How To Measure Social Media ROI

March 24, 2015By

Apple Computer TypingMy first job out of college was a manager for a catalog company. Part of my job was working on the circulation for a catalog. I was looking at past performance and figuring out who should get the next catalog and the version of the catalog each person should receive.

It actually wasn’t broken down by individuals, but it was broken down into segments. The measure of success was strictly based on the profitability of each segment. If the segment was profitable, we mailed it. If it wasn’t, we often wouldn’t mail it. If segments were doing well with profit, we would expand into similar segments potentially.

But it was all based on profit. And it wasn’t strictly based on profit. It was based on a lifetime value.

Lifetime Value

The lifetime value concept is one just about every business owner and manager should know and you probably do already.

For the catalog company we had a calculation for figuring out lifetime value. It wasn’t this easy, but basically we looked at how much a customer was likely to spend over a certain timeframe, usually 18 months. We removed the cost to provide the product. That gave us a profit number.

Then we looked for ways to acquire a customer without paying too much for them.

A basic example would be that a customer might spend $200 over two years with two purchases. The cost of to provide the product is $100. That’s $100 profit.

We would be willing to spend maybe $90 to acquire that customer leaving $10 profit.

If you look at only the initial purchase it’s a loss, but when you look at the average lifetime of your customers then you can expand.

Traffic And Conversions

Alright, let’s get back on track here. We’re talking about social media.

I wanted to touch on profit and lifetime value, though, because all marketing is ultimately about profit. If you’re not profitable you’re not in business. The savings eventually runs out and so does any investment you might have received. You need profit. It’s a good thing for you and for your customers.

In my experience, profit comes from getting the right customers to discover your brand and buy your product or service. Pretty straightforward.

But there are two main indicators I find useful in the online world:

  1. Traffic
  2. Conversion Rate

Sources Of Traffic

So I like to look at website traffic as a major indicator of success. But the conversion rate will tell you if it’s the right traffic.

That’s where the source of the traffic comes in. You need the right people and social media can bring in the right people along with organic traffic from search engines, email marketing, direct traffic and a few others.

The big thing with any source of traffic is the content you create. When we’re creating content here we’re discussing things that our potential customers would be interested in reading.

For blogging, we focus on the questions our target customers are asking in relation to the social media industry. We assume that managers, owners and others interesting in social media would also be interested in getting professional social media images.

You know your target customer and your industry. Identify the questions being asked and answer those questions. More general questions can be answered on a blog and on social media. More specific questions can be answered on other pages on your site like the homepage and also in your email marketing efforts.

Here is how to look at it from the social media side of things.

Social Media Content

When you’re creating content on social media whether it’s sharing a blog post, answering a question or sharing a tip, always focus on the questions your target customers are asking in relation to your industry. Over time, this practice attracts the right people to your social accounts and you’ll get better engagement on social media, which leads to traffic and conversion.

Social Media Engagement

Social media engagement can mean anything from followers to re-shares to comments and favorites and all kinds of different things. But some of those things are more valuable than others.

Here is my social media engagement priority list:

  1. Clicks
  2. Followers
  3. Re-Shares
  4. Favorites/Likes/+1s
  5. Views

There are a few others, but those are the important ones.

When you’re looking for indicators on how well you’re doing on social media look start with clicks. You can see on your website analytics the traffic you get from your social channels.

If you use a tool like Buffer, you can track clicks that way too as well as other engagement.

It’s obvious that you can see your followers on all the social channels. Generally you want that number going up especially with the type of people that would be your target customer. If the right people are following you it’s an indicator that you’re sharing the right kind of content.

Re-Shares are also big. When the right people re-share your content you get exposed to their audience. That leads to more clicks and more followers in most cases.

Favorites and likes are good. They kind of show that your stuff is good, but you don’t really get much more than that. And views are obviously important, but you don’t get a good image of how you’re doing. Yeah, 10% of your followers may have viewed your update, but clicks and re-shares are more important.

Looking For The Best Social Media Sites

I have shied away from using Facebook. What I noticed was that for my businesses Facebook didn’t produce the best traffic. I would track traffic from Facebook to my sites and then look at if that traffic was converting into customers. I didn’t get the best conversion so I moved focus to other channels.

Now I focus mostly on Twitter and also on LinkedIn and Google+.

It may be different for your business.

Social Media ROI

So to sum up or TL;DR, I start with profit and work backwards. I look at profit, conversion, traffic and then I see what social media sites are leading to the most engagement and traffic.

You can’t always get the full picture so I’ll ask new clients how they discovered my site. When a new inquiry comes across I’ll check my social sites to see if they follow me on Twitter or I’ll see if we’re connected on LinkedIn. I’ll see if they’re signed up for our email newsletter.

I’m not sure, but it seems like building a strong brand overall can help your organic search rankings. From a big picture look it would make sense that Google would want to show the best brands in a given industry in results so if you have a lot of customers along with a lot of good website content that you’d be seen as a good brand. And you would probably have a good presence on social media.

So social media probably helps out your SEO in a way, but you always want to focus on what your target customer wants. And they want good content. If you create that content on your site and on social media you’ll attract the right audience. It takes time, but you can do it and it’s worth the effort in the long run.

Then to track your effort look at profit, conversion, traffic and engagement. You can see if a particular social site is performing better than another and you can put more effort there and take it away from one that might not be performing well.

And as new sites come along you can experiment and see what the return is.

So while this is not a specific formula for social media ROI I do thinks it’s the right mindset to have when it comes to assessing how well you’re doing on social media.