Learn Social Media Part 2 – Social Media And ROI

by Square One Web Solutions

Last week we started the Learn Social Media series, listing the 10 most common questions that marketers ask in regards to social media. Today we are tackling question number 1, which is How do I measure the effect of social media marketing on my business? ROI is huge when trying to figure the effectiveness of a new campaign, but how do you measure the ROI of something like social media? And do you have to measure ROI to determine if social media is effective? Let’s take a look below.

Why Companies Are Using Social Media

First, let’s think about why companies are using social media right now. As this is the number one question that marketers have about social media, obviously it is not because they know that it is working. Most businesses seem to be using social media for one of two reasons. Either they know that this is the way that people are communicating today and they want to embrace the new trend, or they know that their competitors are doing it so they figure that they should too. Neither make a compelling argument in a world where the bottom line rules, so how do you justify using social media as a part of your marketing strategy?

Measuring Social Media Effectiveness

One question that has to be asked here is, how do you measure effectiveness? What does it mean to be effective? I would define it as meeting a preset goal. So what should the first step in any social media campaign be? Setting a goal, or coming up with objectives. Think about what you want to accomplish using social media. MDGadvertising has broken it up into 7 possible objectives for social media, and I’ll list them down below.

  • Short-term sales
  • Engage existing customers
  • Brand awareness
  • Increase your searchability
  • Complement promotional campaign
  • Encourage word of mouth
  • Spread news and important information about your business

So, when thinking about measuring the effectiveness of social media, you have to have in mind what you want to accomplish before you start your campaign. When you have this in mind up front, you have something to measure. If you want to engage existing customers, you can set a goal and you can measure whether you have achieved it. If you want to have 50 new fans per week, that is easy to measure.

The Elusive ROI:

I don’t want to shortchange the importance of ROI, because you have to decide if it is worth it to your business to spend the time that it takes to do social media right. So how do you figure ROI? That get’s a little bit more complicated… Radian6 has a pretty helpful infographic that talks about social media and ROI, you can take a look at it below.

learn social media infographic

They have a pretty handy little formula for finding the ROI of social media, but for it to work, you need to be able to put a value on the benefit of what you are getting from your social media. So, let’s go back to the Facebook fans example. If you know what a Facebook fan is worth to your business (it takes some testing, but it is possible to figure out) you can easily plug that into this formula and come up with an accurate ROI for all of your social media efforts. Granted, some objectives are harder to determine a value of, but that is true in other forms of marketing as well. How do you put a price on talking to every customer that comes into your store? Yet that is a strategy that many businesses swear by.

Measuring ROI Conclusion:

What it all comes down to is that you need to have an objective beforehand, try to put a value on the benefit provided by accomplishing that objective, measure the results, plug them into the formula, and you will be able to measure the ROI of any social media campaign.

Leave a Comment

Previous post:

Next post: