Social media has become a crucial part of any business. So what’s it really worth to you?
The average North American spends two hours a day on social media channels, from Instagram to Twitter to Facebook, according to a recent article in Adweek. And if you are in business, you probably know by now that social media is where your customers are, and how you build loyalty and good will and increase your brand presence. But surprisingly, many businesses still don’t take social media seriously and the reason could be that they still don’t know how to gauge the return on investment (ROI).
So how do you figure out what works or doesn’t work for your business?
Plan It Out
The Internet is a massive place (shocking, I know), so it’s important to have a social media plan that syncs nicely with your overall business goals. Importantly, instead of trying to reach everyone everywhere, plan measurable goals and target specific platforms.
Step 1 Audit what you have currently going on. Which channels are you using and with what results? What time are you putting into social media? This audit should be a regular part of your business — monitoring your online activity and successes allows you to see when you are hitting your goals.
Step 2 Create measurable goals — you’ll need tangible actions to evaluate, such as:
• generating new leads
• creating new followers
• communicating with existing customers
• inspiring actions from your followers, such as signing up for a newsletter, liking or retweeting content or purchasing merchandise or services (the last is the Holy Grail for most businesses).
Step 3 Create a content plan. Content is easy to share, harder to create, but the content you create can be gold if it’s compelling enough for others to want to share it. So don’t leave this to chance — formalize that process: build a calendar and mark off when you’ll create content, how you’ll distribute it and which goals it will meet.
Step 4 This is the most important step: evaluate your ROI! This is where that crucial return on investment comes in — we’ll get to that in a moment (see below).
Step 5 Tweak like crazy. If your goals aren’t being met, if the ROI is lousy, change tactics and try again.
Calculating Social Media ROI
Here’s how to put step 4 — evaluating your social media ROI — into action. And it’s easier than ever with today’s sophisticated analytics. Google and Hootsuite are good starting points, or Buffer if you want to get deep into shares, likes or follows.
Assign a monetary value to your social media goals. Some of these values will come from sales results (e.g., average earnings from social media customers), some will come from intuition and, if you really get stuck, there are standard valuations online for social media activities.
Be cautious, however, as these valuations do fluctuate and no one is going to know your business like you do. For example, if your goal is to increase Facebook likes and you have, on average, $50 in sales for every 25 new likes, then each follower is worth about $2. It’s useful as part of this exercise to consider costs you would be paying without social media; for example, online ads that would otherwise drive traffic. Out of this, you should have a rough monetary value assigned to each goal.
With this data in hand, you can calculate the ROI. Take your time (or staff time) and multiply the number of hours you’ve committed to social media over the period you are evaluating. Add in the cost of all the social media tools and services you use plus any advertising you’ve done to build your social media following or drive traffic.
Now you know your investment. Compare this investment to the combined dollar values you’ve assigned to your social media goals. Voila, you have a pretty accurate idea of your social media return on investment.
Now, a word of caution: it’s easy to start pouring resources into the social media realm — and it’s big enough to absorb whatever you give it. The takeaway from this column is to start looking at social media as you would any other function of your business. While calculating the ROI on social media can be a bit taxing to your math skills, it will ensure you know that what you are putting in is paying off.