Social media ROI and true business ROI are two different things. Social media ROI is about activity, while business ROI is about money. I decided there had to be a way to meld the them together and calculate social media ROI in dollars.
As it turns out, it is impossible to measure social media ROI in just dollars.
Let me back up a bit: I initially got stuck on this idea after listening to a podcast on measuring social media ROI. Author and social media consultant Nichole Kelly said, “ROI is a financial return, and social media has to be translated into dollars – not retweets, not mentions – to understand if it’s working.”
Social media, as I alluded to above, is often measured using social metrics: number of fans, followers, likes, shares, comments, retweets, mentions, pins, etc. All of these things are activities and easy to track on their own.
When I got really frustrated trying to come up with a formula that any business could use, I turned to my friend and social media expert Nicole Krug of Social Light. “I love where you’re going here, Monika,” she said, “but social media is not about just sales, and it cannot be measured with one simple formula. Let me tell you how I calculate social media ROI for my clients.”
Here’s what Nicole does:
Start with goals
When you’re calculating social media ROI, you have to start with your goals. Are you trying to raise awareness of your brand, promote a new product, get feedback as you develop a new product, build a community, become a go-to expert? All of these things will eventually lead to sales, but increased sales is just one measure.
For example, let’s say you’re developing a new product. You decide to use Facebook to get feedback from customers on the product features, pricing, packaging, scent, color, etc. You can’t calculate the value of that feedback in dollars, but you can look at it from a long term perspective: Is the feedback I’m getting helping me develop a better product that people will buy?
Look at cost savings
Another good metric for small businesses especially to calculate is cost savings. With social media, you can have a one-to-many conversation and reach more people quickly, thus saving on time and effort.
Think about the real value of a fan
Finally, think about the real value of a fan, because one fan is worth more than a $30 sale. Fans’ recommendations, reviews, feedback, and conversation about your business are all valuable – all of those things taken together help you stay valid and viable in the long-run, and that will definitely affect your bottom line.
So, what are your social media goals? How do you translate them into ROI?
Monika Jansen is a copywriter and editor who is happiest pounding out blog posts, website content, and other marketing materials for her clients, who tend to be startups and professional service providers. She is a blogger for GrowSmartBiz and the managing editor of UberStories. You can follow her on Twitter (@monikacjansen) or find her on LinkedIn.