In addition to being inexpensive, social media is a fantastic tool for connecting with new clients and creating a brand community. Not surprisingly, marketers now prefer to use it.
However, calculating the return on investment from your social media marketing is difficult. While 46% of marketers believe their company primarily uses social media as a marketing resource, just 15% of marketers really use social data to analyze social media ROI.

In this article, we’re going to provide you with some pointers on how to determine the actual worth of social media, handle the findings, and increase the return on investment from social media.

As you probably know, ROI stands for “return on investment.” So, social media ROI is the return on investment from social media marketing activities.
If you’re using paid social ads, and running social media campaigns, it’s relatively simple to measure the ROI. Take your profit (money earned from social media marketing efforts) and divide it by the investment (total cost of those efforts):

Profit / investment x 100 = social media ROI %

However, the equation becomes complicated when dealing with investments that are not directly linked to money.

Measuring the non-financial benefits of social networking is challenging. Suppose you shared an amazing infographic on call center training and it received a lot of likes. It might be challenging to demonstrate that this degree of interaction produces “soft” leads that eventually become customers, even when you know that this is the case.
Measuring shares and comments may seem imprecise in comparison to exact measurements of your e-commerce conversion rate or hard metrics like clicks on the call to action button on your website. Additionally, because they are unfamiliar with the language, CEOs may be difficult to persuade of the benefits of social media.

The trick is to demonstrate the overall value that social media brings to the business. For example, you could measure an increase in followers or the number of positive mentions. You could also show the value of social listening through the intel you gathered and passed on to the product development team.
This formula starts with all the social media actions that create value and divides this measurement by your investments (people hours, ad budget, etc.). Here is how to calculate social media roi.

Value / investment x 100 = social media ROI %

What is a Good ROI for Social Media?

There’s a perception that social media doesn’t have an especially high ROI—but that’s probably because not enough marketers actually measure it in order to find out! Like we said already, it’s not an easy thing to quantify or to prove. But there is so much potential for high ROI in social media—not least because of the sheer number of people who use it every day. Of course, some social platforms are more successful than others.

According to a 2021 report, more than 40% of marketers said that Facebook was the most effective channel for their businesses in terms of ROI. Again, this is probably due to the amount of users (there were 2.8 billion active users every month in 2021. It’s easy to segment your audience and target specific demographics, and Facebook’s algorithms can really help you out.

Instagram didn’t rank quite as highly in that study, perhaps because its metrics are even more nebulous than FB’s—but despite vague social media metrics, around 30% of respondents said the platform gave them their highest ROI.

Whichever platform(s) you use, the relatively low cost of social media marketing means that it should be easier to see a return on your investment. You can advertise for free in most cases, and even if you choose to run paid social media campaigns, it’s still far cheaper than something like a billboard or a TV ad.

Here’s the thing: there’s no universal number for a “good” or “bad” ROI in the context of social media. Life might be a heck of a lot easier if there were! Sorry, marketers—it’s up to you to do the research and decide for yourselves what sort of figure is acceptable for your business.
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This will vary based on your specific costs and margins, and the goals your business wants to achieve. For the marketing industry in general, 500% (also expressed as 5:1) is considered to be a good ROI. In this scenario, you’d gain $5 for every dollar you spend on a particular campaign. But this is a rule of thumb that applies to all forms of marketing, not just social media.
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Basically, as long as your ROI is above zero, your investments are making money. However, you don’t want to be at that end of the scale. A 2:1 ratio would be better, but it still may not be profitable depending on the other costs involved in your business. If you think your social media ROI is not where it should be (or where you want it to be), this may not be the fault of social media. It may be because your strategy needs tweaking.

How to Measure Social Media ROI

Define objectives and set goals

Your definition of “value” will depend on your business objectives, which might include boosting brand awareness and customer satisfaction. Start by defining what value means to your business, and create a set of clear objectives.
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While objectives define where you want to go, goals show how and when you’ll get there. Set a number and a deadline—instead of just aiming to boost referral traffic to your social platforms, say that you want to improve it by 20% in six months.
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It’s helpful to use the S.M.A.R.T. framework, in which each goal must be Specific, Measurable, Attainable, Relevant, and Time-bound. You should also measure past social media performance to establish benchmarks and be clear about how much value each goal will bring.

Track the right metrics

It’s important to choose metrics that align with your objectives and help you make informed business decisions. You also need to check that you have the capability to measure these social media metrics effectively, or you risk getting false results.

Read Also: What Should ROI be on Advertising?
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Things like comments, likes, and shares are sometimes called “vanity metrics,” but that doesn’t mean they’re not valuable. It’s fine to measure these as long as they align with your objectives. You can use them to evaluate the general success of your social media presence, see how you compare to competitors, and which content engages users.
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More tangible metrics to measure include site traffic, leads generated, sign-ups, and conversions. Don’t forget to analyze each of your platforms, ad formats, and ad placements separately to find out which generates the most revenue.
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Whichever metrics you’re using, check them regularly, and measure ROI over a specific period based on your sales cycle. If the sales cycle is four months, there’s no point looking at the results after a couple of weeks.

Calculate your investment

The next step is to work out the cost of your investment in social media marketing and factor it into the calculation. Choose a specific social media campaign or timeframe to measure, so you have something to compare it to.
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First, look at the monetary costs—how much are you spending on paid versions of social media management tools, paid social ads, and agencies or consultant fees? How much did you pay your writers, editors, and content managers to produce the material you shared?
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Harder to quantify is the time spent by your social media team on a certain campaign, but you can add this up and put a figure on it. Think about meetings, posting and promoting content, running ads, and undergoing training.

Create and share a report

The best way to collate and present your findings is to create a report. If you use a template (you can find these online or in some analytics software packages), you won’t have to build new reports for every campaign.
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Make sure the report is easy to understand, even for those in your business who are not familiar with social media. Use the data to show how you’re meeting business objectives, and include insights to highlight the value of non-monetary aspects.
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Point out which tactics were effective and which were not—what lessons have been learned and how will you use them to maximize value and revenue in the future? 

How to Improve Your Social Media ROI

If the analysis shows a need for improvement, one way to boost ROI is to optimize your social media output.

Experiment

More than 40% of marketers named Facebook as the most effective channel, but you should use the full range of social platforms to determine which works best. It’s also helpful to use A/B testing, where you split your audience in half to see which version of an ad or post generates more interest.
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For example, on your website is a guest blog called “contact center vs call center,” and you want to direct your social media users there. You could experiment by posting the link in different types of posts and seeing which get the most click-throughs.

Analyze

It’s important to be driven by the data. You might perceive that certain posts get lots of likes or shares, but you have to crunch the numbers to make sure you’re right and find out why. Then you can use the figures to inform what kind of content you publish.
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Customer analysis is also important. Find out who is scrolling through your social media and when, and you can tailor your content to them. It pays to be aware of the competition, too.

Adapt

Social media moves fast, so you’ll need some flexibility in your strategy to keep up with the changes. Look out for new platforms and technology, emerging trends, and changes to algorithms—as well as customer preferences and behaviors.

Using a social platform is the norm for most businesses these days, but it’s not enough just to maintain a presence—you have to make sure that you provide regular content that engages your audience and raises awareness of your brand.
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There are lots of tips you can use to enhance your social media output. Encourage users (and employees) to share your posts, and interact through competitions, feedback, and user-generated content. You could also branch into affiliate marketing and partner with social media influencers.
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If you find that certain content performs well, there’s nothing to stop you from repurposing or re-using it across channels. Turn a long-form blog into a listicle or a how-to post, or add a video. Almost 69% of marketers say video ads outperform image and plain text ads on Facebook.
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Then there’s social media commerce, which is when users can purchase from you without leaving the platform. This will help you prove ROI as you’ll have quantifiable numbers, such as the number of people who saw the post or ad and clicked to buy the product.
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Whatever you do, make sure it’s optimized for mobile—that’s where most people browse social media. Remember that social media is a fast-paced world, so if someone engages with you through a comment or a question, it’s crucial to respond as fast as possible (39% of social media users expect a response within the hour!).

Which Advertising Media is Most Effective?

The most successful type of advertising is thought to be word-of-mouth marketing. Your best marketing materials are contented customers.

At little or no cost to the company, word-of-mouth advertising spreads product information to a large number of other prospective customers (and may even involve promotional trial demonstrations and free tastings). Your company should develop an advertising strategy that encourages word-of-mouth promotion whenever at all feasible.

Here are some guidelines for creating memorable advertising that really sells:

• Make sure your ads are “on strategy” with your business positioning. A good positioning strategy ensures the identification of the correct target audience for your advertising, along with a listing of meaningful features and benefits. It can provide reasons why the product is superior and unique, along with an advertising “personality”.
• Go to where your customers are. Research the best advertising platforms to reach your target customer. For example, if your consumers are younger then mobile advertising platforms might be a good fit. Whichever platform you choose – especially traditional ones like print, broadcast, and radio – request a media kit. This will include information about the outlet’s audience demographics.
• Communicate a simple, single message. People have trouble remembering someone’s name, let alone a complicated ad message. Use the “KISS” principle for ad messages: “Keep It Simple, Stupid”. For online and print ads, the simpler the headline, the better. And every other ad element should support the headline message, whether that message is “price”, “selection”, “quality”, or any other single-minded concept.
• Stick with a likable style. Ads have personality and style. Find a likable style and personality and stay with it for at least a year or more. Changing ad styles and personality too often will confuse potential buyers. It also fights against memorability.
• Be credible. If you say your quality or value is the “best” and it is clearly not, advertising will speed your demise, not increase your business. Identifying and roasting the competition should also be avoided. It is potentially confusing and distracting and may backfire on you by making buyers more loyal to competitive products, not less.
• Ask for the sale. Invite buyers to come to your store, visit you online, send for more information, or call for information and orders in the ad. Provide easily visible information in the ad for potential customers to buy including website URL, location, telephone number, store hours, charge cards accepted, etc.
• Make sure the ad is competitive. Do your homework. Examine competitive ads where you are planning to advertise. Try to make your ad stand out from competitive ads. You can use personal judgment, ad test exposures to a small group of target buyers (i.e., qualitative research), or more expensive, sophisticated quantitative test methods. Compare ads for uniqueness, memorability, credibility, and incentive to purchase.
• Make sure the ad looks professional. If you have the time and talent, stock images, templates, and image editing apps and software can help you create professional-looking ads and posts. Consider obtaining writing, artistic, and graphics help from local agencies or art studios that have experienced professionals on staff with advanced graphics and video capabilities in-house. They may save you time and money in the long run, with better results. You can leverage design tools such as Canva or Adobe Express to create different types of marketing collateral, though you may want to employ a professional for large campaigns. Other electronic ads (e.g., TV, podcast, radio) and outdoor ads are usually best left to professionals to write, produce, and buy for a fee or percentage of media dollars spent (i.e., generally 15 percent of gross media spending).
• Be truthful. Whatever advertising medium you select, make sure your message is ethical and truthful. There are stringent laws regarding deceptive practices and false advertising.

Bottom line

The use of social media marketing by companies of all kinds is crucial. This blog post’s data show the efficacy and possible return on investment (ROI) of social media initiatives, from higher conversion rates to more website visitors.

Businesses ought to think about devoting more funds to their social media campaigns because these initiatives have been shown to improve search engine rankings and online visibility in general. By implementing appropriate metrics, marketers may assess the effectiveness of their endeavors and guarantee that they are obtaining the highest possible return on investment from their social media endeavors.