What is my social ROI?
Basic ROI calculation:
(earnings-costs) x 100 / Costs
Step 1: Define Your Goals
Sign-ups and conversions
Step 2: Assign Monetary Value to Those Goals
To measure the ROI of your online investment you need to know both the amount of conversions and the approximate bottom line value of each type of conversion.
Ex: Site visitor = 20 cents
A better Example:
Let’s say you have an e-commerce website and your avg. gross margin per transaction is $10, and the site converts 2% of visitors into paying customers. We would multiply $10 by 2% to get a rough value of each visitor of 20 cents.
For the purposes of this example. we’re ignoring the percentage and value of the people who will return and buy again as repeat customers.
So, if you were able to buy 10,000 clicks at 15 cents a piece, you’d pay $1500 for that traffic.
If you expect 2% of those visitors to make a purchase (200 transactions) and the average transaction yields $10, that’s worth $2000.
Subtract what was paid for the traffic and you’d net $500 on the campaign.
You’d make a profit anytime you paid less than 20 cents per customer.
“If someone can buy dollars for a nickle apiece, I suggest they do it all day long.”
If you’re completely stuck and don’t know how to calculate the customer lifetime value or use the example above, ask yourself following questions:
If a trustworthy person promises you 10 filled out contact forms from potential customers of average quality. How much are you willing to pay per filled out form?
If a trustworthy person promises you 1.000 sign-ups (of average quality/relevance) to your company newsletter. How much are you willing to pay per sign-up?
Your answer will constitute a good alternative method for setting the conversion value for that type of conversion.
Step 3: Identify costs
Salary for employees handling social
Tools used: example: SproutSocial
Ad spend: facebook ad spend, twitter, linkedIn, etc
Step 4: Track Goals
Nearly all marketing channels can be tracked directly in your web analytics tool. Our favorite is Google Analytics.
With Google Analytics, you can track website traffic, on-site conversions, and sign-ups originating from social media campaigns.
Step 5: Analyze & Adjust
Accept the fact that you will be using a lot of averages and assumptions during the first phases of adapting to the ROI mindset. Even if your numbers are pretty off target, the discussions towards your first ROI data will give you important insights into what is really driving your business. This is a journey that can take several years.
"Social media isn't only about ROI. And it isn't only about sales. Social media is about branding, opening channels of communication with customers, building loyalty, being transparent and establishing good will.
And if you cover all of those bases, then guess what? If your product or service is worthy, you will most definitely see a return on your investment." - Gary Vanerchuk