Many feel that ROI can be difficult to quantify when it comes to social media marketing, but this is not the case. Assessing ROI in social media marketing is different from measuring traditional advertising returns, but with the help of a different set of tools that examine different metrics, a picture of a company’s ROI in this new area will begin to emerge.
One thing to keep in mind when measuring social media ROI is that typically the returns take a longer time to come in than with traditional media. It may sometimes be six months or so before they become apparent, but they are often more substantial and long-lasting than those offered by traditional media.
One fairly straightforward measurement is that of pay-per-clicks. This can be done by comparing the number of visitors from various social media channels to PPC costs; on paper, ROI can’t be simpler. ROI = (Gains – Cost) / Cost.
Sales conversion is a bit more complicated. Data based on sales conversion will differ depending on what site is being examined and whether the customer’s first or last click-through is the one being measured. Experts differ on which should be counted, but counting the first click-through takes into account the tendency of many customers to wait for some time after exposure to initial advertising to actually purchase an item.
Measuring other aspects of social media is less of an exact science, but customer engagement can be the most valuable gain from social media marketing. Social media offers unique opportunities for customer engagement, and greater customer engagement leads to higher quality customers. Higher quality customers will remain more loyal and will share the positive experiences that they have with a company or organization with others. Sometimes they will do so using social media themselves.
For Facebook marketing, Twitter marketing, and other forms of social media, we always send out a link that is set up as a campaign within W3Roi (now called Improvely). Improvely will track individual clicks, and can even tell you how many sales you’ve made from individual places and track revenue. You can create separate campaigns for Twitter, Facebook, and whatever other social media campaigns you have.
How this customer engagement is measured will depend on how the business uses social media. Customer actions from email clicks and forwards to forum posts to blog comments and more can all be assessed. One of the best ways to do this is to develop a rubric that includes all the social media marketing methods used by a company and assign values to different degrees of customer participation. For example, a company might have a forum for its customers. A user who simply looks at the forum occasionally would be assigned a low score. A user who posts from time to time would get a medium score, and a frequent poster would receive a high score.
This does not produce a direct measure of money spent to sales achieved, but these engaged customers make for a loyal customer base, and some of those loyal customers will recruit other customers with no effort from the company itself. The cost of acquiring a customer can actually be assigned a dollar value, and quality customers who frequently participate on social media count as acquired customers. Similarly, engaged users who answer other customers’ questions in forums save on staffing for the company. Within an online community, recruitment for focus groups and even employment can occur. This also saves the company money, and all of these things can be assigned a certain value.
Some experts suggest other difficult-to-measure but valuable benefits of community building through social media exist as well such as longevity. In other words, a community will actually appreciate in value and with increasingly less effort from the company itself.
Some companies may be resistant to social media marketing, and part of this resistance may arise from a perceived difficulty in quantifying ROI. However, methods do exist for assessing the ROI of these valuable new tools in marketing.
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