Published June 30th, 2016 by

The ROI of Social Media

You can never deny the importance of social media when it comes to marketing the product or service you are offering. It is more cost-effective than any other form of marketing, and its reach is much larger. However, having a successful social media marketing campaign does not happen overnight—it is something that happens over time as you build engagement and relationships with your target audience. Because there is a lot of effort, time, and resources involved in promoting a company online, understanding what return you’re getting is critical.

The Importance of Social Media

According to We Are Social, out of the world’s 3.419 billion internet users, 31% are active in social media. Therefore, using social media to promote a product or a service gives you the opportunity to reach a wide audience. Aside from this fact, here are a few more reasons why your business needs to be more visible on social media:

Cultivates trust

People view Facebook, Twitter, and Instagram as social tools instead of marketing devices. There is a humanized element to it where people feel that they are interacting and doing business with other people instead of a faceless brand. As a result, they become less guarded and more receptive to your marketing messages. Social platforms can be a way for your customers to provide honest feedback and for you to create meaningful discussions with them. By doing so, you will earn their trust and loyalty to your brand.

Drives traffic

By sharing compelling content that is relevant and useful to your audience through social media, you can drive your traffic to other destinations such as your website or landing page. As social media is more for relationships than selling, you will want to ensure you are not writing solely promotional posts, but engaging and informative ones. Then as relationships build with customers, businesses see them move down their buying funnels.

Helps SEO

Reviews and check-ins made on your social platform will increase your presence within the search engines. Link sharing from your Facebook page or Twitter account to your website allows Google to recognize that your site is credible, and will, therefore, be placed higher in the SERPs.

Increases sales

By constantly updating your social media accounts and engaging with your followers, you keep your brand fresh and on top of your customers’ minds, increasing the chances of a converted sale. Flash sales and coupon offers can also be announced over social media.


Traditional advertising using mediums such as TV, radio, and print could prove to be costly while advertising through social media can be free.

Why Knowing Your Social Media ROI Matters

You should not rest your laurels once you see likes, retweets, and shares over the content you post online. After all, what good are those if they don’t contribute anything to your business’ bottom line? Measuring your social media marketing’s ROI allows you to know if a social media campaign is effective or not overall.

Once you have determined that something is not working, you can learn from your mistakes and make tweaks in order to not only improve engagement but more importantly, to convert it into actual sales. The end goal is always to turn an online follower into an actual paying customer.

How to determine ROI of social media

At first glance, measuring the ROI on your social media campaign may sound vague and hard to do. How do you know if 100 likes got you that sale? However, there is a way and it is important if you want to put your marketing efforts to good use. Buffer’s Kevan Lee has some suggestions on how you can measure your campaign’s ROI.

The Formula for calculating ROI

The first thing you need to do is determine the formula you are going to use to track your ROI. Here’s one of the simplest and straightforward formulas you can use:

ROI = (return – investment) / investment

Set a goal for a platform

Before you can measure what your ROI is, you need to establish what you want to achieve in your social media campaign. Simply put, this is the action that you want your followers to take. If you want to increase your lead generation, then a completely filled out contact form is your end goal. If you want conversion, then a completed online purchase is your primary goal. If you want to grow your email list, then newsletter signups should be the goal in mind.

Track the goal

Once you have set a goal for the social media platform you have chosen, you can track the number of people who have successfully completed your desired conversion action. If you are just starting out in your social media campaign, the best way to go about this is to use the free version of Google Analytics.

Identify the monetary value of the goal

Here you need to assign a specific dollar amount to every completed customer action that resulted from your social media campaign. This is where it can get a bit tricky. One way to do this is to calculate the lifetime value of your customers. This tells you how much each customer is likely worth. You find this by multiplying your average order value, by the average number of repeat sales you get, by the average length of time you retain a customer.

Say you sell coffee and your average sale is $4, your average customer comes by once per week (52 weeks in a year) and they stay a customer for 2 years. Your lifetime customer value would be $416.

Then, if you have a 3% conversion rate from those who fill out your contact form or email form you can work out the value of each sign up. For example you have 100 sign ups, from which 3 will convert, those 3 conversions will generate $1248 LCV so each sign up is worth $12.48.

Calculate costs or investment

While social media is often cheaper than other forms of marketing, you will still need time and resources to maximize its use to your advantage; hence, the need to measure costs. Add up the total costs incurred during the social media campaign. This may include your hourly rate x the number of hours you have logged in, the salary of a social media manager, and the monthly subscription cost to a social media tool such as Hootsuite or Buffer.

Then run your calculations. Let’s say you got 100 sign ups from your Facebook efforts which brought $1248 dollars of lifetime customer value to your company. Let’s also say you spent 5 hours networking and creating content at a rate of $50 per hour and paid a subscription cost of $300 for your social media tool. You’re ROI would be 1.26%. This shows profitability. If ROI is below 1%, it’s time to go back to the drawing board.

Ways of Tracking ROI

Analytics Tools

There are several tools that can help you track your ROI.

Google Analytics

This is a great tool to start tracking your ROI on social media. You can use this to track your progress when it comes to site visits and signups that were triggered by your social media campaign.


Hootsuite is not just for scheduling social media posts. It has a lot of analytics tools to help you measure your social media ROI. Hootsuite Insights identifies your reach and helps track conversations about your brand while Hootsuite Analytics Reports provides data on your follower growth and URL click-throughs.


Just like Hootsuite, Buffer is not just great at scheduling social media content posts. It has a built-in analytics page that you can view from your Buffer dashboard which tells you how each social media post is performing.

Facebook and Twitter Insight

The two biggest social media platforms have their own analytics tool to help you track your social media campaigns. Aside from giving you basic statistics such as the number of impressions or clicks your post have made, both also provide follower demographics to help you learn more about the people who matter to your business.

Analytic Templates

When making a social media analytics report for your business, you can use analytic templates that make use of data that are in sync with your social media goals. To further illustrate, mentioning the number of followers, likes, or retweets are important in a social media analytics report while including the duration or the length of time a visitor stayed on your website is irrelevant. Using an analytic template will allow you to present specific and relevant social media data in an easy-to-understand manner.

Make Adjustments to Increase Value

The great news is that social media is never static. It is not a one-time event but a constantly evolving process. Once you see something is not working in your campaign based on your ROI, you can go back to the drawing board to analyze and make tweaks on your strategies and make it more effective.

It’s Time to Start Measuring Social Media ROI

Many businesses do not yet realize the importance of tracking their ROI on their social media campaigns. It is not really an abyss where you get lost in a sea of numbers. But with the use of the right social media tracking tools, you will know how your business is faring in these social media sites and just how much value you are bringing to your company. Furthermore, you will be able to increase in areas which are more difficult to measure as a natural consequence; these include branding, visibility, and trust. By tracking progress against set goals, you will be able to optimize your strategies and funnel your efforts in the most profitable direction, resulting in not only knowing your ROI, but improving it.

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Caz Bevan

VP of Product Operations & Marketing at Creatives Scale
Caz is the VP of Product Operations & Marketing at Creatives Scale for freelance marketers and Co-Founder of Anhelaré startup advisory. Caz has extensive experience blending business goals and marketing tactics into comprehensive company strategies. Her creative innovation and expertise has helped shape customer experiences and drive continual engagement for a variety of companies and products including Sony Music Entertainment and SpeedTV. Connect with Caz: @CazBevan | Linkedin

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