Determining return on investment (ROI) can be a tricky business for many marketers. A relatively small number of social media marketers can confidently calculate ROI, mainly because it doesn’t require measurement only in monetary terms.
Revenue isn’t the only thing you’re getting out of your social media and blog campaigns. Sometimes you’re aiming to establish trust with your customer, add value to their lives, or get more clicks and shares on your posts, so more people know about the business.
In cases like these, calculating ROI can often be a hassle. Still, it’s a necessary step to take when asking for budget allocations for your next marketing campaign while trying to understand what works and what doesn’t. Knowing if your marketing efforts are in vain and if any tactics are doing better than expected can help you refocus your resources more efficiently.
What is social media ROI?
Social media ROI is the return you get on your investment into your company’s social media strategy from a monetary or non-monetary perspective. Many companies aim to get more than a tiny profit from their social media platforms. They spend at least some money on their maintenance, even if most social media platforms are free.
These investments can be in the form of a premium subscription with a social media management platform, the money you pay to your blog writers and editors, the graphic designers, and the social media managers. Organizations even keep track of how much money they spend on ads for their social media campaigns. It all contributes to the “investment” they make into their social media.
On the other hand, you might want to get more shares on your social media posts or interact with current and future customers. Social media platforms like Facebook, Twitter, and Instagram are great places to interact with other users, conduct surveys, and ask for feedback. All these things are the “returns” you get on your investment.
The general formula for calculating your social media ROI is as follows:
profit/total investment × 100 = social media ROI
Define clear social media goals
Before you go about planning your social media marketing campaign, take a minute to consider what you hope to gain from your social media. Some of the things that organizations aim for are:
- Brand Awareness: Increase exposure and understanding about the brand
- Customer Loyalty: Give your customers a brand that delivers on promises and one they can connect with
- Positioning: Reiterate your company’s brand promise and solidify what you do and don’t do – especially concerning your competition
- Partner Confidence: Convey to existing and future partners about your brand, interact with their staff and strengthen mutually beneficial relationships.
Once you’ve clearly defined your goals, it will be easier to measure progress.
Determine your objectives
Once you’ve decided on your goals, you can give them a bit more substance and thoroughly flesh out your objectives. Your social media marketing objectives are not the same as your goals. While goals are what you want to achieve with your marketing generally, objectives define what you want to accomplish.
Every objective you set for your business needs to be attainable, well-defined, and measurable. If your goals are vague, it will only confuse and lead to an ineffective social media campaign and low ROI.
The importance of attribution models
What is attribution?
Before we dive into the usefulness of attribution in your social media ROI calculation, let’s talk about what attribution is. One thing every business wants is more clients. Knowing where most of your clients came from can tell you what parts of your marketing campaign are working and what aren’t. Attribution means to assign a value to each element in your marketing strategy based on customer interactions and the rate at which they influenced conversion.
The importance of attribution
Attribution doesn’t just tell you what it was that finally made your customers buy; it tells you how many times they had to interact with your ads and content before they converted. And that sheds light on the part of your social media marketing campaign that’s effective.
Once you know where your customers are coming from and why they buy from you, you’ll be able to determine what parts of your campaign need to be altered. As far as calculating social media ROI goes, this can help significantly increase the confidence in your ROI.
Different attribution models
There are many kinds of attribution models, but they can be divided into two categories.
- First Interaction Attribution
- Last Interaction Attribution
- Linear Attribution
- Time Decay
- Last Non-Direct Click
Single-touch attribution only focuses on a single interaction in the process of buyer conversion. It can involve either the first engagement that puts them on the buying journey or the last meeting that finally sealed the deal.
First interaction attribution
In the first interaction models, all attribution is given to the first time a client interacted with your organization. It doesn’t just take into account the online interactions. They could have seen the products at a conference, a sale in the grocery store, or a social media ad on Facebook, LinkedIn, Twitter, or Instagram. Either way, the first engagement receives all the credit.
Last interaction attribution
Much like the first interaction model, this model gives all the credit of a buying decision to the buyer’s last engagement with the brand. Both models are relatively easy to use and simple to keep track of.
However, they don’t give you the complete picture. For example, they don’t tell you if any of your customers needed multiple engagements to make a decision or which one may have genuinely had the most influence. In this model, the last engagement always receives the credit, no matter how many other interactions.
Multi-touch attribution models operate differently and are more complex than single-touch attribution models. They’re different in the sense that they take into account the multiple interactions prospects had with your business. They then attribute varying degrees of credit from the final sale to each component.
The linear model gives the same amount of credit to each interaction a buyer had with your product before making the final decision. If there were five engagements between the first interaction and the buying decision, each would receive 20% of the credit. The major flaw in the linear model is that while it helps identify different drivers of a customer’s buying decision, it doesn’t help to identify the most important or the least important one.
The time decay model devotes more credit to interactions leading up to the buying decision and less credit to the ones earlier in the journey. It can help you identify the kinds of posts and content that influence customers in the end. However, it may not adequately consider critical ones earlier in the process.
The position-based attribution model gives credit to the first and last points of interaction between a customer and your brand and places less importance on the ones in between. The main drawback here is the lack of attention given to engagements in the middle of the buying journey that may be as important as the first and the last. On the other hand, the position-based attribution model allows organizations to identify the engagement that drew the prospect into the sales funnel and the last engagement that may have been the tipping point leading to conversion.
The data-driven attribution model provides excellent insight regarding the effectiveness of your social media campaigns. With this approach, different weights are assigned to individual engagements within the organization’s sales cycle. By tailoring the model for unique scenarios and circumstances, it can potentially provide the most significant insight. While the data-driven model can provide great insight, it is the most complex to configure. Don’t let this deter you if your objective is to glean as much insight from your campaigns as possible.
Determining ROI for a social media campaign
Attribution can help you calculate more clearly how each part of your social media campaign is delivering results. It’s important to remember what matters to you and your organization regarding conversion. Choose the suitable attribution model for your business. Once you have all the data you need, keep your social media marketing objectives and goals in mind.
Review how every part of your campaign helped (or didn’t help) you achieve those goals. This data can also be used to plan future campaigns. Knowing the suitable attribution model to use and how to derive an ideal ROI can mean the difference between a highly-effective social media strategy and a complete waste of your time.
This guest blog post was written by Cam Sivesind. He is the senior content writer for LeadsRx, a multi-touch attribution platform that helps enterprise marketers improve return on ad spend (ROAS). Cam has more than 30 years of journalism, writing, marketing, communications, and public relations experience. He holds a journalism degree from the University of Oregon. You can connect him on LinkedIn.