Social media has exploded as a platform for marketing businesses. Some business models exist entirely on social media with little or no alternative online presence. Whilst some diligently invest marketing and adverting spend on running successful social media campaigns as a part of their integrated communications plans. Love it or hate it, a well-executed social media marketing campaign can win customers, build brand advocates, and extend reach. How though, can we ensure we effectively measure social media ROI (return on investment)?

Focus on the measurements that matter

Understanding numbers in business is essential. Measurements help us to keep our business and marketing activities on track as well as helping to understand when we may need to make adjustments.

We can measure a number of things on social media. From followers, shares, posts and likes, but it’s not just about that. What really matters is the impact on the audience and the business sales, and the cost of our business and marketing activity. All of these numbers assist in effectively measuring social media ROI.

Social media does not operate independently of our other marketing activities, for this reason, it is hard to attribute exactly what earnt us a sale. There are multiple touch points before purchase. For example, looking at the AIDA model, it is often challenging to isolate the activity which first generated awareness, or which activity initiated interest in our product or service. We must be aware of both the micro and macro environment when assessing the effectiveness of our marketing activity. For example, competitor activity.

The most common metrics used in social media are so-called ‘vanity metrics’ including the number of likes on a Facebook page, or followers on Twitter, but they do not tell you what is working or what’s not. The metrics that matter are volume, engagement and website traffic, as these are the key components in attracting, retaining and converting potential customers. These metrics will help to measure social media ROI.

The following are some key social media metrics and how to calculate them:

Reach = Number of fans who saw a particular post ÷ the number of fans online at the time

Amplification (The rate at which your audience is sharing your content) = Number of shares ÷ number of posts.

Engagement (If people interact with our content it means they value it. This helps us to extend our reach and build our audience, generating a greater response) = Sum of interactions across a social media platform ÷ total number of fans on that social platform.

Applause = The number of favourites or likes per post.

Website traffic is perhaps the most important data set. Your website is media that you own, so one of your main goals should be to drive traffic to your website. Using Google analytics, it is possible to analyse your visitors and which social media channel they came from. How long they stayed on the website, and which pages they visited. This helps to identify where the best prospects are coming from, in terms of social media referrals. 

Defining ROI

ROI is the value a business derives from investing in a marketing activity. ROI is a performance measure, used to evaluate the efficiency of an investment, and a measure of the profit earned from each investment.

ROI shows us what is and isn’t working, and what actions we need to take.

We can only calculate social media ROI if we have first set goals and objectives that are in line with our business strategy and if we can measure what matters against those objectives. To do this we need to know the revenue generated from social media, and the cost of our social media activity.

How to Measure Social Media ROI

The below illustration demonstrates the calculation needed to measure social media ROI.


Social Media ROI

How to Calculate Social Media ROI

This means we need to know the revenue from our social media activity, subtract this from the cost of our social media activity and then divide by the cost of our activity.

For example, this information could be derived using Google Analytics and sales data. Say we had 10 posts on Facebook and this led to 1000 clicks, 1000 clicks led to 500 leads by completing a form on a landing page on our website, of those 500 leads 100 end up making a purchase. This would give a traffic to lead conversion ratio of 50% (500/1000=50%) and a lead to sale ratio of 20% (100/500=20%).

For this example, let’s imagine that each purchase generates £100 of revenue, and there were 100 purchases, generating £10,000 of revenue. The cost of the posts on Facebook was £500, so the ROI, in this case, was £10,000-£500/£500 = 19% or 19:1. For every £1 we spent we generated £19 of revenue.

Remember, there are also non-financial benefits to social media. It is an excellent tool for generating and maintaining brand awareness, provides an insight into what our audience are thinking or feeling as well as helping to guide our business decisions. We can also use social media for lead generation, customer acquisition and retention. It also provides a platform for real-time customer conversation.

This post was written by Laurie May, Director of Canvas Consultancy and tutor at Oxford College of Marketing.

If you want to learn more about how to measure social media ROI, our Social Media Marketing unit from our Diploma in Digital Marketing may be of interest to you. It can be studied as a single award or as part of our wider Diploma. To find out more, get in touch with our student representatives today via email or by calling 01865 515255.