How do you measure return on investment on social media?

Marketers are trying to figure out how to measure return on investment (ROI) from their social media marketing activities. The pressure to measure is on and 2012 will be the year we move away from fans and followers to actual value of our social media efforts.

You can measure ROI of your social media by using the right traditional and digital metrics. Two good tips for beginning to track how you do with social media is staggering your activities and using unique URLs.

1. Stagger your marketing activities will help you find out what’s working and what’s not working for your social media marketing.

A very important metric every business needs to know is the value of their customer. Without lifetime customer value, it will be hard to determine the ROI from social media.

To calculate Lifetime Value of a Customer=(Longevity*Revenue)*Margin

To calculate the value of a visitor:

Now, how this relates to your social media activities?  To calculate the value of your blog, use the value of a visitor that you already calculated and the amount of traffic your blog receives.

This is a fairly easy way to measure the return-on-investment for your social media.

2. Use a unique url to track all of your online activities. An easy and excellent way to see the type of traffic you are getting from each activity. Use unique URL for your blog, Facebook, Twitter, LinkedIn, video, and every digital action you take. This way, you will know very well what is working for you online.

Another way to see what the value of your Facebook page is will be to take an old email marketing approach to it. To calculate the value of your Facebook social media efforts based on your email marketing, you can use Jay Baer’s valuation worksheet below.

In addition to marketing applications from social media, we also have customer service return on investment from social media and sales return on investment from social media.

ROI on customer service. Studies show that by implementing social into your business, you can improve your customer service score, thus generating more word of mouth and referrals. To measure your customer service score you can use Net Promoter Score as a baseline before your social media and then measure it after making your business social.

 ROI on sales. Lowe’s sold $1 mil more in paint by implementing social in their business process and allowing employees to share ideas internally. For a good bog post on how to calculate the ROI for sales, check out this Social Media Examiner’s post.

Below is a good presentation from Social Media Today on return on investment on social media for both B2C and B2B. The screen shots and insights above were extracted from the Social Media Today’s presentation.

What do you think? Do you currently measure return-on-investment from your social media? Do you need to?  Small businesses are in the perfect position to measure the return on investment from social media. If you are currently not measuring your social media, are you planning on doing so soon?

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About Milena Regos

Comments 3

  1. Frederic Gonzalo

      |   reply

    Great post, Milena!

    Calculating social media is without a doubt one of the biggest challenges in marketing today. Articles on the topic get published daily, and there are many varying opinions and schools of thought on this one. At the end of the day, it really boils down to what works for your company, or your industry.

    Here is my take on social media ROI: http://ow.ly/88ipC

    Cheers, and all the best for the Holidays!

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