Recently we’ve published a blog series on our new Social Media Strategy and shared my experience of the Social Media World Forum Africa held here in Cape Town. With all this talk about Social Media and the focus on the importance of Social Media in business it is natural that you would eventually ask:
How do I calculate the return on Investment of my Social Media efforts?
Social Media is still a young and emerging discipline, but as a business function it needs to be justified with regards to the value it adds to your business against the cost in terms of time and money invested in maintaining your social media presence. Let’s take a look at two of the biggest myths surrounding Social Media and ROI.
Social Media Myths
MYTH No.1 - The ROI of Social Media cannot be determined, because you cannot place value on relationships
MYTH No.2 – Social Media is free
Many practicioners swear by these myths, but I disagree and here’s why:
DEBUNKED MYTH No.1 – The ROI of Social Media can be determined
While it is true that you cannot place a monetary value on social interaction and you cannot quantify the value of relationships, there still has to be a measure for your business to determine if getting involved in Social Media and your specific approach is worth while.
The truth is that to measure the ROI of Social Media, first you have to clearly define the goals for your involvement.
Possible goals for your business to engage in Social Media could be:
- Increase exposure
- Generate leads
- Increase site traffic
- Find new business partners
- Improve search engine rankings
- Reduce marketing expenses
- Close more business
- Improve brand awareness
Now, if your goal is to increase exposure, an increase in fans and followers could be your ROI metric. You could also measure the success of your campaign by the amount of retweets and sharing of your content.
For a more sales focused campaign, perhaps your goal is to let others know about your new product and generate leads by driving traffic to the relevant product page on your website. Here traffic, leads (possibly measure by the amount of sign ups or completed Client Intake Forms) and conversion rate would be your metrics.
Determining what you want to achieve with Social Media is the first step towards determining the metrics you should use to calculate your ROI. Measuring a return on simply having a Facebook page or a Twitter account is rather pointless, but when engaging in a campaign on Social Media (such as promoting a new product) the goals of the campaign will inform the metrics for the ROI and should be measured.
DEBUNKED MYTH No.2 – Social Media is low cost, but not free
While it is true that anyone with a computer, tablet or mobile phone and an Internet connection can get involved with social media at no extra cost, it is not true that for a business there are no costs involved.
Being active, engaged and successful in using Social Media to achieve your business goals takes time, and time is money.
That’s right: Time = Money = Cost
This might not be a massive costs, and for many Social Media is a great low cost marketing channel. But the cost of time has to be factored into the calculation of the possible return.
If you are a professional Programmer, Illustrator or writer – any profession where you are paid for your services by the hour – then every hour spent on Social Media Marketing is an hour of productivity lost. Similarly if you are a manufacturer of goods – A furniture designer or a shoe maker – every hour spent on Social Media is an hour that could have been spent on creating or improving your products.
It is true that all that productivity would be pointless if you have no market, and that engaging with Social Media could create or help you find the market, but then the generation of leads will be your ROI metric and you would measure the value of the time spent on social media activity against the value of engaging with other marketing activities across other channels.
Your time is valuable and that means Social Media has a cost associated with it. Social Media might be a very low cost channel, but it is definitely not free.
Recommended reading:
For further insights into SM ROI take a look at these resources:
