Social Media ROI: Why Your Business Needs It

The number one question buzzing around social media for many companies is, “What is the ROI?” Measuring ROI or return on investment is important for companies using social media to better understand the impact to the bottom-line. Whether that is increased sales, generating new leads, or an increase in revenue per customer.

Today, we tackle the “serious” term ROI to take away the mystery. ROI is key to your company or organization for understanding the impact of your social media efforts.

There are two basic steps to measuring ROI:

1.  You must clearly understand the costs associated with your Social Media efforts – both actual and opportunity costs.

Some of the costs associated with Social Media include:

• Technology – new or upgrades
• Salary associated with employees performing social media activities
• Training
• Consultants employed to assist with strategic alignment

2.  You ought to have a way to accurately capture the gains achieved from your social media efforts. For example:

• The number of leads generated by your Facebook activities that convert to a sale
• The number of leads that download your e-book or video that convert to a sale

There are definite benefits to calculating and understanding your companies ROI:

1. By understanding actual and opportunity cost, there is potential to lead to cost reduction.
2. It forces you to analyze revenue streamed to identify additional opportunities for growth, i.e. increasing transaction size or new customer base.
3. It will allow you to develop a clear marketing strategy.

Now that you know the ROI equation and benefits, the question most companies ask is, “How do I do it?”

It is important for businesses to identify metrics that track the performance of their social media efforts, such as website visitors, blog comments, retweets or other key performance indicators (KPI).

For the metrics to make sense, your company must create a baseline – the starting point for each metric used to compare the performance of your marketing efforts before initiating a social media strategy. There are many tools for tracking social media KPI. One is Google Analytics, a free service offered by Google that generates detailed statistics about the visitors to a website. Companies may create a weekly report to stay up-to-date on the progress of their website, and modify their strategy accordingly.

There is also HootSuite, an online brand management service that publishes to Social Media sites such as Facebook, Twitter, LinkedIn, etc. HootSuite reports enables users to track the performance of individual posts and monitor the growth, influence, demographics and trends on your Social Media profiles. In addition, HootSuite integrates with Google Analytics to allow an immediate view of Social Media activity and their impact on your website visitors.

Armed with the tools to create a baseline and monitor KPI, you will have a more accurate picture of how your Social Media activities generate leads that convert to sales. Sales represent a tangible gain from investment for the first element in the ROI equation. If you are diligently tracking the cost associated with the Social Media implementation, you can now calculate ROI.

The key to measuring ROI is to find trends and track them back to their original point. Then you can ask the question, “Has the company met, or exceeded, its Social Media goals since creating the baseline?” If so, you have social media to thank for that!

Remember social media does not have immediate financial return. Whether your company has strong brand recognition or if you are a start-up business social media marketing is beneficial. However, the goals and objectives you establish at the onset of your social media efforts will be more effective when you establish metrics, monitor your ROI, and make adjustments as necessary.

To learn more about how your company can establish a baseline and begin tracking ROI, contact Project Socialize for assistance.

By Leah Addison, Community Manager