The importance of social media was never so high, and the resources spent on social media management are increasing correspondingly. With the increased overheads and costs, trying to attribute social media cost to the social media business impact or revenue, was never more relevant. Seems like a classic case for an ROI calculation. The problem is that measuring social media ROI is a damn difficult thing to do. In reality, it’s a challenge ANY online brand is facing. Before going into the how, it’s critical to grasp where are the challenges first.
Why Measuring Social Media ROI Is So Damn Difficult?
When you are managing your PPC campaign, it’s easy. The purpose of this campaign is to acquire new users and that’s how this campaign should be measured. When managing your social media properties, your purposes are (at least) twofold: Both users retention, (Usually your followers are existing users, which you will try to bring back to your product) and users acquisition, (Your existing customers will often share your content and will help you to acquire new users). The problem is that when you are attributing revenue to conversion and calculating user’s life time value, you are already taking into consideration the entire retention impact for this user’s life. Counting user’s retention impact, and user acquisition impact will end with counting the same revenues twice. The best practice to overcome this challenge will be to measure Social Media revenues while attributing only new users acquisition. At a later stage, make an A/B test between users who were invited to follow your brand over the social media, vs. users who were not. Measure the delta between the two groups. This delta will be the retention impact of your social media marketing.
How To Measure Social Media ROI:
- Make sure to publish all your links with unique tracking parameters.
- Make sure to save these unique tracking params in a tracking cookie located on your user’s browser.
- Make sure to record the tracking params recorded in the tracking cookie to your data-base at the conversion stage.
- Attribute revenues to acquired new customers. This will be your social media marketing impact on users acquisition.
- Perform the A/B test explained above and calculate your delta. This will be your social media marketing impact on users retention.
- Calculate total social media revenues by adding user acquisition revenues to users retention revenue.
- Calculate the total cost associated with your social media management.
- Calculate your ROI by following this formula:
That’s it. You have finished to measure your social media ROI. Bare in mind though, that Social Media poses a value which is beyond ROI, user acquisition or user retention. It has a lot to do with fluffy concepts like brand awareness and engagement. Brand awareness and users engagement are Fluffy and intangible indeed, but business critical for sustainable brand creation. While taking that into consideration, your social media ROI will often turns out as negative. What’s important here is that you created a baseline. This baseline must demonstrate improvement constantly.
That’s all folks. I really hope it make sense to you. Let me know if you have any questions or comments. Cheers, Dada.