# How to Measure Social Media ROI

In Digital Marketing by Kaomi Team

How long is a piece of string?

This slightly frustrating answer to unanswerable questions is often used when people talk about measuring social media ROI. You’ll be happy to know that that social media ROI doesn’t have to remain a mystery.

Yes, there will certainly be an element of subjectivity and a little educated speculation. We all agree though, that some degree of measurement – even if it’s not 100% accurate all the time – is better than floundering around in the dark.

This poses more than a few questions, and we’re going to do our best to answer these for you in this article.

## What is Social Media ROI?

Return on investment (ROI) can be applied to any business spend. It equates to the amount of money in Rands and Cents that you get back from an investment. Financial investments are easy to track: you invest R500 and after six months you get out R1000, which means that your ROI is 100% Conversely, a return of R520 is a 4% ROI.

However, it’s never as simple as just a Rand amount when it comes to digital media spending.

Social media costs need to include strategy development, the time allocation of your graphic designer, content writer, social media manager, and of course, any money that you allot to boosting posts or for ads. If you’re running your own social platforms then this simplifies matters a little, but remember, your time is money so needs to be factored in.

## How to Measure Social Media ROI

In the simplest terms, the calculation to measure ROI is as follows:

ROI = (Return – investment) ÷ investment amount x 100

In real figures let’s assume that you’ve determined your investment value to be R2000 in total, and you’ve calculated your return to be R3500.

ROI = (R3500 – R2000) ÷ R2000 x 100

R1500 ÷ R2000 = 0.75 x 100 = 75%

### Calculating Social Media Actions

This makes sense, right up until you try to calculate your return. The reason this is so tricky is that there’s no right way to measure it as each business will have different goals. It’s easy to track a return when you’re operating an e-commerce site and you can clearly see the link between ad clicks and purchases. But this isn’t always the case.

Calculating your return requires a little more research and feedback from various members of your team. Essentially you need to determine what matters to your business; what actions do you want to see that will move your customer to where you want them to be. These may not always be purchases but could be a step in the right direction.

Let’s explore that a little further.

#### Choosing a Goal

What actions would you like your customers to take to move them from researching a product to considering your brand’s product, to buying it? These can take many forms from the beginning of their journey and can include:

• New likes or followers
• Saving a product
• Complete a contact form

Factors such as the length of your buying cycle will also impact your chosen goals as you may want to focus on customers who are further down the funnel.

#### Tracking

The importance of setting up accurate and comprehensive tracking of your chosen actions can’t be overstated. Without these metrics, you’re left to guess what is or isn’t working and may miss out on some valuable insights.

Google Analytics is a must, configured to log each significant action that you have identified. The current social channels each offer some great tracking tools, most of which can be integrated into your Analytics account. Separately, you can track actions such as video views, clicks, likes, and mentions – whatever you have chosen as the Things to Watch.

#### Give it a Rand Value

Here is where things tend to get a little murky and is the most subjective part of the process. There is no foolproof way to assign a Rand value to an action, but there are some ways that you can come close.

##### Sale Value

Probably the simplest of all calculations is to determine the value of all sales passing through your site in a month and use this number as your return. An average sale value based on this information could give you a reasonably accurate Rand value.

However, this blanket approach may not factor in PPC ads from Google or other marketing initiatives which could skew the data. If you’re only advertising on social media, then this should be pretty accurate.

##### CLV

Customer lifetime value (CLV) is another way to track actions to assign them a Rand value. This is a long-range view and requires some historical data, but is a fascinating exercise. Here you’ll be exploring:

• The cost per sale
• The estimated lifetime number of sales per customer
• The known cost of acquiring a new customer

There are some online calculators that can help you through the process, so don’t feel like you need to reinvent the wheel.

##### Equivalent PPC Costs

One of the benefits of social media, especially for smaller businesses, is that they can communicate with their target audience without having to outlay a ton of money on ads. For start-ups that are prepared to invest the time, this is an excellent promotional tool.

Therefore, some choose to measure the desired actions by plotting them against what it would have cost them if they had gone the PPC route. If you don’t have historical data, then you can make use of industry benchmarks when starting out, and refine your data sets from there.

For example, if you ascertain that each new Facebook like would have cost you R0.30 then it’s reasonable to extrapolate this to 100 likes being equal to R30.00.

As we’ve noted, organic input into social media channels doesn’t cost you in Rands and cents, but it does cost you time. This, coupled with the cost of any social tools that you make use of, and of course, your actual ad spend, all determine your investment.

What is your hourly rate as a business owner? Let’s assume that it’s R200,00 per hour and that you’ve invested 30 hours in social media for the month. Your software may cost R1500 per month, and let’s assume you’ve spent R2000,00 on ads and boosting posts.

Your monthly costs will look like this:

Labour – R200 x 30 = R6000

Software – R1500

TOTAL – R9500

This is the figure that you will plug into your ROI calculator when you’re determining what’s working. (And what’s just costing you money.)

## Now What?

For those of us who aren’t numbers people, this is a lot of information and a lot of work. If you need to go and lie down, we understand completely.

But the thing is, if you don’t spend the time and effort calculating your social media ROI, you may be throwing time and money away. Social channels are a critical part of digital marketing in today’s world, and they require just as much thought and strategy as any other platform.

Do you need help?

Our team do these calculations every day. We have the data and insights that prove what’s worked in the past and will likely work in the future. We’re also an awesome group of people to do business with. Take a moment to send us your details and we’ll call you back and chat about your social media ROI.

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