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How to Measure the ROI of Your Social Media Marketing Campaign

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Social media campaigns can be tricky. It’s necessary these days to have some kind of social media presence—even if it’s just to help your customers find information on you. But if you’re going to invest in a bona fide social media marketing strategy, you need to do it right. Otherwise, you’re liable to lose more money than you generate from renewed interest in your brand.

Fortunately, there’s a metric that you can use to determine whether your social media efforts are worthwhile: ROI, or return on investment. If your ROI is negative, it means you’re spending more money than you’re making, but if your ROI is positive, the reverse is true. Therefore, ROI should be your top priority in a social media marketing campaign.

Note that this formula applies only to traffic organically generated from a social media campaign—if you use social advertising, you’ll need to address that separately.

Step One: Calculate Your Total Costs

articleimage1346  step one

The first step is one of the most complicated, since you’ll be dealing with multiple variables and subjective figures. Start with the easy costs: the ones you can quickly and effectively measure. For example, do you use any social media tools to help you schedule posts or analyze traffic? If so, total their monthly costs. Do you use the help of any employees or freelancers to boost your campaigns? If so, estimate how much you spend on them every month and add those costs to the total.

Finally, estimate how much time you spend planning and executing your social media strategies across all platforms. Take this number of hours (monthly) and multiply it by your hourly rate. Add this to the total. You should get a figure that represents the average amount of money your company spends every month to uphold your social media marketing campaign.

Step Two: Measure Your Total Traffic Generated

articleimage1346 step two

This step is easy as long as you have Google Analytics installed on your site. Log into Analytics and head to the Acquisition section, where you’ll see a breakdown of all the traffic that’s come to your site over the past month. Take this total number and set it to the side. Then, you can ignore everything except Social traffic—take the total number of social visits your site has earned, and set this off to the side. Again, make sure you’re finding this from a monthly perspective.

As a side note, you can do some more exploring in this section to learn which platforms generate the most traffic, and which segments of that traffic tend to stick around longest. You can also see what links generate the most traffic.

Step Three: Measure Your Conversion Rate and Conversion Value

articleimage1346 step three

Next, you’ll want to find and measure your conversion rate side-wide. You might be able to do this on the backend of your site, depending on what kind of system you use. If not, you’ll have to set up a Goal in Google Analytics and start tracking one month’s worth of conversions. Eventually, you should come up with an “average” number of conversions your site generates over the course of a month.

Now, you’ll need to estimate the value of a given conversion. For e-commerce sites, this is pretty simple—all you need to do is calculate the revenue generated by one sale. For B2B companies, it’s a little trickier. You’ll have to calculate the likelihood that a conversion turns into a real customer, and then estimate the lifetime revenue a new customer would generate. Still, you should eventually come up with a “conversion value” that you can use in step five.

Step Four: Estimate Your Total Social Conversions

articleimage1346 step four

Now, we’ll start putting the pieces together. Figure out how many “social” conversions your campaign has generated by dividing your Social traffic by your Total traffic (both found in step two). You should get a percentage that represents how many total visitors on your site came from a social source. Then, multiply this number by your total number of monthly conversions.

As an example, if you had 500 visitors, 250 social visitors, and 10 conversions, you would divide 250 by 500 to get 50 percent, and then multiply 50 percent by 10 conversions to get 5 conversions.

Step Five: Calculate Your ROI

Now, you have the total number of monthly conversions your social media campaign generates. Multiply this times the value of the average conversion and you’ll have the total amount of monthly revenue your social campaign generates. Compare this to your social cost figure (found in step one). If your cost figure is higher, you have a negative ROI, which means you’re losing money. If your cost figure is lower, you have a positive ROI, which means your campaign is profitable. Do bear in mind that most social campaigns start out with a negative ROI, as it takes time to gain momentum and efficiency.

Hopefully, this measure of ROI can help you determine whether your social media campaign is successful. However, there are a few flaws with this approach. First, it only incorporates the total amount of traffic you generate with your social platforms, but that isn’t the only benefit social platforms can have. For example, your Facebook page might increase your brand’s reputation with a handful of followers who never visit your site, but do tell their friends about your business. Similarly, you might find yourself underestimating the number of hours you spend on your campaign, since you’ll be working on it here and there rather than in one lump session.

Still, this is one of the most accurate readings you can get for your social campaign. Use this metric to improve your campaign further and figure out whether it’s truly a boon for your business.

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Kathrina Tiangco

Kathrina is AudienceBloom's project manager. She works closely with our writers, editors, and publishers to make sure client work is completed on time.

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