What is Social Media ROI?

Social media ROI. Social media analytics. Its a hot topic. Everyone wants to understand what they can and can’t get from their social media efforts.

Let me say that I’m an ROI advocate. I’ve developed a number of proprietary tools which I use to help my clients understand their ROI. Here’s the rub: if you don’t measure the rest of your marketing, how will you measure the return on social media? How will you know its any more or less effective than say, radio advertising? How will you know if you should move some of your radio budget into social media if you can’t compare their efficiencies and effectiveness?

There are 5 steps to social media understanding. Not one of them can be skipped.

1) Identify Goals:

You’ve decided to do social media. Why? Yes, you want to drive revenue, but think beyond next quarter. You’re goals are the dreams that you have for your company. What do you want to be when you grow up?  Do you want to be the #1 provider in your area? Do you want to sell your company in 3 years?  What else?

2) Develop or Utilize KPI’s

KPI’s are the answer. Sometimes you can use existing marketing KPI‘s to measure social media, they’ll change slightly because of what is and isn’t available in other forms of marketing, but at their heart, if you have existing KPI’s, you can probably massage them in to social media KPI’s.

But it isn’t so easy is it? Developing KPI’s means taking a hard look at all marketing efforts and sales over the past. Small business owners in particular don’t always love to analyze information in this way. And yet, they hold social media to a higher standard than they hold any other form of marketing. Blindly doing as they have in the past, small business owners will say “I don’t have money for social media” while spending hundreds or thousands of dollars on marketing avenues that they either can’t or won’t track.

In an effort to better understand what a client sees as success, I’ll often ask “What marketing KPI’s do you currently use?” And more than once, I’ve been met with crossed eyes. In other words the answer is “I don’t know.”  At that point, I usually recommend that we do some homework together to identify some KPI’s. No, I can’t apply one company’s KPI’s to your business. You have different needs.  Yes, that time will require commitment from your staff and you. Yes, you’ll have to dig deep. Yes, I’ll ask about your other marketing spends and sales history. You’ve got to help me, help you. I’m happy to roll up my sleeves and do the dirty work with you, but I can pull KPI’s out of the air and I can’t read your mind and I can’t do it without you. Yes, ROI at its most basic essence is Sales divided by Cost. I do understand that. I also understand that there are numerous elements that go into the COST of a program, including cost savings. I understand that integrated marketing is all about multiple touch points, and I’m an advocate of an integrated program as well, but if you integrate, you should measure your total results in an integrated way. If you want to pull out some key KPI’s for social media exclusively, you can do that, but you’ll want them to be in context with the rest of your marketing KPI’s.

There are literally hundreds of KPI’s that you might measure:

  • number of conversions on website, Facebook or Twitter
  • number of conversions from each media source
  • bounce rate
  • number of impressions
  • average sale
  • increase in number of appointments
  • net promoter score
  • number of positive comments in review sites
  • increase in number of positive comments in review sites

All of these things and more can be measured.

Having a firm grip on KPI’s will lead you to metrics.

4) Identify Metrics: Those metrics will lead you to the path of understanding what’s happening and enable you to make changes. Metrics are meaningless unless you understand how they apply to your KPI’s and thus your business model. What will you actually measure to determine if you are on the right track with your KPI’s? What numbers will you review to determine if your KPI’s are on track.

5) Analyze and Optimize:

Once you have some


But there’s more. Social media DOES have some qualitative benefits that are difficult to put a number on. For example, how do you measure loyalty, advocacy and passion? Those are FEELINGS that you can directly influence through social media that you can’t put a quantitative number on. I mean, that’s the golden goose of marketing right there my friends. Gary Vaynerchuck made major social media news this year when he challenged an audience with the line: “What’s the ROI of your Mother?” His point was that just because you can’t put a number on it, doesn’t mean there isn’t value. He was right. And so are those who advocate for social media measurement. You SHOULD measure, but you should also realize that social media has benefits that you can’t quantify.