How do you know if your social media efforts are worthwhile? Or if you’re maximizing your potential with your current social media strategy? Simple: By calculating your social media return on investment (ROI).
ROI lets you know if your social media strategies add value to your business. It also helps you justify your ad spend and overall marketing budget to your executives.
However, calculating social media ROI can prove challenging, especially if you don’t know which inputs and variables to consider.
In this post, we explore everything there is to know about calculating social media ROI, from the factors to consider beforehand to the tools that can streamline the calculation process.
Understanding social media ROI: The basics
Social media ROI measures the value social media campaigns bring to your business versus your total investment. You calculate this value using the formula:
(return – investment made) / investment made X 100
Your return could be anything from leads generated and increased social media engagement to conversions and increased reach—it depends on your social media goals. For instance, if your main goal is lead generation, your return could be the value of leads generated.
Your investment is any cost incurred when developing and executing your social media strategy. This includes ad spend, influencer pay, employee salaries, and subscription costs for social media management tools.
You’re making money from your marketing campaign if you get a positive value (anything more than zero) from your ROI calculations. You’re losing money if you get a negative value, and it may be time to rethink your current marketing strategies.
Social media ROI is vital for optimizing marketing strategies because you know which methods are worth investing in based on their returns. It also shows the value of ad spend for your business and can help explain your marketing budget. With marketing budgets being the first to take hits during budget cuts, you need all the tools you can find to justify yours.
Why you should measure social media ROI
It’s not a trick question. For your business to succeed, you must use tactics you know work.
Many brands use social media simply because everyone else does. They invest time and energy in posting content that just sits there. Or maybe those posts drive serious traffic and lead to sales, but marketers either don’t know the connection or can’t prove it.
Tracking social ROI will help you decide whether to:
- Step up your investment and dedicate more resources.
- Scale back your social effort.
- Diversify your approach to find new channels that might work.
- Continue with your current strategy.
The point is that you shouldn’t use social media marketing “just because.” If you’re investing money in social media, you need to know if it’s worth it.
Factors to consider before getting started
ROI calculation varies from business to business since each has unique goals and budgets. But, there are common factors that most companies and marketers should consider. These include:
Define your goals and benchmarks
What do you want to achieve with social media? There are so many marketing opportunities on these platforms that it can be tempting to try everything. But to begin, it’s best to clearly define your most important objectives. What will you judge your performance (and your team’s) on?
Your goals might be to:
- Increase your follower count.
- Increase brand exposure.
- Send traffic to your website.
- Generate marketing leads.
- Sell your product.
Ideally, your campaign objectives should align with broader business goals. For example, increasing your follower count could be a suitable objective if you want to expand your reach and social media presence.
After determining your objectives, try to make these more specific. How much site traffic would you like to gain? And by when? Give yourself a target and a timeframe, then commit to assessing your social media performance when the time comes.
Think about the target audience
The last thing any marketer wants is to invest in messaging, content, and social media channels with no hope of a positive ROI. To prevent this, take time to research your audience. What are their interests and behaviors? Where do they spend most of their time? What pain points would they want your brand to solve? Only by answering these questions can you create the perfect content marketing strategy.
To understand your audience, do demographic research and collect customer feedback through surveys or questionnaires. Alternatively, you can use social media analytics from your chosen platforms for insights.
Look at your available resources
Your available resources can determine the direction of your social media campaigns. Assess everything from your team’s skills to your marketing budget and tools to determine the scope of your campaign, your choice of social media platforms, and your marketing strategy.
Capitalize on all available resources. If you have a significant marketing budget, you could incorporate paid social media ads instead of relying solely on organic social marketing. Similarly, if you have a skilled videographer on your team, you could incorporate video content into your campaign—which modern consumers favor over still graphics.
Also, invest your resources wisely. To maximize your ROI, focus on the right tools for scheduling, posting, monitoring, and analyzing social media activity. Assess your needs to determine the best options for your campaign.
Essential social media metrics to track
You can only know if your social media marketing campaign is on the right track if you monitor key performance indicators (KPIs). Consider your business goals when choosing which metrics to track to visualize your progress. Common social media KPIs include:
- Reach: This metric shows how many people see your content. It may be suitable if you want to increase brand awareness.
- Conversion rate: This records the percentage of your audience that completes a desired action. Depending on a business’s goals, this could mean anything from people converting non-followers to followers, to filling out a lead generation form, to making a purchase, or anything in between.
- Engagement rate: This metric measures the average number of interactions your content receives. If you want to boost interactions, this is the metric to track.
- Share of voice: You want to know whether people talk about you as much as your competitors. This metric shows you how strong your brand is within the market and whether you’re moving in the right direction.
- Website traffic: If you want to drive traffic with social media, you need to know whether or not you’re succeeding. Track all clicks to your website to see what portion comes from each social network.
Monitoring relevant social media KPIs paints a full picture of your efforts and helps you further hone and optimize your strategies.
How to calculate social media ROI
There are two key variables to consider when calculating social media ROI: investment cost and return. Here’s a deeper look at how to calculate them.
Cost analysis
A cost analysis shows how much you spend on social media marketing, facilitating ROI calculation and guiding future budgeting efforts. Keep track of every cost incurred in your marketing campaign to get an accurate picture of your spending. Common costs include:
- Influencer pay
- Ad campaigns
- Content creation costs, such as the costs of video production and editing
- Management time
- Third-party resource subscription costs, like the cost of social media management tools
If you decide to work with social media experts, consider their charges during cost analysis as well. Account for every dollar you spend on creating and executing social media activities.
Revenue attribution
Revenue attribution helps you assess the ROI of each social media strategy independently, allowing you to make well-informed marketing decisions. You should focus on strategies that maximize your ROI and drop those that don’t add value to your social media marketing efforts.
If you intend to execute multiple strategies simultaneously—like marketing yourself on TikTok, Instagram, and Facebook—you can add UTM (Urchin Tracking Module) parameters to your links to see how much traffic each social media platform brings. You can also provide unique promo codes for each platform to see the number of conversions each one drives.
You can also use these attribution methods when working with multiple influencers, trying out different pieces of content, or varying messaging to see what maximizes your revenue.
Lifetime value integration
It’s worth noting that your social media revenue isn’t confined to what you earn now. Your campaign could result in long-term client purchases, making it critical to calculate the lifetime value of customers acquired through social media.
You’ll need to determine the average purchase value of customers acquired through your marketing efforts, their purchase frequency, customer value (average purchase value multiplied by purchase frequency), and lifespan. Then, to get the lifetime value, you simply multiply customer value by the average customer lifespan. The higher the lifetime value, the higher your social media marketing ROI.
The best tools to use when measuring social media ROI
There are numerous tools to help you measure marketing ROI, eliminating the need for manual metric tracking and calculations. Here are some top choices to consider:
Social media platform analytics
Major social media platforms have built-in analytics tools, like Facebook Insights, X (Twitter) Analytics, and Instagram Insights, which help you measure your ROI. These tools typically track engagement metrics like likes, shares, comments, and view counts, providing insights into how specific posts or campaigns perform. Regularly assess this data to identify the content and messaging that resonates with your target audience.
Google Analytics
Google Analytics is the industry standard for tracking website traffic. Virtually every company uses it in some capacity.
If you’ve set clear goals (as discussed earlier), GA becomes very useful. It lets you create specific conversion points on your site (a user signed up for your newsletter, requested a demo, or made a purchase, as examples) and then track those by source. So you’ll know whether more conversions come from social media, search engines, or other sources.
GA can also provide a picture of the traffic coming from your social media marketing campaigns. It can be valuable if increasing website traffic is one of your goals.
Beyond that, it also provides insights into user behavior once they reach your site. Which pages do they visit? How long do they stay on your website? How many conversion events result from the page visits? These are all questions GA can answer if you regularly assess your reports.
The only downside to GA is that it can be complicated to work with. Fortunately, there are endless walk-throughs to assist you. If you need help with Google Analytics, just Google it! You can also save time by using Google Analytics with Bitly.
CRM software
When integrated with social media platforms, customer relationship management (CRM) software can provide a comprehensive view of customer engagement.
By feeding your performance on various platforms directly into your CRM system, you can track how social media interactions translate into customer relationships and sales, facilitating better ROI measurement and decision-making.
Key features to look for in CRM software you intend to use for social media campaigns include:
- Integration capabilities
- Lead tracking
- Reporting
- Customer segmentation
- Sales funnel analytics
Bitly
A simple way to measure social media ROI is to zero in on individual campaigns. Rather than trying to monitor its day-to-day value, see how social media helps you boost your latest product or promotion.
If you can show that social media brought in 30% of the signups for your latest giveaway, you’ll clearly understand its value. Bitly can help you do just this with our URL shortener.
When you use Bitly links in your social media posts, you get access to the platform’s comprehensive tracking capabilities. These capabilities allow you to monitor click-through rates, geographic data, and referral sources for each link.
Bitly Analytics data can help gauge the effectiveness of different strategies and highlight the content that drives traffic and engagement, allowing you to make well-informed adjustments to your campaigns.
One key benefit of using Bitly is that you get all your data in real time, so you can make quick adjustments to improve your ROI.
Get more out of your social media marketing with Bitly
Continually measure your ROI to determine whether your social media budget is going to the right place. If not, adjust your resource allocations as needed—focus on strategies that align with your business goals and bring positive ROI for social media success.
Bitly can help you maximize your social media efforts by providing link-shortening and tracking capabilities. With Bitly URL shortening and tracking, you can seamlessly add links to social media posts and receive precise real-time data on click-through rates, referral sources, and campaign effectiveness, facilitating fast marketing adjustments to boost your ROI.
Sign up for Bitly today for reliable performance data to help you calculate your social media marketing ROI and make better future marketing decisions!
