AnalyticsConversion & ROITools and tips for calculating the ROI of social media

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.

A recent survey provided a stark reminder of just how challenging it is to calculate social media ROI:

Social ROI

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 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?

  • Inputs are harder to quantify: Organic social media is powered by a lot of time and effort, rather than media budgets. It requires such a diverse blend of skills that it can also be hard to pinpoint what went into each campaign.
  • Outputs are harder to quantify (in commercial terms): What is the value of a ‘Like’? Does it really matter to a business how many people Repinned the latest infographic? We can enumerate these values, but that doesn’t mean they translate into the quantitative terms that companies really care about.
  • Customer journeys are complex: Joining the dots between someone following a brand’s Instagram profile, then visiting the brand’s site via SEO 2 months later and ultimately converting via a PPC ad can be difficult. We’re all moving away from last-click attribution, but factoring in the subtlety of social media is still beyond most attribution models.
  • Lack of clarity behind social media strategies: So many companies ‘do social media’ because they know their customers are there, but there is a lack of precision in their focus. Each channel will bring with it different types of engagement, as will different media formats, and everyone needs to know what to expect in return before launching a campaign. Otherwise, measurement is meaningless.

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.

1. Align social media metrics to broader business goals

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:

Social_Media_ROI

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.

google-analytics-1142957_1280

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:

  • Google Analytics Premium: The data-driven attribution model helps demonstrate the impact of each channel much more accurately than other models can. As such, it will provide insight into the role social media has played historically in relation to your business objectives.
  • Socialflow: Socialflow provides an overview of performance across all social media channels and recommends pieces of content to to promote based on their likelihood of attracting traffic and leads. It therefore represents a very powerful platform for understanding how each social network can contribute to specific goals.

2. Assign commercial values to social media metrics

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.

Social ROI

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:

  • Ometria: This tool is specifically for retailers, and it can calculate the lifetime value of a customer automatically. Combined with an attribution model like the data-driven example provided above in Google Analytics, each social media interaction can be attributed with a monetary value.
  • Kissmetrics: Kissmetrics provides a range of useful analytics products, many of which can help marketers understand the value of social media. Through data analysis and customer segmentation, we can gain a deeper understanding of how valuable social media is. Kissmetrics have also provided a handy step-by-step guide for calculating customer lifetime value here.

3. Track the effort and time that goes into each campaign

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:

  • Content creation: There will be fixed costs tied to the creation of any content, along with time spent by in-house teams to edit this and prepare its launch.
  • Tools/technologies: The list of social media technologies is endless and, while quite a few are free, many require a monthly subscription. Make sure these costs are factored into your calculations for campaign cost.
  • Content promotion: Promoted posts typically sit aside from social media ad budgets, but they do of course still incur costs. Include this within ROI calculations and weigh up the costs against the calue of the engagements you receive.

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:

  • Native analytics: Each social network contains an analytics interface, providing invaluable information on campaign spend and performance. These platforms should therefore be an essential component of any social media toolkit.
  • Toggl: Toggl is a very intuitive time tracking tool that will provide an overview of how much time is spent based on different social media tasks. This quantifies the number of hours dedicated to the campaigns, which can then be multiplied by the hourly rates of each team member.

ROI Inputs

4. Create custom dashboards to measure success

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.

analytics

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:

  • Datorama:  Datorama makes the data visualisation process pretty painless. It connects to a wide range of social media platforms and is highly customizable, so you can create different dashboards for different stakeholders.
  • Google Data Studio: Data Studio has continued to improve over the last few months, adding more platform integrations and data analysis features. It doesn’t connect directly with Facebook, for example, which would be an obvious problem were it not for workarounds from the likes of Supermetrics. Supermetrics can fetch the data from Facebook and deliver it directly to a Data Studio dashboard, making this a real contender as a free solution.

In summary

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.

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