Steps to Measure Social Media ROI
Seven Tricks to Engage Audience Better on Twitter
Social media is the fuel that powers the marketing strategies of brands. As per the Gartner Inc. Report, businesses spend close to 8% of their entire marketing budget on social media for customer acquisition and engagement.
Determining Return on Investment (ROI) from social media activities is, thus, crucial for companies to understand the effectiveness of social media marketing, to gauge the benefits and lacuna and to tweak the strategies accordingly. However, many a times, measuring ROI from social media activities turn out to be difficult because of the failure of the companies to tie social media goals with business outcomes, lack of tools for measurement of ROI, and because of doubts about the credibility of data collected.
Here is a step-by-step guide to make it easier for you to measure social media ROI-

1. Understanding Goals- It is important to understand what your business is trying to achieve through social media marketing. The hardest part in measuring ROI is determining measurable goals that are consistent with your business outcomes. In case of social media marketing, a goal would be an action that you want your customers to take that you can measure and that has a monetary value to your company. Some of the goals that you can set are- number of website hits, sign up on forms, file downloads and amount of online purchases. Once you have determined your goals, use a tool to set values for goal achievement and to record the progress. Google analytics can be a good starting point here.

2. Preparing your Campaigns- Tracking your social media ROI should start right from the beginning, that is, as soon as you plan your social media campaigns. Your campaigns should be designed to achieve the goals set in the first step. They should majorly focus on call to actions that direct the audience to your targeted destination- website, form, shopping portal, etc. The very next step would be to track the results from different marketing campaigns. URL based tracking through Google analytics can serve your purpose effectively if you have just started. You can also turn to advanced analytic tools such as Hootsuite, Buffer etc. to track campaigns as well as to post on multiple platforms simultaneously.

3. Measuring Your Campaigns- After you have assigned tracking URLs to each of your campaigns, the next step would be to set a monetary value for each conversion. Since you have pre-set measurable goals, you would need to analyse how many goal achievements result in lead conversion, that is, how many prospects become your customers. You would also need to measure average lifetime value of a customer which is the amount that an individual spends on your website once he becomes your customer. This data would help you in determining the total benefit from social media campaigns. Here’s an example to help you understand better-
If number of persons visiting your website is your goal, and every 1 out of 5 persons who visit your website becomes your customer, and average lifetime value of a customer is Rs. 20000, then
Value Per Goal Achievement= Average Lifetime Value of a customer / Conversion rate
The value in our case becomes 20000 divided by 5 or Rs. 4000.
Your next step is to calculate value attained from each social media platform. If Facebook attracts 5 visitors and Instagram attracts 10, then the total value generated will be
Value from each Platform = Conversions × Value per Goal Achievement
Therefore, the value generated from Facebook becomes Rs. 20000 and from Instagram becomes Rs. 40000 and the total monetary benefits from social media activities become Rs. 60000.

4. Calculating Cost of All Campaigns- In this step, you would need to calculate the cost incurred on all campaigns across social media platforms. Make sure you add all related costs and split them as per platforms so that ROI can be calculated down to the platform specific level. Some of the cost heads that must be mandatorily included are as follows-
• Man Hours- Cost per resource per hour and the total number of man hours spent in all marketing campaigns.
• Ad Spend- Amount of money spent on Google, Instagram, Facebook, Twitter, etc, for promoting your posts.
• Agency Costs- Amount of money paid to external agencies for creating landing pages, campaigns, creatives, etc.
• Tool Costs- Amount of money spent on using external tools for recording and analysing social media metrics, for example- on Hootsuite subscription.
The total of these heads will give you the overall expenditure on social media marketing activities as well as help you assign costs across different platforms.

5. ROI Calculation- Finally, you can calculate the ROI to determine the effectiveness of your social media marketing campaigns using the following formula-
Return On Investment (%) = Total Monetary Benefits - Overall Expenditure × 100
Once you have calculated the ROI, you can use it to determine which campaigns are outperforming others, the areas in which you have to change your expenditure and the modifications needed in your marketing strategy.