How to Measure ROI from Social Media Marketing

Do you have the daunting task of calculating the return on investment (ROI) from your organization’s social media marketing efforts?

Social media is a crucial element of any good content marketing strategy, but it’s incredibly difficult to translate its benefits into the kinds of numbers that executives want to see. Until now, marketers have been scrambling to convert concepts such as click-throughs, likes and website traffic into measurable dollar signs.

You’re not alone in your confusion, and help has finally arrived. Sean Jackson, CFO of Copyblogger Media, has a message for you: there is no ROI in social media marketing, so stop trying to measure it.

Sounds crazy, right? But Jackson has a valid point. By definition, ROI measures the financial return on an investment – something you purchase that holds its cash value for an extended period of time and that you can potentially sell at a later date. Property is a good example of an investment. When you talk about an investment, you discuss its ongoing value.

In contrast, marketing – whether print, digital or social – is an expense that loses all of its cash value the second you pay for it. You can’t sell your marketing activities to another buyer and make money from the transaction. When you talk about an expense, you discuss its cost.

Despite not holding value over time, marketing is an essential cost of doing business, just like an office lease or a contract with an Internet Service Provider. The financial benefit of your marketing expenses can be measured by calculating the profit margin:

Profit margin = [(Revenue – Expense) / Revenue] x 100%

The most profitable marketing campaigns yield the largest amount of revenue for the least amount of expense.

Many executives don’t see the value in marketing, and therefore, don’t consider it to be an absolute necessity. This is why they lump it in with optional investments like upgraded machinery and ask you for an ROI calculation. Your job as a marketer is to educate your executive team and help them understand that, just like the electric bill, marketing is an expense they must incur in order to continue functioning. The question on their lips shouldn’t be “Should we spend money on marketing?” It should be “What specific kinds of marketing should we spend our money on?”

Once you’ve successfully helped your audience see the value of marketing, they may still want you to compare more specific outcomes based on your organization’s internal objectives. Some of the outcomes you can measure include the following:

  • Number of referrals in a given period
  • Number of customer service contacts in a given period
  • Length of sales cycle
  • Number of sales transactions in a given period
  • Dollar value per sales transaction
  • Total sales dollars in a given period
  • Quantity of customer insights in a given period
  • Quality of customer insights
  • Brand awareness (via followers, fans, likes, comments, mentions, etc. or via surveys)

The key to illustrating the value of social media marketing is to show that it yields better outcomes compared to direct mail campaigns and the like. In other words, you need to show that social media marketing is more profitable and more efficient than traditional marketing. If you can successfully demonstrate that, your executive team will have a very difficult time saying no to social media.

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