Is your marketing on social media ROI positive?
Don’t worry if you aren’t sure, you’re not alone. In fact, 41% of companies have no idea if their social media efforts are paying off. 55% of companies surveyed report that measuring social media ROI is a "high priority" for their institution.
Despite the difficulties in measuring social media ROI, marketing on social media consumed 11.7% of marketing budgets in 2016 and is projected to grow.
Before you jump on this bandwagon, let’s explore a repeatable system for determining your social media ROI.
What is your social media marketing goal?
Hopefully, your social media strategy was designed to impact a clearly defined business objective. It should be the “why” behind your strategy and it is the “what” we will be tracking and measuring to determine your social media ROI.
Of course, your campaign might benefit the brand in several ways, but I recommend starting with or tracking to a singular goal. Trying to influence too many goals will dilute the campaign's impact and make determining social media ROI more complicated. In 2016, we surveyed 200 community banks and credit unions to see what goals they were most interested in achieving via social media.
Many of the above goals, like thought leadership, are "proxy goals" for a business outcome. Establishing thought leadership is valuable because it builds trust and confidence, which translates into sales.
Increasing sales has to be the most common goal of any marketing campaign, and social media is no exception. For the banking industry, a sale would be considered an account opening, submitting a loan application, or even purchasing an add-on product like identity theft protection.
Awareness is another very common social media goal. In a digital sense, we’ll be looking at how many people we’re reached with your content or the volume of page views your campaigns drove.
Brand loyalty equates to happier and more profitable customers, and in the social economy, it drives brand advocacy and word-of-mouth marketing. Metrics like sentiment score, share of voice, volume of testimonials, and brand mentions can inform you on how loyal your customers are.
This could include customer service measurements like ticket resolution times.
If you want your social media campaigns to be seen as a success, align your goal with business objectives. Bring in executives from outside your department to discuss what accomplishments would have a meaningful impact to your institution. Consider asking your CEO or CMO "What is most important to you?"
If you need help establishing your goal, I recommend you check out Bufferapp’s 5 strategies for setting goals.
How do I assign a dollar amount to social media actions?
Identifying your goal should be the easy part. Assigning a value or determining the revenue associated with the goal gets a little trickier. Not only is this a critical step for the social media ROI formula, but it will be useful to know in future goal setting and optimization of strategy.
Depending on your objective, here are some measurement methods:
This method is best for tracking sales goals.
Tracking conversions will require some initial set up of tracking tools. Two that I would recommend are Google Analytics and Google UTM. You'll also want to know the conversion value, or how much a sign up is worth to you. A common number for banks and credit unions here are either the LTV (Life Time Value) or an acceptable CPA (Cost Per Acquisition). The average CPA for banks and credit unions is around $382.00.
Step 1: Set up a goal in Google Analytics. We recommend the "Register Online" objective if you are tracking for account opening.
Step 2: Name the goal something identifiable and select the "Destination" type. This means that the goal will trigger as complete when someone lands on this page. This page should be a "thank you" or "registration complete" page that is only displayed once a consumer has completed the desired action, like signing up for an account.
Tip: Make sure this page is non-indexed. This will ensure that people aren't discovering this page through Google search.
Step 3: Enter the thank you page URL in the "Destination" field and assign a goal value. You'll need to toggle on the "Value" option. This is where you could put the LTV or CPA.
Step 4: Verify the goal to ensure it is working, then hit save.
Step 5: Track which social media channels are resulting in goal completions. To see this report in Google Analytics, go to Conversions -> Goals -> Overview. Then, click on the Source / Medium option.
In the above example, we could say that two of our conversions were from Facebook. If we valued our goal at $400.00, then Facebook was responsible for $800.00 in revenue.
Note: This is a last touch model, meaning that the channel that resulted in the last click before purchase gets credit for the sale, however it is possible that the customer heard a radio ad, then drove past your billboard, and later was on Facebook and clicked your ad. Credit goes to Facebook, but it was a combination of those three marketing efforts that resulted in the sale.
Single Channel Campaigns
It is a lot easier to determine the correlation between marketing and a business result if you limit your marketing of that goal to one channel, or if you include a channel exclusive offer. Setting up a channel exclusive offer will require you to do some technical development, like a custom field for the "bonus code" on your registration page. You can either manually process the bonus distribution or automate it. Remember to track any of this development cost, as you will need it for the final social media ROI calculation.
If you were to run an offer where if a consumer uses the code "Facebook" during sign up, they receive an extra $5 in sign-up bonuses. You hear this tactic frequently used for radio measurement.
At the end of your campaign, you just have to tally the number of sign-ups (if using a single channel) or offer redemptions and multiply that by the LTV or CPA.
Example: I had 20 people sign up using the code "Facebook." I know that my LTV is $400.00.
20 x $400 = $8000.00
Facebook contributed $8000.00 in revenue from this campaign.
Expected Value Calculations
Expected value is a great tool to estimate what an audience is worth. This method is best deployed if you are running multiple campaigns (on multiple channels, or if you have several objectives in one channel).
This calculation requires you know the LTV and conversion rates for each stage of your funnel. Let's assume that I am trying to figure out the value of a Facebook click. I'll need to know what my CTR (click-thru-rate) is from Facebook and what my CTR is for my website. My funnel, complete with those CTRs, would look something like this:
Now, I just work backward from my Goal, multiplying by each CTR as I work backward. My goal value in this example is $400.00.
$400.00 x .02 = $8
Every visitor to my website is worth $8.00 to me (as they have a 2% chance of converting and being worth $400.00). Continuing with this calculation:
$8.00 x .25 = $2.00
Every click I receive on Facebook is worth $2.00. Now I can look in my Facebook insights for the number of clicks I received in a month.
Or look at my Facebook Ad manager to see my click total.
In the shaded row, you can see this campaign resulted in 4,469 link clicks. At a value of $2.00 a click, this campaign drove $8,939 in revenue.
If you found this technique for determining social media value a little confusing, check out this video.
This method is best for estimating brand awareness or loyalty value.
There are two routes you could use in figuring out the equivalent value of a goal. The first, and more accurate route is to look at metrics that are specific to you. For example: If you have run Facebook ads in the past and your average CPM was $11.00, then you will want to use this figure when estimating the value of your organic reach.
Example: This post received 8,253 people organically.
CPM stands for cost-per-mille, and it is the price you pay to reach 1,000 people. If our historic CPM on Facebook is $11.00, then we would need to spend $90.78 to replicate this posts impact. Here is the math breakdown:
8,253 / 1,000 = 8.253 (we divide by 1,000 because that is how many CPMs you'd have to buy)
8.253 * $11 = $90.783
The second option should only be used when you lack business specific historical data: use industry benchmarks. Make sure that you are finding recent data (as costs are constantly changing) and industry-specific data (costs vary greatly across verticals). A good start is this article by WordStream.
We can see in the above graphic, the average CPC (cost-per-click) for the financial industry is $3.77. If you click on the reach of a Facebook post, you get more in-depth information on the post interactions.
We can see this post received 321 link clicks. To replicate this engagement, we would need to spend ($3.77 x 312) $1210.17. We can now estimate the value of this post as $1210.17. If we're calculating the social media ROI for a campaign, we'd we want to do this type of calculation for every post in the campaign.
What are common social media expenses?
Before you can determine your social media ROI, you'll need to sum up all your social media expenses. This should include any expense you incurred to execute the campaign. Here is a list of some common expenses.
If you have full-time employees that are building this campaign, you'll need them to estimate how many hours the dedicated to the crafting, deployment, and management of the campaign. Obviously estimating this number becomes much easier if your employees are hourly or if you contracted outside help or agencies to execute a specific social media campaign.
We have some suggestions for free tools to help you track conversions at the end of this blog, but many social media teams also use management platforms for social listening, posting content, and tracking analytics. These tools are useful all year long, so you should figure out the daily expense of this tool (total cost / 365) and add the appropriate amount to your campaign expenses.
Some of the cost of content creation might have been counted in your staffing costs (for example, an employee wrote a blog post -- this could be calculated as staffing or content creation). Be careful not to double count these costs. If you outsourced content creation to an agency or used any stock photo services for content curation, then assign those expenses to this category.
Tracking ads on most social media platforms is simple. For Facebook, just log into the Ads Manager and run a report on the specific campaign for the duration of the campaign you are trying to determine the social media ROI for.
Bonuses and Incentives
Remember when we discussed measuring social media revenue via channel-specific marketing? In that section, we discussed using referral bonus codes to help determine which channels drove conversions. If you awarded a consumer $5 every time they signed up using the code "Facebook", then you will need to add the total payouts to your campaign expenses. This is true for any bonus or giveaway.
What is the Social Media ROI formula?
The formula for social media ROI is the net income derived from the campaign divided by the total campaign expenses.
Let's take the example we explored in the "equivalent values" section of this blog. We had a Facebook post that generated an equivalent value of $1210.17. This is our revenue.
The expenses of that were:
- Social Media Managers time = $5.80
- Social Media Management License = $3.04
Our total cost to generate that post was $8.84. To see the net value of the post, we have to subtract this expense from the revenue, giving us a net value of $1201.86 for the Facebook post.
Next, we divide that number by our expenses to understand the return rate on or expenses.
$1201.86 / $8.84 = 135.95
To get a percentage, we then need to multiply by 100. (135.95 x 100 = 13595%)
For every $8.84 we spent, we created $1201.86 in estimated value for the company, a 13,595% return on our investment.
What are good social media ROI measurement tools?
Now that you know your goal and how you want to measure it, it’s time to set up the systems to collect the data you’ll need. This short list is by no means conclusive, but they are all free tools that should get you in the ball park.
- Google Analytics
- Google UTM Builder - This is a great tool for building tracking links in a quick and easy way.
- Social Media Pixels - Pixels all you to track website conversions derived from the social network and build custom audiences based on your site traffic for retargeting campaigns.
- Platform Analytics - Most social media platforms have their own analytics platform for tracking organic and paid efforts. Here are links to some of the organic dashboards.
How can I increase my social media ROI?
Think back to the social media ROI calculation. In it, we had revenue and expenses. To get a better social media ROI, you have two major options: increase the revenue or decrease the expenses.
Increasing the revenue can come from improving your conversion rates, meaning that people you reach are more prone to sign up, or by cross-selling to drive up the LTV of each consumer.
The alternate route is to drive down your expenses. This could be accomplished by changing vendors for your social media management, working with a different agency, or refining your social media ads to make them more effective. At Kasasa, we work with institutions to accomplish all of those points and drive up your consumer's LTV.