Social Media ROI: Your Comprehensive Guide
Determining the return on investment for your social media marketing campaigns is essential for being able to tell if you are creating new customers, extending your brand’s visibility, or, alternatively, if your efforts are not reaching expectations. So, how do you measure the ROI in social media marketing? In the simplest terms, just use this formula:
ROI = (Return – Investment) / Investment
However, if you truly want to gain real insights from your ROI calculation, there is much more you should first understand about the entire process.
In this article, we are going to discuss why measuring your social media marketing ROI may not be as straightforward as you think while showing you 5 easy-to-follow steps to make sure you are getting the most out of your ROI calculation.
What is Social Media ROI, and Why is it Important?
ROI stands for Return on Investment and is used to determine if your marketing campaigns are actually helping your company achieve your goals. Social media ROI is what you get back (the return) from all the time, effort, and resources you commit to social media.
ROI in social media marketing means the amount of money you get back from an investment relative to the amount of money you put into it. It is different to profit, which is simply the amount spent subtracted from the amount earned. In the simplest terms, a positive ROI means your campaign earned more than it cost. A negative ROI means that your campaign cost more than it earned.
All this seems simple, right? Perhaps on the surface, but be aware that there are some things you need to think hard about related to the metrics you set, your investment, and the ultimate goal you want to reach when calculating your ROI. Before getting into how to measure the ROI of your social media marketing campaigns, we should quickly go over the challenges related to accurately measuring your social media ROI.
Challenges with Social Media ROIs
While the formula to measure the ROI of a project is pretty simple, many brands struggle with calculating their social media ROI. This is because there is not something like a single social media ROI metric that everyone should use to determine whether their social media strategy is effective or not.
Here are some things to consider when discussing social media marketing ROI measurement in your company:
1. Many Touchpoints in the Customer Journey
Sometimes it can be difficult to tell where a sale comes from. For instance, there can be times someone may click on an ad and not buy right away. In another scenario, someone may see an ad on social media one day and then another ad on a non-social media channel that both come from your company. If the customer buys a few days later, which channel gets the credit? Put simply, a sale has many touchpoints, and it is essential to define what counts as a sale for the different approaches you take.
2. There are Goals other than Financial Goals
Maybe your social media posts did not cause a sale, but have increased awareness for your brand and may result in people talking more about your company and sharing your posts with their friends or partners. After all, social media is one of the best places to building your brand, connect with your fans and increase awareness. Having a popular brand is a massive benefit to any organization. However, how should you measure this in terms of an ROI calculation? For this reason, it may be important to consider using non-monetary ways of calculating your ROI.
3. One-Time Purchase vs. Customer Lifetime Value
Social media is a place where you can build trust and create loyal customers. The value such a customer has for your company is called customer lifetime value, and it goes beyond the amount he or she spends as a reaction to a single campaign of yours. Loyal customers have a higher customer lifetime value, and social media marketing is a major way to build trust and increase the customer lifetime value. To calculate the return of your social media efforts, you could choose to consider not the effects on immediate sales, but rather focus on the lifetime value of each of those audience members.
4. Calculating Your Costs
To calculate the investment on a campaign or campaigns, you need to add all costs that went into making your campaign(s). You may just calculate the costs for your actual ad spend. But what about the costs for the time which members of staff spent working on it, the costs for equipment, rent, etc? Calculating those costs takes some time and effort, but only this way you get a better idea of the real costs of your campaigns.
Understanding ROI for Social Media Marketing: Step-by-Step
All of those reasons make it difficult to calculate an average ROI of your social media marketing campaigns. Rather than feeling stressed about accurately tracking your social media ROI, let’s walk through some steps to help you out.
If you want to improve the overall returns of your campaigns, it is essential to understand the entire social media marketing ROI process. Here are 5 simple steps that detail what you should consider when creating your campaigns with an eye on calculating your ROI:
- Select your Goals and Metrics – what is important
- Determine Your Total Investment
- Set up your Tracking
- Calculate your Return on Investment
- Assess your Results and, if necessary, make adjustments
Step 1: Select your Goals and Return Metrics
The question on the return metric depends on what you want to achieve with your social media efforts. What is your overarching goal with social media? What types of actions do you want to drive with your campaigns?
You can choose relatively simple metrics such as new followers, likes, or impressions and calculate the ROI for each metric. However, measuring the social media ROI based on those return metrics may be shortsighted since you don’t know how these actually result in more sales or leads.
Alternatively, here is a list of some of the more common financial goals that brands set for themselves:
- Order value of purchases coming directly from social media (Impressions x click-through rate x conversion rate x average basket value)
- Average customer lifetime value (Impressions x click-through rate x conversion rate x customer lifetime value)
- Total sales volume through the links in your social media bio
- Total lifetime value (Filled out contact forms x average conversion rate x average customer lifetime value)
- Lower PPC costs than on other marketing channels. Here, you compare the amount you would pay in other marketing channels for a sale, a new follower, click, impression, etc. with what your organic (i.e., not paid) social media sharing costs you per sale, follower, click, impression, etc. An advantage of measuring PPC is that you can compare your social media efforts with all of your other marketing channels such as Google Ads, Meta ads, influencer collaborations, and many more.
Step 2: Determine Your Total Investment
While it’s true that publishing content on social media is free, your time is costly. Moreover, you probably need different tools to create your content and campaigns that can also be costly. To receive a more accurate picture of your social media investments, you want to add up all associated costs:
Advertising spend – The amount you spend on social media advertising— this can include boosting Facebook posts, promoting tweets, etc.
Your time – Multiply labor-cost per hour by the number of hours you’ve committed over a given period (depending on whether you’re measuring social media ROI for the week, the month, per campaign, etc.).
Your equipment and social media tools – Add up the costs of all the equipment, tools, and services you use for social media. This can be content creation tools such as Adobe Express or Canva, video editing tools such as CapCut or Premiere Pro, or AI tools that you use like ChatGPT or FlikiAI. You can calculate the weekly or monthly costs of all of those investments.
Importantly, the average cost per campaign related to the tools or time you use may decrease if you are running numerous campaigns. For instance, if you pay $100 a month for these tools and run two campaigns, then your spend in this case would be $50 per campaign. However, if you run four campaigns for the month, your average cost per campaign decreases to $25 as the costs for your tools are distributed across campaigns.
All these costs added together will equal your investment that you have to factor in when you want to measure the ROI of your social media marketing.
Step 3: Set up your Tracking
Before launching any campaign, you should have a clear understanding of what your goals are, and what metrics you are tracking to understand if you are reaching those goals (see: Step 1). Doing this step correctly is essential when calculating your social media marketing ROI since inaccurate data will render your ROI calculation useless. There are a number of social media ROI tools that can help you with this. For instance, many use Google Analytics can help you track actions (clicks, downloads, signups, purchases) that people take on your website. Here, you can find out which traffic is coming from a social media campaign if you use UTM links or other tracking mechanisms.
There are also a number of social media analytics tools that can help you track specific metrics and give you a better understanding of your progress. This includes benchmarking capabilities to give you a better idea where you stand in relation to your competitors.
Step 4: Calculate your Return on Investment
After completing the steps above, it is now time to talk about how to calculate the ROI for Social Media. While you may have thought it is just about using a simple formula, the sections above have demonstrated how important necessary prep work is in order to make the process of calculating your social media ROI even more fruitful.
With steps 1-3 in mind, let’s go over how to calculate and measure your social media ROI. As we already discussed, in the simplest form, the social media ROI formula looks like this:
ROI = (Return – Investment) / Investment
However, as we demonstrated above, calculating the ROI on social media depends on an accurate tracking of metrics/goals, as well as a close calculation of your entire investment which can include things such as the tools you are using, as well as your own time spent on the campaign.
Another consideration you should make when measuring the ROI on social media relates to the size of your dataset. In other words, look at the ROI for all campaigns during a given time period or every campaign by itself, or both.
If you are calculating your ROI for all social media campaigns, then a small adjustment should be made to your formula. In this case, you add the returns and costs for all campaigns:
Social media ROI = (Return of your social media campaigns – Time and Money invested in your social media campaigns) / Time and money invested in your social media campaigns
When it comes to the question of how to exactly measure the social media ROI for a B2B business, it might be helpful to look at a concrete social media ROI example with real numbers.
Let’s say that company A has run a social media campaign that has resulted in an order value of $5,000 through the links in their posts. The product cost totaled $3,000 and the campaign spend (salaries of employees managing the campaign, video editing software, ad spend) amounted to $1,500. The calculation of the social media ROI of this campaign would look like this:
Social Media ROI = [(5000-3000) – 1500] / 1500 = 33.3 %
One last point we should make is that if you are using a social media ROI calculator for these calculations, remember to consider everything we talked about above.
Step 5: Assess your Results and, if necessary, make Adjustments
The final step is to assess your results. If you are not achieving your goals, then study why that might not be the case and adjust your campaigns accordingly. The point here is that calculating your ROI is not something that you do once. Rather, you should continue to track and study your ROI data if you ultimately want to increase the ROI of your social media marketing. This is because when you track and analyze your data, it is easier to compare different strategies to find out what works and what doesn’t.
Experienced social media managers track their social media ROI regularly, comparing different time frames and campaigns to find out how various content formats, platforms or campaigns are performing. Using a social media analysis and benchmarking tool or a website analytics tool can help you get more in-depth insights.
What Is A Good Social Media ROI?
We should start off with the obvious here: For a social media strategy to be considered financially successful, it has to have a positive ROI. This means your return is larger than your investment. In terms of numbers, it means having a social media ROI higher than 0. The B2B example above shows such a positive B2B social media marketing ROI.
However, aiming only for a higher than zero is a very low goal to set for yourself. Some may say that an “acceptable” social media advertising ROI is 100% (or 2:1) which means that you have doubled your investment.
Many may be interested in searching for the average ROI for social media marketing campaigns. That is not too difficult because there are a lot of different social media marketing ROI statistics online which may give you some baseline estimates about where you should be with your campaigns. However, we should caution against relying too heavily on those since your industry, customer base, and location are factors that may affect averages.
In reality, it is important to communicate and converse with your entire marketing team as to what the initial expectations for a campaign are, and what types of improvements should be made with each campaign.
Tracking the return on investment of your social media efforts can be a challenge. You need to be clear about what your goals are and how you should track them. You also need to measure all types of costs that go into your social media efforts. Only when you have an overview of all the returns from your social media campaigns and all the investments that have gone into your social media management can you measure the ROI of your social media marketing. This tells you whether your social media strategy is delivering the results you want.
If you are interested in finding out how an all-in-one social media tool can help you better understand your social media performance, you can try Fanpage Karma’s free 14-day trial.
There is also a free weekly webinar that shows you how to improve your overall social media performance with the use of a social media too.