Quick Guide: How to Measure ROI in Social Media

Measuring the effectiveness of your social media efforts is a crucial part of your online marketing campaign. In this quick guide, we’ll define what social media ROI is, why it’s important, and explain how to go about the process.

What is Social Media ROI?

Your social media ROI is the percentage of return and profit generated from your marketing efforts. It gives you a measurable insight on the effectiveness of your campaign. When identifying your social media ROI, it’s best figured in terms of its monetary value for you to know how much you get per peso investment.

There's no clear cut way of measuring your ROI in social media as it depends on your organization's objective or goal. Each goal measures success against different metrics.

For instance, if your goal is to drive brand awareness, the metrics you'll be looking at are audience reach and engagement. But if you're after the revenue generation, a simple formula comes in handy: ROI social media = (revenue - cost / total cost)  x 100.

Why Measure Social Media ROI?

Why Measure Social Media ROI?

Surprisingly, around 40% of businesses are actually oblivious to whether their social media marketing efforts are paying off.

Measuring your ROI is important for many reasons. You calculate your ROI because you want to:

  • cut costs
  • drop efforts that aren’t paying off
  • see the areas where you want to improve
  • save labor, time, and other resources
  • maximize the potential of your social media efforts
How to Measure Social Media ROI?

How to Measure Social Media ROI?

#1 Set Your Goal

To measure your ROI, first identify your goal.  The most prominent goals include driving brand awareness, increasing sales, and generating business leads.

When identifying your goal, make sure that it’s quantifiable. A goal like driving brand awareness is not exactly quantifiable, but you can get an insight of how successful your social media efforts are by using analytics tools to analyze and measure these metrics:

  • Newsletter subscription
  • Downloads of PDF files or eBooks
  • Contact form sign ups
  • New followers
  • Trial subscription

#2 Know Your KPI

If you want to measure how you’re performing, there are several metrics you need to track. These metrics are your Key Performance Indicators (KPI).

The most handy and often used metrics are the number of followers, shares, and likes. Other useful metrics to monitor include:

Impressions. This metric determines the number of times your content was shown on a user's newsfeed. This basically measures the exposure of your content.

Reach. Often used in combination with impressions, this metric shows you the exact number of unique users who saw your post or tweet at any given time.

With tools like Facebook Page Barometer, you can compare your reach with other competitors. This metric is most useful if brand exposure is your goal. To calculate your reach, use this formula:

Reach = no. of users who saw your post / tweet / total number of followers or fans

Engagement. This is the number of retweets, mentions, comments, and likes for your content. It measures the interaction of users with your brand. To calculate for engagement, use this formula:

Engagement = total number of interactions / total number of followers or fans

The feedback rate, on the other hand, can give you insights on your top performing content. To get the feedback rate:

Total number of interactions on a post (likes, comments, and shares) / total impressions

Traffic. This measures the total traffic on your social media channels. You can measure this by using the social media option of your analytics tool. Measuring traffic is a good way to understand how successful your posts are in driving traffic to your site.

Conversions. In combination with traffic, the conversion rate shows you how well your website leads users to complete measurable actions such as newsletter subscriptions, contact form sign-ups, downloads, check-outs, and purchases. To measure:

Conversion rate = total conversions / traffic

Follow this metric if your goal is to generate revenue as you can track the number of “add-to-cart” and checkouts.

Bounce rate. This metric lets you know whether the traffic you attract stays on your pages long enough.

#3 Identify and Utilize ROI Tools

After identifying your goal and understanding your KPI, identify and set up analytics tools in order to keep track of the performance of your website and social media accounts.

Take note of these when identifying and using ROI tools:

  • Google Analytics is a free tool that allows you to track conversions in your website. It also shows you traffic referrals from your social media campaign.
  • UTM Parameters are shortcodes that you add to a URL to track website traffic for specific pages. It is used along with analytic tools like Google Analytics.
  • Facebook Pixels is a code that you can add to your website, letting you track conversions from your Facebook Ads.
  • Twitter Website Tag is also a code you can add to your site to track website traffic and other actions driven by a tweet.
  • Twitter Analytics can provide you key metrics to measure your Twitter success (e.g impressions, mentions, and top tweets).

Take time to study each tool in order to maximize them.

#4 Assign a Monetary Value

Since your ROI indicates the monetary success of your social media efforts, you need to get the peso value of your conversion rate. To do this you need to find out the following:

  • Lifetime value - average earning from a customer
  • Conversion rate - or the conversions gained from your social media efforts

To give an example:

Your brand uses social media to drive sales to your ecommerce site. You know that on average a customer pays Php 350.00 (lifetime value) and 16% of website traffic driven by social media ads use the checkout function. By multiplying the social media conversions to the lifetime value you know how much each conversion is worth: Php 350 x 16% = Php 56.

After getting the monetary value of your conversion rate, you can check how much you are earning from different social media channels. Given the same values, here's a sample table of your potential earnings from three social media channels:

Source Conversion Rate Conversion Value
Instagram 15 Php 840
Facebook 8 Php 448
Twitter 6 Php 336

#5 Track Expenses

After getting your potential earnings, the next thing to do is to track the cost of your social media marketing efforts. This includes:

  • Paid tools - analytics and other tools that you paid for a certain period
  • Manpower - the cost of hours spent by a person to manage your social media channels
  • Ad cost - cost of promoted tweets, facebook ads, boosts, etc.
  • Miscellaneous - other costs incurred

Once you get the cost of social media efforts, you can then calculate your Return on Investment.

#6 Calculate your Social Media ROI

Calculate your ROI by using this simple formula:
(Social Media ROI = Revenue from social media – cost of social media marketing / cost of social media marketing)*100.

Given the same figures and with a social media marketing cost of Php 500, the ROI in Instagram is 68%, -10.4% in Facebook, and -32% in Twitter. Your overall ROI is 224.8%.

Source Conversion Rate Conversion Value
Instagram 15 Php 840
Facebook 8 Php 448
Twitter 6 Php 336
Php 1,624

Here's the calculation: Social Media ROI = (Revenue - cost / cost) x 100

Instagram ROI = ((840-500)/500)*100= 68%
Facebook ROI = ((448-500)/500)*100= -10.4%
Twitter ROI = ((336-500)/500)*100= -32.8%
Overall ROI = ((1624-500)/500)*100= 224.8%

A positive ROI means your investment on social media efforts is paying off, and a negative ROI means that your earnings did not exceed your cost.

An ROI of 100% indicates that you earned twice the amount of your expenses. If your ROI is at 0%, your earnings exactly matched your total cost.

How is your social media campaign doing in terms of ROI? Measure the effectiveness of your strategy to know the adjustments you have to make and ensure that the time and effort you spend on your social channels are worthwhile.

Did you find this article informative? Find more relevant social media tips and updates by visiting our blog.