When your boss asks you how social media is boosting the bottom line, do you know what to say? You can rattle off statistics about tweets and clicks and likes, but senior management wants to know what that means in terms of new customers, higher sales, or a more valuable brand. Just as important, they’re interested in finding out whether social media efforts are worth what they cost.
That’s why you need to measure return on investment, or ROI — and if you think that’s a tough task, you’re not alone. More than one in four of the marketing decision-makers we recently surveyed said that measuring the effectiveness of their content was their No. 1 challenge; another one in five cited measuring ROI as their biggest hurdle.
And as business impact through social media continues to advance, measuring ROI will only become more important. The Salesforce Research’s 2016 State of Marketing report found that 39 percent of marketers reported significant ROI generated by social media in 2016 compared with only 9 percent in 2015.
To measure the performance of your social media, you should identify what conversion means and what, exactly, you should be monitoring. Then you can assign dollar values and measure progress. Your content marketing partner should give you the tools (and the story) to prove to senior management that your campaign is working cost-effectively to achieve broad corporate goals.
Identify Your Conversion Metrics
You’re not using social media just to get clicks and likes — you’re trying to drive revenue for your company. Quantifying social media’s impact on sales looks different for each business. First, you have to identify what measurement will help you get there. For one company, that might mean measuring social media referrals to the website; for another, email subscriptions. Ultimately, you’ll want to be able to tie the factors you measure to a dollar figure. How you do that will depend on your business model and what tracking capabilities you have. Here are a few successful methods that we’ve used before:
With the help of a capable CRM platform or some clever social media and website managers, you can identify which visitors to your website came via a social media referral and track them. How many of these convert to customers? Can you assign lifetime value to those customers? How much more can you discover regarding these referrals? Here’s an example: For one client, we found that fans who subscribed to that client’s email list via their Facebook page had an average order value that was vastly higher than their typical customer.
The informational possibilities are endless — but, alas, not everyone has the technology (or the bandwidth) to analyze it. Which brings us to our next point.
Perhaps you aren’t so advanced that you have a CRM system, and most of your sales take place off-line. You can still track social media referrals to your website and conversions to lead forms. If you’re able to take your leads and assign an average sale value to them, you immediately have a measure of how much revenue social media referrals generate. This is something we are able to do for our own marketing, which helps guide exactly how much money we invest.
Regardless of whether you’re able to tie social media to sales or leads, you’ll want to measure overall awareness and engagement. Content marketing is all about the non-direct sale; pulling the customer in rather than pushing product out at them. So, you’ll want to measure factors that indicate awareness. This is where fans and followers come in. Engagement factors such as comments and shares are also critical here. Check to make sure your social media is converting to website traffic, including social media referrals, number of pages viewed, bounce rates, and time on site.
Tying awareness to revenue figures involves a little more art than science, but you can start by tracking overall brand lift — like month-to-month sales — and relate that to changes in awareness indicators. You can perform surveys of your social media followers to gauge how many of them are customers, their intent to buy, awareness of services, etc. For one of our customers, we perform annual surveys to show how much specific channels and the overall content program impact sales. It’s a powerful tool for the client when advocating for the overall program.
The next step is to look at how much it’s costing to generate social media impact. Add up expenses like salaries, vendor payments, computer equipment, software, subscriptions, and any other expenses directly related to content marketing, as well as a prorated share of general business expenses like rent, utilities, and overhead. Voilà — the sum is equal to your investment in ROI.
Now you can calculate ROI by subtracting investment from return (so you have net return) and then dividing it by your investment, like this:
Determine Your Ideal ROI
To optimize your program, you’ll need a baseline survey of indicators you’ll be measuring so that you can determine whether your program is improving month over month. Set an average benchmark for your conversion factor, such as cost per acquisition, leads, referrals, etc. — and set some goals.
What’s considered a “good” ROI can vary depending on what you’re trying to accomplish as well as the unique characteristics of your company and business, but one way you can evaluate how you’re doing is by benchmarking your ROI against other companies in your industry. You’ll also want to monitor ROI over time so you know whether your program continues to be cost-efficient and effective.
Get Started Today
Measuring social media ROI accurately — and continually — can help you identify what’s working in your program and what could use some tinkering. It gives you the tools to make the case to senior management for your program. And it can significantly boost your impact on the company’s bottom line. For more information about how D Custom can help you get started, contact us. And help increase our ROI by following us on Facebook, Twitter, Instagram, and LinkedIn. You scratch our back, as the saying goes …