Social Media ROI: Why Measuring It Is Critical for Your Business

As social media is becoming a central part of digital marketing, it’s becoming increasingly important to allocate more of your budget into developing sound social media strategies while demonstrating their Return On Investment (ROI).

Social Media ROI: Why Measuring It Is Critical for Your Business

Companies across the globe are expanding their investments in social media, aiming to turn it into a major revenue driver. What does this mean for social media managers? There is rising pressure to prove they’re using their budget more efficiently and can effectively report on their social media ROI.

There are many misconceptions in the market about how social media ROI is calculated. They make the calculations seem complex, but they don’t need to be. Measuring ROI is the most accurate way of proving that you’re contributing to the company’s business goals and spending efficiently in places where you know will see the maximum return. Additionally, analyzing your revenue will allow you to make more informed decisions and help you be a more tactical marketer.

What Is Social Media ROI?

Social media ROI, on a basic level, is a metric demonstrating the amount of profit you generate from your social media marketing investments. It is usually displayed as a ratio or a percentage, with the highest values indicating the most efficient spend.

How to Calculate Your Social Media ROI

The first step to calculating social media ROI is pretty straightforward:

Profit / Investment x 100 = social media ROI %

Profit – the money you’ve accumulated from your social media marketing efforts

Investment – the total cost of your social media marketing efforts, for example the money you invested in Facebook ads to reach a specific goal

The formula mentioned above is a good starting point, but measuring ROI gets slightly more complex when you begin considering your business objectives. For instance, if your social media strategy aims to raise brand awareness, you can start defining your ROI in terms of the volume of engagement, new fans, or mentions, and later translate that engagement into conversions.

To truly develop a tangible measure of your social media ROI, you need to trace the campaign outcomes all the way down the marketing funnel. Let’s assume you gained 100 new fans as a result of an awareness-raising Facebook campaign. At first glance, it might seem difficult to estimate the monetary value of new fans. However, by analyzing the way they move along the customer journey, you can discover how many of them have actually reached the bottom of the funnel and converted. From there, it will be easy to determine your social media revenue.

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The Importance of Measuring Your Social Media ROI

The social media marketing environment is becoming increasingly competitive. As companies are vying for audiences’ attention, you need to pour more and more budget into your campaigns in order to stand out. A bigger spend, in turn, often requires proof that it’s delivering tangible results – and this is where measuring social media ROI comes in.

Analyzing your social media revenue can enable you to support budget requests by showing that your investments are beneficial to the company. On the other hand, if your ROI is low, it can help you pinpoint the inefficiencies of your social media strategy and start making improvements. This proves that measuring ROI is integral for growth, both for the business and the marketer.

But that’s not all. Measuring social media ROI can also help you determine how much value you’re delivering to your audience. A high number of converting users is evidence that your messaging is relevant and compelling, which shows that quality content plays a big role in earning social media revenue.

The Takeaway

In today’s competitive social media environment, measuring social media ROI is no longer optional. The growing costs of reaching your target audience mean it’s necessary to increase your budget, spend it in the most efficient way, and demonstrate its impact on your business. Most importantly, looking into your ROI can provide you with valuable hints on how to fine-tune your social media strategy, which can effectively put you ahead of the game.

Content Marketing Specialist

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