoping to make a dent in an increasingly fruitful market.
These paid social media options are driving an ideological shift as marketers consider what social media can achieve for businesses. Traditionally seen as a way of increasing brand awareness or engendering customer loyalty, social media is now expected to deliver in direct commercial terms too.
However, quantifying this impact in a strict commercial calculation is difficult within the scope of an organic social media campaign.
Source: State of Social Media Marketing 2017, Simply Measured
The CMO Survey also revealed only 15% of C-level executives felt they had seen quantitative proof that social media was making a positive contribution to their business.
We like direct causal relationships in digital marketing. If we spend x, we get y. Even if y isn’t astronomically higher than x, as long as it’s higher we have something to work with.
Social media is an industry with some room to mature, no doubt, but we can do more to prove that it works. The onus is on us as marketers to define what social media really means for business.
So why has this been so challenging?
Fortunately, these are all challenges we can tackle.
Through a combination of technology and some old-fashioned human know-how, we can start to give social media efforts the commercial prominence they merit.
The tips below are intended to direct marketers towards practical ways to answer these pressing questions.
This is a frequently cited source of frustration with social media marketing, but it really should be rather simple to resolve. As we can see below, marketers voted the gap between social metrics and business goals as their biggest social media challenge:
Source: The Social Media ROI Cookbook, Altimeter
The alignment of goals is one challenge, the assignment of monetary value to metrics is another. We’ll begin with the former and tackle the latter next.
Just like any content marketing campaign, we can classify a social campaign as informational, educational, transactional, and so on.
Our business goal may be to increase the number of subscribers to the company newsletter, for example. From here, we can start to define which social media channel would best deliver on this, and then discuss how we would measure that impact.
This gives us a very tangible business outcome to focus on and it means we can assign social media tasks to this objective.
Measuring how successful this has been is not easy in terms of a pure causal chain of events, but we shouldn’t be deterred. Login-based tracking is on the rise and provides a more accurate way of tracking users across platforms than cookie-based alternatives. This is still imperfect, given that no tech company has the dominant ecosystem this would require for its flawless functioning.
However, great strides have been made and this knowledge should feed our approach to social media goal setting. Solutions like the data-driven model in Google Analytics Premium are bringing us closer to a true view of user-level interactions too.
We can therefore start to see the impact that our increases in social metrics are having on our business goals, bearing in mind that social media has a wider impact than just the direct transactions it brings.
Before launching a social media campaign, we should therefore assign a business objective to each activity we plan to undertake. This qualitative exercise sets us up well for the more quantitative work to follow.
Tools to help align social media with business goals:
What is the value of a ‘Like’? Many meetings about social media performance return to this perennial question. Although we could certainly argue, with some merit, that this is the wrong question to ask, it is easy to see why it arises so frequently.
The reason it refuses to go away is because there is no truly satisfactory answer. And if we want a campaign to be seen as successful because of the engagements it drew, its success needs to be conveyed in terms that matter to everyone.
Fortunately, we can at least trace the steps between social interactions and transactions. The most effective way to do this is through a piece of reverse-engineering, beginning with the calculation of a customer’s lifetime value (LTV) for the business.
This exercise makes use of historical data and predictive analytics models to ascertain how valuable the average customer will be in terms of the money they spend with the brand. Once we have this figure in mind, we can start to combine this with our attribution model and apply a calculation to reflect how valuable a social engagement is in the long run.
Of great worth here is the assessment of how social media customers engage with a website. Top brands report a per-follower engagement rate of over 4% on Instagram, compared with only o.o4% on Twitter, for example, so it is reasonable to expect that the value of customers will differ across social networks.
As a result, the LTV for customers on different channels should be adjusted to reflect this.
Tools to help assign commercial values to social media metrics:
As mentioned above, one difficulty with calculating social media ROI is that the inputs are less tangible than the reliable certainty of a media budget. People plan, strategize, test, go back to the drawing board, and re-launch campaigns. Social media also relates to everything from existing customer interaction to prospecting for new followers.
Ensure everyone on the team uses a task tracker and categorizes their activities in a consistent way. This will help to assign a cost to the main areas of activity involved in a social campaign.
The other inputs that should be tracked and costed are:
Once you combine the monetary value of these factors, you can arrive at the input cost for your ROI equation.
Tools to help track the cost of social media campaigns:
All of the above should help to arrive at an ROI equation that brings accountability to social media and reflects its contribution to business goals. By assessing the value of the inputs against the business value attributed to social media outputs, a simple ROI equation can be generated.
The next step is to include these metrics and calculations within custom dashboards that allow senior marketers to monitor progress. With activities aligned to goals and values assigned to metrics, social media performance can be communicated alongside other channels.
This removes it from the nebulous arena of ‘engagement’ and ‘buzz’ and directly into the domain of commercial impact.
Even if these contributions are less direct than other channels, it at least opens up the conversation to the wider impact that social media has for any business.
It is worth noting that 100% transparency remains a challenge with social media metrics, particularly with the difficulties of tracking ‘dark social’. That said, the social media landscape has evolved to such an extent that marketers are capable of comprehending this bigger picture. Even without tracking every single interaction, there is more than enough data available for any business to feel confident in the returns their social campaigns are generating.
Tools to help create compelling social media dashboards:
Although it requires a bit more work than other channels, there are still feasible ways to calculate your social media ROI.
By applying reliable, quantitative indicators to traditionally qualitative fields, it is possible to arrive at a simple equation that allows marketers to report on organic social media alongside their paid media efforts.