Written by Binh An Nguyen
We all know about using social media for increased engagement, brand awareness, and customer service. But is it possible to put a dollar amount on the benefits of using social media? Can social ROI actually be calculated?
This is a question that has been hotly debated over the last number of years. While the ROI of some forms of digital marketing – like pay per click or banner ads – are more easily measured, social media tends to be less transactional in nature. What I mean is this: In many cases, it is difficult (if not impossible) to track the relationship between an individual social media effort and a corresponding conversion or sale.
Rethinking the ‘return’ in ROI
For this reason, many businesses are realising they need to rethink how they define the ‘return’ in ROI. While traditionally ‘return’ has stood for sales or conversions, this definition doesn’t take into account the many ‘soft’ returns that may come out of social media.
Some of these returns may be:
As you can see, each of these ‘returns’ is extremely difficult to calculate, particularly if you’re thinking in terms of dollar amounts. In fact, according to Hubspot’s 2013 State of Inbound Marketing Report, 34 percent of businesses cannot or do not calculate overall inbound ROI (which would include social media efforts, as well as other types of inbound efforts). In addition, one quarter of those surveyed reported that theirbiggest challenge was measuring ROI for inbound marketing efforts.
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Metrics that can be tracked: Social referral traffic and leads
Despite the obvious difficulties of nailing now the ROI for your social media efforts, there are some metrics that are relatively easier to monitor. Measurements like social referral traffic and leads are far easier to track, although even these can be somewhat cagey; even when an individual social media post does lead to a sale or conversion, there are a number of factors that may convolute the measurement process. Factors like time between the post and the conversion, indirect routes to the conversion event, and conversions due to word of mouth just to name a few.
That said, for businesses looking for a simple way to measure and replicate the success of their social media efforts, one way would be to focus on social lead generation, nurturing, and ultimately conversions.
Although this is certainly not an exact science, following the three steps below can give you a framework for determining which social media efforts will be most likely to ultimately lead to sales or conversions.
Step ONE: Track social referral traffic
Because we know that social media is far more about engagement than about sales, enticing people to visit your website is a critical first step in eventually seeing financial results. If we think of our online marketing efforts in terms of a funnel – awareness, consideration, conversion and loyalty – your social media efforts will fall into the ‘awareness’ stage.
If you’re consistently providing valuable content via social media and people like what you have to say, they’re more likely to visit your website. This may be through direct links, or a more roundabout process. In any case, getting visitors to your site through social media should be your first step.
Step TWO: Track conversions
This is obviously highly simplified, and measuring conversions from social media referrals won’t always be possible. However, in many cases, it will be possible to track which links, offers or promotions have led to a particular conversion event.
These conversions may be sales, but may also be non-monetary actions like submitting a quote request form or calling your business to request information. In any case, following your website visitors from social media to conversion will give you a good idea of what actions have led them to this point.
Step THREE: Use what you’ve learned, and repeat the process
Once you have an understanding of how and why your social referral visitors have converted, you can use this information to repeat the process for increased conversions. Some questions you may want to ask yourself are:
Although this is obviously an oversimplified process, following your customers from social media, to website, to conversion can be extremely helpful for understanding the mindset of your target market. What types of content ultimately lead to conversions? What calls to action am I using that seem to hit a nerve? What social media efforts seem to be most effective and most lucrative?
The point is this: Although it’s not always possible to measure the ROI of your social media efforts, tracking leads is one way to better understand which strategies are working, and which aren’t. Understanding this one piece of the social media puzzle can give you insight into how your customers think, and what they value. This knowledge can also help you improve the ‘soft’ results of social media like engagement levels, brand awareness and customer loyalty.
And that’s a winning combination.
About the author
Binh An Nguyen is the founder and CEO of Market Ease Business Promotions, a digital marketing agency dedicated to helping companies in Australia grow by leveraging the power of the internet. In the past 6+ years, Binh has helped several multi-million dollar companies in Australia establish themselves as the market leaders in their fields, and sell millions of dollars worth of products and services online. You can find out more about Binh and his company at http://www.marketease.com.au