As marketers and social media platforms mature, we're discovering a lot more about the upside and downside of investing in social media. You'll see that I'm often critical of the expectations set by social media consultants – but that doesn't mean I'm critical of social media. I save tons of time and effort by sharing wisdom with peers and conversing with brands online. I have no doubt that my time spent on social media has been an incredible investment for my company, my publication, and my career.
The issue is a matter of both expectations and measurement, though. Here's an example: A customer complains via Twitter and the company responds immediately, thoroughly correcting the issue for the customer in a fair and timely manner. That customer's audience sees that behavior and now has a positive impression of the company. How do you measure that return on investment? Over time, you may be able to by measuring the sentiment of your brand and correlating that to overall revenue and retention… but it's not easy.
44% of CMOs say that they haven’t been able to measure the impact of social media on their business. However, it’s absolutely achievable for firms of all types
More often than not, companies want to measure social media marketing ROI by directly attribute a download, a demo, a registration, or a sale to a Tweet or Facebook update. While that's the lowest common denominator of social media ROI, it's not always plausible. Are your prospects going on social media to make a purchase of your product or service? Highly doubtful in most industries – although it does happen from time to time.
4 Steps to Measuring the Return on Invesment of Social Media Marketing
Keep in mind that you may not have these in place at the time you decide to begin measurement. It may require you to set resources and a budget to work on social media for at least a few months to determine what your return is.
- Define Measurable Goals – It can be as simple as building awareness or go much further to engagement, building authority, conversion, retention, upsell, or improving overall customer experience.
- Assign a Value to Each Action – This is a difficult task, but what's the value of educating, engaging, and servicing your customers on social media? Perhaps segmenting your prospects and customers – comparing the ones who follow and engage with you online versus the ones who do not. Was there increased retention? Increased upsell opportunities? Faster time to close? The larger size of contracts?
- Calculate the Cost of Your Efforts – How much time is it requiring and how does that translate to employee and management pay? How much are you spending on platforms to manage social media? How much money are you spending when refunding or discounting customer service issues? Are you spending any money on research, training, conferences, etc.? All of it needs to be included in any ROI calculation.
- Determine the ROI – (( Total Revenue Attributed to Social Media – Total Social Media Costs ) x 100) / Total Social Media Costs.
Here's the full infographic from MDG, covering how to define measurable goals, assigning value to each activity, and calculating the overall cost of your efforts in How to Measure Social Media ROI: