How to Calculate Social Media ROI

social media ROI

A good number of businesses have been resistant to using social media with consistency, and it typically comes down to a question of if social media is worth it and how to actually calculate social media ROI. 

Obviously, you don’t want to spend your company’s time and advertising dollars on a method that simply doesn’t yield any results. But many businesses are missing out on the opportunity to build brand recognition, drive sales, and increase customer loyalty by ignoring the power of social media.

Calculating your social media ROI allows you to prove your social media strategy’s effectiveness, and gives you the opportunity to adjust your strategy as needed to fit your company’s goals. 

There are five basic steps to calculating social media ROI:

Step 1: Select Social Media Goals

Every company’s goals are going to be different. Some are looking to generate new leads, others want a certain numbers of customers, and still others are more interested in engagement or clicks. 

While all of these are great goals, you want to select the most important ones for your company, and then set some realistic, but specific, numbers to measure your social efforts. This allows you to build your strategy around your desired goals, and to dedicate your resources towards reaching these goals in the best possible manner. 

Step 2: Track Social Media Goals

Depending on your goals, you may need to use a specific tool to track your metrics. If your goals are related to website actions (traffic, downloads, etc.) you will want to utilize Google Analytics. For social media interactions you can track those goals through the social media management tool of your choice. 

Whatever tools you decide to use, they need to provide the right data to allow you to track goals over set periods of time. 

Step 3: Calculate Social Media Return

Assign a monetary value to the goals that you are tracking. You can do this however makes the most sense for your company. Perhaps you are looking at the lifetime value of a customer, or maybe you want to track how much you would have paid through PPC ads for the same social media actions. 

This may take some experimentation and data digging to really find the social media return that makes the most sense for your business. 

Once you’ve determined your social media return, it is time to move on to the next step. 

Step 4: Determine Social Media Expenses

 Your overall social media expenses will be different for each company. Consider the cost of things like:

  • Social media management tools.
  • Hourly rate and time investment of employees / vendor handling social media.

Understanding how much money and time is actually going into your social media channels will allow you to add up an overall expense rate for social media. Typically, the greatest expenses will be the actual hours spent posting and interacting on social media. Unless, of course, your company chooses to use social media advertising. 

Step 5: Calculate Social Media ROI

 ROI = (return – investment) / investment

Plug in the values you determined above into the equation to find your overall ROI. Lets say that you figure out your return is $50 and your overall investment is $25 (just for the sake of small, easy numbers). 

The equation would look like this: (50-25) / 25 = 100%. Your ROI for social media is 100%.

The most difficult part of calculating your social media ROI is coming up with the return amount. Once you determine how much each social media goal is worth to your company, it becomes a lot easier to calculate and prove your ROI. 

And if you find yourself in the negative, it may be time to carefully consider what your social media strategy looks like. Are you targeting the right channels for the customers you actually want? Are you interacting with your social media followers in a way that will help you achieve your goals? Calculating your ROI will help you see where you might be missing opportunities, or where you are simply wasting your time and effort.