Return on Investment is crucial, not only does it help to determine the efficiency of marketing campaigns, it is often used to determine and negotiate budgets with management and also to used to determine the accountability of social media. Nowadays businesses demand financial returns and ROI on social media investment so that they can see the results being achieved through this field. To determine Social Media ROI you must use the following steps:
1) Define your social media goal
2) Based on this goal, define your social media return
3) Define how you will tie financial weight to social media activities.
There are a number of ways to estimate Social Media ROI and we are going to take a brief look at:
Social Media ROI on Sales
So the end goal here is that we want to increase sales. The return will be defined based upon the value of sales that can be attributed to the social media campaign. The value is the amount of the sale. It is difficult to determine and associate sales to social media however; there are one or two methods to do so. For example:
1) Social Media Specific coupon codes – If a customer uses the Social Media Specific coupon code, this will allow you to associate the sale to social media activity.
2) Forecast the value of sales without a social media campaign. Then during the Social Media campaign, compare actual sales versus the forecasted sales. If actual sales are greater than forecasted sales, this can be attributed to the social media campaign.
So the amount of sales that you attribute to your social media campaign is your social media return. The return on investment can then be estimated by: (return – investment) / investment x 100/1= %.
For example if last month, we estimated €2,o00 in sales attributed to our social media campaign. (This is our social media return). Assume we invested €1,000 in the campaign , using the formula above:)( €2,000 – €1,000) / €1,000 x 100/1 = 100%.