ROI on social media is as important in any other marketing activity. Also, one of the advantages of digital marketing is that everything can be measured; social media is not the exception. The key is to define clear objectives and design an expected customer journey for your audience.

In this article we will discuss how to set up goals and KPI for social media, strategies and tools to measure.

Goals and KPI’s to calculate ROI on Social Media

The first step of the process is setting up your goals. Remember, goals should be SMART (you can view my article on smart goals for more info). I would recommend aligning your goals to elements tied to revenues. Depending on your marketing structure, you could be a lead generator on social media or a sales generator.

Firstly, for lead generation, your goals should be actionable leads, your social media should be designed to drive your audience to submit their contact information so that your sales team can close. Your KPI could be leads generated, downloads to documents, traffic to website, etc.

Secondly, if you are an e-commerce, you should focus on driving either direct sales or sign-ups for loyalty programs or created accounts resulting from traffic from social media.

On the other hand, when it comes to likes, shares, and comments, even when they are good indications, they are not to be taken as priority KPI’s. You can’t live from likes; you live from revenue. These are considered vanity metrics.

How to measure ROI on social media

To begin, you need to understand your investment and your returns. Your investment will include everything from ads, to tools to publish or analytics like Hootsuite, Sprout, or others; investment in design or cost of your marketing agency, among others.

Your returns depend on your business model. For a lead generation, you can estimate the value of each lead using expected value, lifetime value, or average sales times the estimated probability of sales that your historical result has had.

Case example

For instance,  to simplify everything, let’s suppose you work with a social media agency for 1,500 USD a month and invest 500 in ads. Also, if your sales team closes 30% of your leads and your average sale is 10 dollars, and you generate 1,000 leads, your ROI will be:

ROI=(Current value of investment-cost of investment)/cost of investment. In this case [(1000×30%x100)-2000]/2000 = (3,000-2000)/2000 = 50% ROI. In other words, for each dollar invested, you will get 1,50 back. It’s worth mentioning this example does not include the cost of goods sold but should explain the process.

I hope you enjoyed this week’s article. If you like this post, you might want to check out last week’s article, Social Media Ads: Why your business needs them. If you have any questions, please leave a comment on the section below.

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