You probably calculate ROI figures from time to time. It’s pretty easy to do when you’re calculating ROI on something like a direct-response advertisement. But what happens when you’re dealing with something like social media?
There’s the standby formula:(revenue – expenses) / expenses = ROI … but that doesn?t really work for social media. So let’s walk through the steps of determining your social media ROI…
Step 1: State Your GoalsThe “return” on your investment may not translate into a direct monetary amount, which is why you need to first figure out your social media goals. These goals may include:
- New followers
- Engagement metrics (such as likes, shares and comments)
- Clicking links to go to your website
- Watching a video
- Downloading a file (app, report, video, etc)
- Joining your mailing list
- Making a purchase
Step 2: Assign a Dollar Figure to the NumbersNext, you need to figure out how much these measurable goals are worth to you when someone takes a specific action. Depending on your goals, you may be determining:
- The lifetime value of a customer.
- The value of a click.
- The value of a subscriber.
- The value of a visitor.
Step 3: Track and Measure Your GoalsYou’ll need to install tools so that you can measure your goals. Google Analytics or the alternative Piwik.org will help you with onsite analysis. For social media engagement, you may use a tool like Buffer.com.
Step 4: Figure Out Your InvestmentIf you use something like Facebook pay per click ads to figure out your investment, then the calculation is pretty easy. Just figure out how much each click costs to determine ROI. Let’s go back to the example where each person who watches a video is worth $2 to you. If you spent 50 cents to get each viewer, then you’re getting a nice $1.50 return on your investment for each viewer. The calculations get a little more complex if you’re dealing with other types of investments. Here’s what you need to calculate:
- How much time you spend working on a social media campaign (and how much your time is worth per hour).
- How much time your staff spends working on a social media campaign (and how much their time is worth per hour).
- What you’re investing to outsource your social media.
- What you’re investing in paid advertising (such as pay per click marketing) to bolster your social media campaign.