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Measuring Social Media Marketing and your ROI

Much debate has surrounded the implementation of social media marketing and the manner in which it can be measured in relation to companies ROI (return on investment). 

Simply, ROI is a profitability measure that evaluates the performance of a company by dividing net profit by net worth. It is defined by the investment that is lost or gained as a result of the money invested. However when measuring ROI for social media there is no direct tangible results that can be measured, as social media essentially acts as a form of word of mouth marketing. It is therefore important to consider that social media requires organizations to measure not just financial statistics, but also the quality and value delivered by their relationships with customers which is where companies have faced difficulties.

As social media has continued to grow in size, marketers have come to recognize its growing importance, but measuring progress on social media has proven the biggest difficulty yet. A starting point for many has been counting the number of recommendations a product or service receives. This is suggested as a means to measure social media marketing as social media is essentially user generated content, and a consumer is significantly more likely to buy a product as a result of a recommendation made by a family member than by a stranger. Research shows that a high-impact recommendation from a trusted friend, is up to 50 times more likely to trigger a purchase than a low-impact recommendation. 
Although social media can be measured in terms of likes, comments, shares, etc through popular tools and software analytics such as Google Analytics, Hootsuite, Facebook Insights, etc; this does not determine the impact on their ROI. As social media marketing cannot be directly measured in comparison to a ROI, it can be suggested to demonstrate a correlation, as done through mass media marketing, when marketing managers look for a positive correlation between sales and brand preference, and then a correlation between brand awareness and advertising, it allows marketers to establish what part of their marketing strategy has contributed most to their ROI. Social Media campaigns and marketers can adopt a similar approach, establishing correlations between social media engagement metrics through popular tools and software analytics and brand preference and sales, depending on the marketing objectives.

However Jeffrey Gitomer famously states, “If they had measured the ROI of TV, or the computer, or the Internet after five years, nobody would have gotten involved, and we'd be in a technological bog.” Suggesting that it is not initially a major issue for companies to feel the need to measure all of their progress on social media, but to instead, maintain up to date with sociological and technological trends in the external environment by actively engaging with their stakeholders through this new form of communication. While in the short term ROI is essential for a social media marketing campaign, in the long term it is less about financial statistics, as Eric Qualman states, “The ROI of Social Media is that your business will still exist in 5 years.”


Join The Conversation

  • Apr 9 Posted 3 years ago Courtney Sulzberger

    Agreed. It's improtant to remember that we are only establishing correlations, rather than direct facts. I think a lot of people have a difficult time remmebering this. You can still gain a lot of insights from correlations though. 

    I personally like the attribution modeling and assisted conversions tools in Google Analytics. Displays a little more information on when social media has played a role in someone converting.

  • Ben Green's picture
    Apr 7 Posted 3 years ago Ben Green

    Thanks Chris, very good outline of the social media - ROI problem. Most tools count metrics like shares and likes which can make you feel good, but don't have much monetary value. 

    We overcome these issues with ROI calculation by using a tool called Oktopost, which lets us track metrics like clicks and conversions. This lets us see which posts have higher engagment and generate leads, things we can translate in terms of value generated. 

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