Investing time or money into a social media campaign isn't something that any business owner should take lightly. Although it's often heralded as the end-all, be-all of internet interactions in our online world, social media – gasp! – may not be right for every company or every niche. So before committing substantial resources to a new media campaign, it's wise to understand what your expected ROI will be and how you'll measure it.
But first, a little background information… “ROI” stands for return on investment. Typically, ROI is measured as a percentage change, but the basic goal is to show that your investment in a given product or opportunity has a demonstrable, measurable benefit. To understand what this means in the real world, let's look at an example:
Say Gary typically earns $5,000/month from his retail store. One month, he decides to run an advertisement in his local newspaper (using a unique code so that he can track which coupons can be directly tied to this promotion, of course). The coupon costs $200 to run, and he receives $1,000 in new sales as a result.
In this case, Gary has made a 400% return on his investment, which is calculated by subtracting his initial investment from his returns, then dividing by the initial investment. If Gary had only received $100 in new sales, his ROI would have been -50% – meaning that he lost money on the promotion.
Of course, this example is fairly straight forward and doesn't account for indirect variables, like the amount of time it took Gary to create the ad or any extra overhead expenses that resulted from his increased sales. But hopefully, this general example is enough to show the importance of tracking the return on investment that's generated by any major commitment of time or money.
Now, measuring the ROI of social media is a little more complicated, as social media campaigns often deal with intangibles – things like increased brand awareness, viral traffic opportunities and an increase in “followers,” compared with hard dollars or sales. However, the basic principle remains the same – whether you're investing money in working with a social media consultant or committing the time to do it yourself, you need to be sure that you see some sort of return from your campaign.
To help determine the ROI of your current or future planned social media campaigns, consider the following evaluation framework, designed by Katie Paine of the KDPaine &Partners Social Media Research Firm:
- Define the “R” -Define the expected results?
- Define the “I” –What's the investment?
- Understand your audiences and what motivates them
- Define the metrics (what you want to become)
- Determine what you are benchmarking against
- Pick a tool and undertake research
- Analyze results and glean insight, take action, measure again
Before launching any social media campaign, it's important to understand what you want to get out of it from the start. Simply saying, “I want to get more involved in social networking because some blog told me I should be,” isn't going to cut it!
Instead, consider what specific changes you want to occur due to your campaign. Are you hoping to make more sales on your main website? If so, how many sales? Which product lines do you want to grow as a result of new media involvement? Or, are you engaging in social networking to increase brand awareness? If that's the case, how will you track whether you've been successful? Will a larger number of backlinks work, or would you consider a greater number of Twitter mentions a success?
Once have an idea of what you want to get out of a new media campaign, the next step in ensuring you get a good ROI for your involvement is to determine what you're willing to invest in the project. If you're paying a social media consultant to improve your company's online image, the specific amount of your investment is clear. But if you'll be doing the work yourself, you'll need to figure a price to account for time invested, missed opportunities and any other overhead expenses you'll accrue during the project.
Of course, while analyzing these two things, it's important to keep your audience in mind. For example, if your target visitors don't spend time on social networking sites, you likely won't achieve the same results as someone whose audience frequents these sites regularly. It's also important to manage expectations and be realistic at this point. If, as an example, you're selling a high-end or unique product, you're going to need much more than a few Tweets to increase sales.
Based on the answers you've come up with from these first three steps, your next task is to determine exactly what metrics you want to see a change in. Any of the following social media engagement metrics could be considered when planning a new media campaign:
- Overall number of website visitors
- Average time on site
- Website visitor conversions/sales
- Email newsletter signups
- Number of Facebook fans or Twitter followers
- Number of backlinks pointing to your site
But beyond the obvious items listed above, consider some of the following new metrics the Mobile Marketing Association suggests tracking as a result of increased social networking engagement:
“The number of eyeballs, shakes and finger swipes. The number of blogs, articles, tweets and diggs. The number of acquisitions, conversions, calls, responses or purchases. Total basket size, consumer recall, loyalty and recommendations. Check-ins on foursquare and check-outs on Amazon.”
Obviously, the metrics that matter to your business may be different from the data that are important to another company. If you've been active with web analytics and measurement before, you should have a good idea which metrics contribute the most to your website's success. If this is your first exposure to data-driven decision making, you'll likely need to spend some time determining which metrics it makes the most sense for you to track.
The last three steps of Paine's process will be pretty intuitive to anyone who's worked with data analysis before. Understand what your baseline results are (so that you have something to compare the results of your campaign to), implement tests and make use of tools that allow you to track measurable results, and then analyze what you've come up with. Be sure you run a long enough test to ensure that the results you're seeing are valid and not just an anomaly in a too-small sample.
If you don't like the results you're seeing, change course and another approach until you find the right combination of social media engagements to meet your goals. As each industry is different, it may take some time to find the best social networking sites to engage with and the right messages to send to your potential visitors. However, if you're willing to invest the time and money to conduct a good social media campaign, there's a good chance you'll see a solid ROI from your project.