So in case you haven’t noticed, social media is a pretty big deal these days. If you somehow haven’t noticed, you may be living under a rock. Social media is not only a communication tool used by individuals to make connections with those around them, it is also a powerful tool for businesses to reach new customers, engage with existing ones and generate sales.
But there is a long journey to be made between deciding to use social media marketing and having success with it. It’s a noisy world out there, and finding the right strategy for reaching those you want to reach can be a challenge that absorbs both time and resources.
And whenever you are spending time and resources on something, you better have a way to prove that it is working. Whether you are the owner of the business or an employee who needs to present to executives, you need to be able to convincingly justify a social media marketing campaign by demonstrating how it affects real business outcomes. This, however, is much easier said than done. So let’s take a look at how to do it.
What is ROI (Return On Investment)?
Simply put, ROI stands for return on investment. It’s what you get out of what you put in, and it is one of the most powerful metrics for measuring the worthiness of any business activity.
Businesses that engage in activities that achieve a high ROI tend to be more successful and valuable, something you should be interested in should you decide to sell your business someday. A business’ ability to recognize high leverage opportunities and to maximize its resources and efforts will go a long way towards determining its present and future success.
In the marketing world, people talk about marking return on investment (MROI). We should not think that this is different than content success. Measuring the number of shares, likes or views is important, and in some contexts can be your ROI (obviously it is good for your brand to have your content widely shared across Facebook and Twitter), but we’re looking at something more concrete. We want to know what effect these efforts are having on sales, for example.
By measuring MROI, you are working to identify exactly how your marketing efforts impact the business as a whole. What effect do they have on generating sales? How do they help you create new leads? How do they boost profits? And by how much? The key here is cold, hard numbers.
The Challenge of Measuring MROI
One of the main issues with measuring MROI is that it is often confused with content success. You may be very proud that your content has been shared 500,000 times and liked by 38,000 likes people, but unless you know exactly what that means, few others are likely to be impressed.
Another one of the big challenges is that the internet is just plain confusing. If you’re running a social media campaign, it is likely you are sending out lots of content over a variety of different channels. It can be hard to know which ones are working and which are not, assuming you don’t know where to look. But if you approach your marketing strategy with an eye towards measurement, and you use the right tools, you will be able to measure MROI, helping you improve your marketing efforts and giving your business a better chance at succeeding moving forward.
How to Measure MROI
Measuring MROI is a process that starts when you first begin thinking about your social media marketing campaign and that continues throughout its implementation. Here’s how you can set yourself up to be able to measure MROI effectively.
Step 1: Planning and goal setting
To effectively measure MROI, you need to know exactly what it is you are looking to get out of your efforts. Are you trying to boost brand awareness? Increase sales? Generate new leads?
No matter what the overall objective is, though, it is important that your goals be specific. Setting goals like “increase awareness of my brand” isn’t going to be very helpful. The same with “boost sales.” Instead, make goals that sound more like: increase sales of product X by X percent over the next quarter.
A helpful trick for remembering how to set quality goals is to make them SMART. Specific, Measurable, Attainable, Realistic and Timely. Setting these goals at the beginning of the campaign will make it much easier to determine ROI at the end.
Step 2: Tools for tracking and measuring
After setting your goals and determining the best way to achieve them, the next step is to track what’s going on and measure your success. Fortunately, there are lots of resources out there that help make it a lot easier to more clearly identify ROI.
For example, nearly every social media site—Twitter, Facebook, YouTube, etc.—as well as Google, has some analytics software you can use. This helps if you are looking to determine ROI in terms of content success. You can quickly and easily determine who is viewing your content, what they are doing with it and how well it is being received. So if you were looking to increase awareness of your brand by 25 percent amongst young men ages 18-30, this would be the way to try and figure out if you hit this goal. But measuring ROI in these terms is a bit tougher, as it is hard to quantify the value of this increased awareness.
To get more concrete, consider taking an approach that asks you to measure ROI more in terms of how it affects larger business outcomes. There are lots of different tools you can use to help you do this. For example, Kissmetrics is great for understanding how marketing has affected sales. You can track conversions rates from multiple traffic sources, such as Facebook or Twitter. This will give you tangible evidence as to how much your efforts these platforms have helped boost sales numbers.
Another useful tool is the Customer Lifetime Value Calculator. This tool tells you how much money you spend on turning someone into a customer and then how much money they spend on you. Using this tool is a great way to determine if you are getting enough bang for your buck with your marketing efforts. For example, if it costs you $50 to bring in a customer who spends an average of $60, you’re ROI is only a $10 increase in profit.
This may or may not be good news for you, but it is at least a tangible, quantifiable measurement of how much you are getting out of your marketing strategy, allowing you to understand the impact of your efforts and to make better decisions moving forward.
Step 3: Evaluate and adapt
Evaluation in marketing is a constant process that needs to be built into nearly every step. And then when you begin to see the results, you need to adapt quickly. You may find that you can boost your ROI simply by making an adjustment mid-campaign, which is far easier and cheaper to do that if you wait until the end to see how you are doing.
Social media can transform your business. This is no secret. But understanding exactly how it is transforming it by measuring your MROI will help you better understand what is working and what is not, giving you the chance to better focus your efforts and to position yourself for future success.
About the Author ( This is a Guest Post): Jock is an internet entrepreneur who understands the value of social media marketing. He enjoys working with other entrepreneurs to refine their business growth and marketing strategies.