Social Media Return On Investment

Social media return on investment (ROI) is a measure of the efficiency of a social media marketing campaign. But first, let’s all remind ourselves what ROI actually means.

ROI is mostly used in measuring the financial efficiency of an investment and it is based on the following formula:

ROI = (return – investment) / investment * 100 %

If you increase your return while keeping the investment same, the ROI is increasing. The higher the ROI is the better. ROI formula is an easy way to compare and measure marketing campaigns.

What is social media return and how to quantify it

Social media return on investment is not that easy to measure. The investment made for social media activity is straightforward, but how do you measure the return and attach a dollar value to it?

Social media return

Social media return is the value that you get from your social media campaign, and you can define that value to be what ever you want. If your goal is to drive your sales with your social media campaign, then the social media return is the number of sales that you can attribute to your social media campaign.

Instead of sales, your goal might be to drive consumer insights, or increase brand awareness. In other words, social media return is the value that you derive from social media based on the goals of your campaign.

Quantifying social media return

After defining your social media return, you need to quantify it into dollars. This can be difficult because you need to look at each type of social media return and develop a method for dollar quantification.

Looking strictly at sales the quantification of social media return is much more simple than quantifying consumer insights or brand awareness.

One commonly used technique to quantify consumer insights is to compare the quality and quantity of consumer insights from offline focus groups to consumer insights from your social media campaign.

Calculating social media return

After defining the social media return and quantifying it, you can calculate social media return on investment (ROI):

Social media ROI = (SM return – SM investment) / SM investment * 100 %

ROI is a measurement of efficiency and a powerful tool in your marketing toolbox. After you have calculated the ROI of your social media campaign, you can and you should use the ROI number to compare to other social media campaigns as well as your TV, media, print, radio and other campaigns.