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Social Media ROI for Idiots

Some companies are still have trouble understanding the return on investment of a well-run social media campaign. In an effort to take into account short attention spans and a general lack of interest in changing hard and fast attitudes we've put together a quick, and easy, piece here to show how social media not only gives a great return on investment, it now surpasses most traditional media.

Traditional ROI is calculated: ROI = (revenue - investment) / Investment * 100.  

Or: ROI = (∆ revenue - investment) / Investment * 100. Where, for those of you who have forgotten grade 9 math, ∆ revenue means "change in revenue". 

Ok, so that's how companies have traditionally determined if the cash they're shelling out for an ad campaign is worth the effort. Investment takes into account the hours to create the campaign and airtime and anything else that costs them money. They then deduct that from whatever sales they can attribute to that particular campaign.

The 2nd formula is a bit smarter because it's easier to quantify the campaign's success if you know what your sales were before you began.

Now that we've got that sorted we can move on to social media. While the formula doesn't change a whole lot there are a bunch of new parameters that can be included to determine the return on investment. Stuff that you don't get with the traditional model. 

Social media ROI can be calculated in a ton of different ways. Check this out:

ROI = (revenue - investment) + targeted engagement (new clients) / investment * 100. How many new leads has the campaign established? You can make a case for traditional campaigns doing this too but since social media is highly targeted you're more likely to get qualified leads from your social media.

or this one...

ROI = (revenue - investment) + employee retention / investment * 100. Engaged employees are more profitable, productive and less likely to leave their jobs. How much does it cost to train a new employee?

According to the Gallup G12 poll there is a direct correlation between employee and engagement and retention. The same poll correlates employee satisfaction with customer satisfaction and loyalty. The "idiot" explanation of that is; If you're employees like your company and business practices so will your customers. Duh! 

how about this one...

ROI = (revenue - investment) + customer engagement and idea generation / investment * 100. 

Take the Old Spice campaign for example. Old Spice saw a 2700% increase in Twitter followers, 800% increase in Facebook fan page visits and 300% increase in traffic to the brand website and countless parodies, but most importantly sales of its Body Wash more than doubled! 

Other companies have had similar success when they engage their customers. Engagement builds incredible customer loyalty and brand awareness but also gives users a sense that they're dealing with a real company, with real values and real people. 

and finally, my personal favourite...

ROI = (revenue - investment) + social good / investment * 100. This is my favourite because, for so many years, big business has focused only on their bottom line. Even the companies that have philanthropic endevours built into their business model have had little success in translating that to ROI

If you still don't get it maybe social media isn't for you. If the company you work for doesn't see the value in engaging employees and customers, developing new sales opportunities, reaching target markets and doing some social good then perhaps they should stick with traditional media like TV. After all, no none is using their PVR and skipping all the commercials. Are they?

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  • Jun 6 Posted 5 years ago lorak (not verified)

    In my opinion the only way to measure ROI at least partially for social media campaign is the use of Facebook application like coupon generator. Customers then gain some small discount while presenting or entering on the website a unique discount code. Only then you can be (almost?) sure what your effectiveness is.

    Other way is to make some small research, some survey asking about the source of information of brand awarness.

    Besides its rather impossible to measure it precisly.

  • socialmedia-canada's picture
    Apr 27 Posted 5 years ago socialmedia-canada

    Thanks so much for your note Chris! I think you really have something here. I have found it easier and easier to get clients to understand that ROI isn't all about the numbers. 

    Now that SMM is IN YOUR FACE C-level execs are having a harder and harder time ignoring it.

    I like to lead with "your brand is being discussed online. do you want to be involved in the discussion or not? because whether you are, or your not, customers are talking."

  • Apr 21 Posted 5 years ago George B (not verified)

    Very, very true. Social Media just better hope that it goes the the way of TV spots -- people just buy them and don't care that they can't measure the return.

    Social Media may garner that kind of clout, but it may not. It's competing in the online realm where people demand more defined measures of results -- particularly financial results.

    It will be interesting to watch unfold.

  • Apr 21 Posted 5 years ago George B (not verified)

    I completely agree with your post. All the other metrics mentioned by the author are valid, they just aren't ROI. As Social Media becomes less about hype and fear not doing Social Media, and more about financial results, industry participants are receiving more pressure from managers to show quantifiable dollar results. Since Social Media guru's have no answer for how much cash is being generated via their campaigns, they have no choice but to make up new metrics and push them as a new form of results, which is fine.

    As the author stated new media: new metrics. However, the question of how much cash ROI is still unanswered. Expanding the definition of ROI to include "tweets", "likes", and "engagements" doesn't address what managers really care about when it's time to file the 10-K (financial results). Industry participants attempts to justify expenditures by convincing managements that there is similar value in new (Social Media) metrics, as financial metrics not only laughable -- it's also annoying. I would feel so much better if my Social Media consultant just flat out said "I have no idea what your ROI is going to be in financial terms", done! Don't try and sell me on an increase in "likes", "likes" are cool, but really, I care about increases in cash.

    What do you say to a client who is upset because they spent 100k on Social Media, saw a huge spike in Social Media metrics, but sales were flat three or six months after the campaign?

    New metrics, while useful, are no substitute for financial results. You can't fund payroll with "likes", you can't finance capex with "tweets", and you can't make interest payments with "engagements".

    It will be interesting to see how it plays out. Will Social Media campaigns, like TV ad campaigns be accepted as necessary even though you can't measure whether or not your sales went up because you spent that extra 100k for Conan spot -- or will managers lose patience with the industries inability to prove that it adds value (in the financial sense).

    Finally, I find it interesting that the author failed to address your post. It's the most opposed to her thesis, which gives ample opportunity to address the concerns of those opposed.

    To the author:

     "I understand your point but I'm saying that the rules are changing with regard to how we measure ROI completely. It's no longer how much did I spend, how much did I make, what's the return on that investment."

    Sorry, but you're wrong, IMO. It's the people in the business of selling Social Media that are trying to push this view -- I don't think anybody is really buying it though. I'm guessing the vast majority of people on Wall Street and Main Street  care much more about their financial ROI than their Social foot print. The two may be correlated, but that has yet to be proven.

  • Mar 31 Posted 5 years ago Chris Runyon (not verified)

    Return Of Investment or Return Of Objective (ROI or ROO)

    Great post Jacquie but wanted to explore another way in measuring social media marketing. ROI has an established and understood meaning and using "ROI" as a synonym for "results" can get a little hairy. Marketers that promise ROI may be setting expectations that cannot be delivered by social measures.

    Financial metrics are just one way to evaluate social marketing programs. Social media can bring a variety of advantages to organizations, both for short and long-term success. To accurately asses the impact of their social media marketing efforts, marketers must align their objectives, metrics, targets, and strategies with a “balanced scorecard“. 

    balance scorecard brings other perspectives into focus, not solely measured on financial metrics.  Dr. Robert S. Kaplan and Dr. David P. Norton’s, The Balanced Scorecard: Translating Strategy into Action, explains in their book that an effective social media marketing balanced scorecard considers metrics from four different perspectives:

    Financial: Has revenue or profit increased or costs decreased?

    Digital: Has the company enhanced its owned and earned digital assets?

    Brand: Have consumer attitudes about the brand improved?

    Risk Management: Is the organization better prepared to note and respond to attacks or problems that     affect reputation?

    To properly assess your social media marketing programs, other perspectives must be accounted for when determining short and long-term success.The true measure of ROI is how successful you were in meeting your business and communication objectives, that what should determine your success of the SMM campaign.

    I recently read an analogy that said,

    Direct marketing is like getting the consumer wet by directing a hose and spraying water on him or her; brand marketing is a fog that constantly envelopes the consumer and gets them damp over time. You can measure the water coming out of a hose, but how do you measure fog?

    But clients want to hear concrete number and your SMM ROI formulas. They give clients a sigh of relief that their precious marketing dollars haven't gone to waste. If clients understood how marketers can accurately measure SMM, I think our job would be easier to get them on board with Social Media than to constantly persuade. Please read my blog and share your thoughts.


  • Mar 8 Posted 5 years ago Marie-Christine... (not verified)

    Thank you for putting this ROI-discussion back into proportion. Apart from this, this is nothing new: even before social media it has been tricky to evaluate, which part of corporate communications lead to whatever results. 

  • socialmedia-canada's picture
    Mar 5 Posted 5 years ago socialmedia-canada

    Thanks Erik!

    I agree that it should be "return" and I love that you pointed out the difference between the concept of "return" vs "revenue". I can definitely use that with some of my more "passionate" commentors :)


  • Mar 2 Posted 5 years ago ErikSchnitzel (not verified) my younger years I learned that R in ROI is for return and not for revenue. I guess that has not changed yet doenst matter in what century of x.0 we all live.


  • e-marketing for sensible folk's picture
    Feb 26 Posted 5 years ago e-marketing for...


    "Return on Investment" is return on investment.  Final.

    If "return" is measured in dollars, you must calculate it with dollars.

    If you'd like to say that you now want to calculate "return" in terms of "connections," "tweets," "likes," "followers," "customer satisfaction score," etc., then you're really measuring something else - not ROI.  This is fine, if that's what you want.  But I promise that the vast majority of investors don't want just a good feeling at the end of the day.  They want their money back (their investment), and then some (the return).

    Also, please be careful about formulae that add dollars to number of new clients (or any other non-dollar figure).  This produces a percentage in the end that is meaningless.

    Your bottom-line point, that we can examine our effectiveness in using investment dollars to produce "social good," "customer engagement," "idea generation," etc. is wonderful (albeit not necessarily new).  But at some point in any business that is run with the intention of not going bankrupt, someone somewhere in the firm will have to translate "customer engagement" or "idea generation" or any other non-dollar concept into a dollar figure that represents or leads to either revenue production or cost savings.  This dollar figure will then be compared to the investment to see if the investment is cost-effective.  Or, for example, with "social good," the firm might decide that this is a charitable contribution irrespective of the bottom line.  Again, a fine decision that some investors (the socially conscious type) might agree with to some extent.

    But as I was told once by a brand manager at Kodak during a meeting where we tried to push a project that would create additional goodwill for the firm, "let me know how it moves boxes!"  He was willing to fund our venture for a smaller amount on the basis of a charitable contribution, but for the amount of money we were asking for, he wanted validation that the investment would be cost-effective.  That it would produce revenue, that is, move boxes off the shelf.

    The media may be different, but ROI truly remains the same.

    Thanks for sparking some lively discussion.  :-)


    E-Marketing for Sensible Folk


  • socialmedia-canada's picture
    Feb 23 Posted 5 years ago socialmedia-canada

    Hey there, thanks for your note.

    That's an interesting question. How long have you been running this initiative? I think that when you're trying to convert a current customer/client base you'll have to give it several months before you see that those efforts are getting any traction.

    In the meantime, you're improving your connection with the online community so it's a win/win.

    In the meantime you could define what the end-goal of the initiative is. If it's to convert 60% of your customers in 4 months then that's something you can gauge. If it's to garner new customers then define what the market share you hope for is so that you can gauge that as well.

    There are a bunch of ways to measure your ROI in this case. You just have to determine what the main purpose of the campaign is in order to do so.

    Good luck!

  • Feb 22 Posted 5 years ago Anonymous (not verified)

    I'd be interested in your ROI thoughts for government since governments don't have revenue.  Our ultimate goal is to use social media to do more with less.  We want to move customers from more expensive channels (ex 1-1 conversations via phone) to social media/web based alternatives (1-many conversation).  However, my experience has shown that rather than creating a fundamental shift in channel traffic we are just seeing a whole new set of customers.  Not debating the pro/con of the new customers but it makes calculating ROI somewhat difficult because most advantages seem qualitative and not quantitative.


  • socialmedia-canada's picture
    Feb 21 Posted 5 years ago socialmedia-canada

    Hey Brad,

    I understand your point but I'm saying that the rules are changing with regard to how we measure ROI completely. It's no longer how much did I spend, how much did I make, what's the return on that investment. 

    Social media changes that in that it allows for ROI to be measured from more than marketing perspective. i.e. how are we engaging with our clients? How are we building brand recognition (since sales from brand recognition cannot be attributed to just one campaign but to an entire philosophy how is that measured? I don't know that it matters necessarily that it is measured.)

    Perhaps focusing on ROI is misdirected. Maybe we should simply say "we're putting this out there and we'll revisit our numbers after 3 months to see if things are better, the same or worse." Maybe that's how it's all going to be measured in the future.

    I dont think there are right or wrong answers. I think that the discussion has to continue and, like others have mentioned, we may not have a formula for years to come.


  • socialmedia-canada's picture
    Feb 21 Posted 5 years ago socialmedia-canada

    Thanks so much for your comments Tristan. I'm off to read your article. I love all this stuff and I really enjoy the fact that going off-grid on the rules is how things are moving forward.

    (i've never been much of a rule follower :)



  • tristanhandy's picture
    Feb 7 Posted 5 years ago tristanhandy

    Mike and Jackie -

    I'm really happy that we're focusing on this issue, as I think it's the biggest one in all of social media marketing at the moment. Jeremiah Owyang agrees. I tend to agree with Mike that there is a lot missing in these equations, but I do believe that they get the high-level picture right. Most importantly, Jackie should be applauded for generating a lot of interest around an important topic!

    Mike, you're 100% right that there is a lot that goes into measuring ROI in social media marketing before you can even begin to apply formulas. The problem is primarily one of attribution--specifically, who gets credit for sales that you make? Social media marketing efforts tend to be intent-generating rather than intent-harvesting, and social media marketers often get shafted by paid media (especially search marketing) when it comes to getting credit.

    I've done a lot of work around this...if you're interested feel free to read my most recent post on this topic from back in December. ROI can be measured--marketers just need to be smart about the tools and methodologies they choose.

    All the best guys and gals; keep hammering on this topic as it needs the attention!


  • Feb 3 Posted 5 years ago Brad M in Austin (not verified)

    Nice article Jackie but I think Social Media ROI is a bit more complex (indeed, al ROI is). The main issues is see with the above is directly linking increased revenue to social media activites. I am not saying that social media does not increse revenue, but the above formulas do not seem to acknowledge that social media is often one of many channels that contribute to increase revnue.

    For instance, in the Old Spice campaign that you mentioned ("sales of its Body Wash more than doubled!"), the above formulas do mention tath the campaign also relied very, very heavey on :30 TV Spots (national ad buys) and print ads (national magazine buys). Don't get me wrong, the social media aspect of Old Spice was brilliant--pricely b/c it was seemless intergrated with the TV and Print, etc. The above formula doesn't seem to acknowledge this. Is seems to get given all the revenue credit for Old Spice to social media.

    I don't have the answer..this is really really complex stuff. A formulate would have to be something like ROI = (revenue CLEARLY FROM SOCIAL MEDIA - investment IN SOCIAL MEDIA PROGRAM) +etc, etc / SOCIAL MEIDA PROGRAM investment * 100. But how a brand can cleary say "this sale is came from from somone that follows us on Twitter" and "This sale came from somone who day out TV ads during the last episode of LOST" is beyond me. Really complicated stuff.

  • Feb 2 Posted 5 years ago Mike Greening (not verified)

    Thanks for your response Jacquie - I agree, new media, new measurements.  I think that finding the right measurements will take a little time and a lot of people like you exploring the issues.  I'm sure some of the traditional ROI equations for specific industries and media formats were years, if not decades, in the making. 

    Forward momentum with this will benefit both businesses and consumers!

  • socialmedia-canada's picture
    Feb 1 Posted 5 years ago socialmedia-canada

    Hi Mike

    Thanks for your note. You bring up some great points. I wrote the article based on my own experiences and discussions with companies, some of whom have had successful campaigns and some, not so much.

    I can understand how someone may assume this is a pitch piece based on your comment but I really wrote it as more of a warning to companies to make sure their strategist knows what they're doing before they go down that road.

    I think you can measure social good or goodwill. It's used often when measuring a the worth of a company for sale. You can also measure customer engagement if you define it as engaged in the conversation on a social media network  like Facebook or Twitter. So too can you measure employee satisfaction. 

    So, while I understand that, in a traditional marketing sense, some would consider these parameters "fuzzy" the new language we are creating with social media suggests otherwise. 

    That new language, new way of thinking and new way to measure is what this article is about. 

    Simply because something has always been done one, particular way doesn't mean that, in a new scenario, it needs to be done that way still. New media, new measurements. 

    However, this is all just opinion and I respect yours and thank you for your note. I am sure you will have many people who agree. 

  • socialmedia-canada's picture
    Feb 1 Posted 5 years ago socialmedia-canada

    Thanks Janet!

    I really appreciate that. I'm going to be putting a new piece up tomorrow so stay tuned :)

    Aloha to you too (are you in hawaii you lucky girl? ah, to be warm would be lovely ;)

  • Feb 1 Posted 5 years ago Mike Greening (not verified)

    As a social media marketer with an engineering background, I have to mention that not one of the equations presented in the article is meaningful without an explanation of the ways to measure the social parameters that have been identified in each.  For example, how do you measure social good?  How about customer engagement?  Idea generation?  You can make up some measurement for each of these at your own risk if you're taking them seriously as indicators of the success of your social media initiatives.  When you balance them against the bottom line, better pray that your measurement methods provide results that are in the ballpark.

    This is an ongoing issue with social media and the reason why most people are reading this article - measurement techniques are necessarily fuzzy.  For a brick and mortar retail operation, a 2700% increase in Twitter followers could lead to thousands more sales, or it could lead to none (you have a bit more leverage if you're selling online and can measure how many Twitterers are making purchases at your website).  Chances are pretty good that's it's a positive sign of people recognizing your brand, but creating an equation that pits these statistics against how much you actually spent on your campaigns is pretty reckless.  It comes down to measuring total sales before and after implementing social media initiatives, and even then there could be other market factors involved in any changes.

    I'm an optimist and I love to see this being explored.  My opinion is that it is not nearly so cut and dried as Jacquie suggests.  This article is coming across to me as a fear inducing pitch to hire a social media consultant, and a bit of an attack on the uninitiated and inquisitive folks who are learning the ropes.  Jacquie's hard and fast approach here and the idea that if we don't get these equations, social media is not for us, is pretty short-sighted.  I suggest a part two of this article that explores specific measurement methods and discusses their viability.

  • Feb 1 Posted 5 years ago Janet Callaway (not verified)

    Jacquie, aloha.  As I was reading yor article, I found myself nodding.  When I read you last paragraph, I broke into a big smile.  Thx for a great start to the day.  I found you through a tweet so am off to share your "words of wisdom" the same way.  Aloha.  Janet

  • socialmedia-canada's picture
    Jan 31 Posted 5 years ago socialmedia-canada

    I like that Keith! "I know I want it I just don't know what it is I want".

    Thanks for your comment.

  • Jan 30 Posted 5 years ago Keith Brown (not verified)

    Great article, definitely agree 100% about the lack of ROI in social media. I think it's much like the early days of SEO and online marketing, companies have no idea what they are getting but just know they want to be a part of what's trending.

  • socialmedia-canada's picture
    Jan 29 Posted 5 years ago socialmedia-canada

    I hope you found it helpful! Thanks for reading and leaving a comment. It makes me happy :D

    Pass it on to anyone you think might benefit from the information.


  • socialmedia-canada's picture
    Jan 29 Posted 5 years ago socialmedia-canada

    Hey Jeff,

    I don't know any of the details behind the campaign but I think it would be worth finding out the process. It's a brilliant campaign, laughs at the industry, is super memorable. On the social media side it has to be said that they did have a traditional marketing campaign to set it all in motion but still...great results.

    I was thinking of drilling down a case-study to see how everything came together for a campaign, maybe I'll choose Old Spice :) (that's for the idea!)

  • Jan 28 Posted 5 years ago HemiTemi (not verified)

    OK that makes a lot of sense when you think about it.

  • Jan 28 Posted 5 years ago Jeff Hester (not verified)

    Great article! Too many businesses and organizations approach social media haphazardly -- lacking any sort of strategy or plan to measure the results. 

    I especially liked the Old Spice anecdote. It would be interest to hear the whole story behind that campaign. Do you know any details? 

  • socialmedia-canada's picture
    Jan 28 Posted 5 years ago socialmedia-canada

    Exactly! I completely agree. A great social media strategist will sit down and set out the goals of the project along with the company. Just like every social media campaign is different so should every individual project. 

    Sometimes companies don't even know what they want and, that too falls on the strategist. (those are the ones I love the most because I get to help direct the campaign in a more creative way :)

    Thanks so much for your comment!

  • socialmedia-canada's picture
    Jan 28 Posted 5 years ago socialmedia-canada

    You've basically said the same thing. In your formula the money you put in is the investment and the money you made from the results is the revenue. So, in mine, money you made less investment divided by the investment x (times) 100. 

    If the return is $50,000 and you invested $10,000 then the equation looks like this: ($50,000 - $10,000) / $10,000 X 100. For a total ROI of 400%.

  • Jan 28 Posted 5 years ago Jocuri (not verified)

    I always thought that ROI is calculated by substracting the money you put into lets say ad campaigns from the money you made from the results of those campaigns.

    Can you explain why we should do it like this ? (revenue - investment) / Investment * 100

  • Jan 28 Posted 5 years ago Craig McGill (not verified)

    A good post. I think the main thing for any company is to remember to define at the start of the project what success will be - increase in sales, brand awareness, X amount of people on a mailing list. That makes life so much simpler for all involved.

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