How to calculate Social Media ROI?

[Stephen]

[Isabella]

It's impossible to measure it accurately, but your client won't want to hear that.

The reason I say this is that if you are working on several social media platforms and taking other steps to improve your branding or exposure, there's not always a way to know what amount of your success is coming from each of your efforts.

For example, if you are running Lisa's Widgets, and you see a customer make a purchase on your site who clicked through from a tweet, that's very clear.

What will happen more often though, is you'll work on social and other exposure and you'll start seeing customers who searched for Lisa's Widgets, where previously there were none. Or you will see an increase in this kind of branding activity.

So far as dollars to dollars ROI, it's not actually possible to figure out accurately, so we have to just do the best we can.

Perhaps the best thing to do is set goals and attach a value to them.

What is it worth to capture a like or a follower, who will now see your updates?
Of course the answer to this is not easy (and depends on the type and perceived value of your content), but it's a starting point.

How about capturing an email address and permission to send updates directly to prospects? What is that worth?

It will take time to start making correlations between these social activities and actual increases in paying customers, but ultimately your best efforts at analyzing that number is your own ROI

[Steve]

Calculating the ROI of social media requires a framework or model of the dynamics of social media
campaigns. This is then populated with measurement of how engagement with new prospects, existing
customers, and collaborators via social media channels helps to drive and derive a bottom-line impact to the
company, either through cost avoidance/savings or incremental revenue/margin impact.
Alinean proposes that Social Media ROI can be calculated by analyzing the value chain, from Investments to
Engagement to Benefits and Derived Value and finally, to ROI (net derived value/investments) as follows:
1. Investments — to get any benefit from social media requires an investment, particularly in marketing
labor, resources and tools to establish the social media presence, create content and campaigns,
monitor and collaborate and measure social media success;
2. Engagement — a first order effect of the investments, measuring the resultant number of followers,
advocates, reach and influence of the social media marketing efforts;
3. Benefits — the quantification of the resultant value of engagement, measuring the impact that social
media marketing is having on generating incremental revenue with new prospects and existing
customers, driving product/operational savings and innovation with collaboration partners, or avoiding
costs, such as avoiding the marketing expenses for other less effective/ efficient or redundant lead-gen
programs;
4. Derived Value and ROI — a financial summary comparing the ratio of investments versus derived
benefits to assure that the social media efforts are generating enough value compared to other
potential investments, and worthy of more (or less) investment.