How to Calculate Social Media ROI

ROI Models by Ignite Social Media

Social-Media-ROI-Charts1

How’s that Facebook campaign going? Or even better – how much revenue has Twitter been sending your way this year? “Yeah, right,” you think. “If I had those answers, I’d be set!” Well, if you ask us, you can have those answers.

Ever since companies jumped into this loosely defined and elusive business of “social media marketing,” marketers have acted as if defining ROI is an insurmountable task. We definitely agree that it’s difficult, but it’s certainly not impossible.

Ignite Social Media, “the original social media agency,” took it upon ourselves to figure out how to calculate social media ROI. The answers still aren’t crystal clear, but we’re getting close. So far, we’ve developed six straightforward models that are getting real results for our clients.

Because social media ROI has so many different facets, we find that it takes at least six different approaches to get the big picture. We wouldn’t be surprised if additional approaches come to light this year, either.

Click on the boxes below for a brief synopsis of each of our six social media ROI models.

Amplification Model

This model isn’t technically an ROI model; rather, it’s a way of determining the number of social impressions and actions your brand is getting, as well as what those impressions and actions are actually worth.  With our  Purchase Equivalency Calculator we can use the Amplification Model to determine how much a client’s social media impressions cost compared to the cost of getting the same number of brand impressions through traditional advertising like print, TV and radio.

A little confusing? Don’t worry. We’re going to unpack this in much more detail below.

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Social Traffic vs. Display

27% of brands spend 11–25% of their marketing budget on display advertising. With the Social Traffic vs. Display Advertising model, we can determine a relative return on investment for social traffic visibility versus display advertising visibility. For example, we’ve been able to show clients a 6.5x better return on social traffic  than on display traffic!

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Quality of Visitors from SM

Some of the visitors on your Facebook Page arrive as a result of your careful social media marketing. Others just happen to land there according to the whims of the Internet Fates. Who’s who? What’s the difference in quality? This model fleshes it all out.

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Revenue from FB Fans

As your Facebook fan base grows, you hope to see your revenue grow, too. However, pinpointing an exact figure of projected revenues can be a daunting task. This model breaks it down into a precise science. If it isn’t possible for you to track Facebook fan clicks to your ecommerce platform, this model will help you get a good idea of the correlation between the two actions.

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Revenue from SMM

This approach is the “big one” — determining how much revenue your social media marketing actually gives back. We start with the big picture (the number of visitors you receive on your goal pages) and continue to add more specific data until you’re left with only the most pertinent, crucial information. Download our white paper to find out more.

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Social Promotions Sales ROI

This model is relatively easy to complete once you have your “Revenue from Social Media Marketing” model in action; however, it’s important to remember that not all social promotions are designed to result in sales. Many promotions have objectives that don’t result in immediate sales, such as increasing mailing list sign-ups or improving brand sentiment online.

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  • Amplification Model

    Amplification Model

  • Social Traffic vs. Display

    Social Traffic vs. Display

  • Quality of Visitors from SM

    Quality of Visitors from SM

  • Revenue from FB Fans

    Revenue from FB Fans

  • Revenue from SMM

    Revenue from SMM

  • Social Promotions Sales ROI

    Social Promotions Sales ROI

Making Sense Of It All

Does This Stuff Really Work?

The idea behind determining the ROI of social media isn’t to achieve some inarguable, objective figure. Instead, we advocate using these models to get really, really close.

When you think about it that way, these approaches definitely work. While one or two of these models are great for picking out specific pieces of data, we really recommend using all six of the models in conjunction with one another to get the big-picture idea, as well as the “little picture.”

To see how these models are working for others, check out our video:

Why You Should Start With the Amplification Model

Let’s be honest. We all have limited budgets in the marketing department. Even if that budget is hundreds of thousands of dollars, there’s still a limit. When you can’t quantify what kind of results your social media marketing is achieving, you have to ask yourself a tough question:

Do I just cut all this Facebook money and buy a really nice advertising campaign?

For some companies, the answer is yes. For many more, however, it’s a definite no; but, you can’t make that decision until you run the data – hence the Amplification Model.

The Amplification Model kicks into action with the Purchase Equivalency Calculator. Click the link to see a full spreadsheet of this calculator in action. With this spreadsheet, you can see how the client in the example generates $2.45 of value for every $1 spent on social media marketing. If spreadsheets aren’t your thing, check out the Infographic at the bottom of this page.

Plug in data from your own company (using basic information from your analytics software) to get answers about your unique marketing budget. Here are the inputs that you’ll need:

  • Facebook Organic Impressions (from Facebook Insights)
  • Clicks on Facebook Links (from your tracking links)
  • Twitter Impressions (using our formula)
  • Clicks on Twitter Links (from your tracking links)
  • Organic YouTube Views (from YouTube Analytics)
  • Blog Page Views (from your analytics tool)
  • Online Brand Mentions (from your monitoring tool)

Why This Works…

The bottom line is this:

Positive mentions of your brand in front of those with a propensity to buy will increase sales. 

Remember, the Amplification Model isn’t designed to measure your sales. It measures the brand impressions you get through social media (and their cost) against the brand impressions and cost of traditional advertising.

To get a more thorough understanding of how the Purchase Equivalency Calculator works, view the PowerPoint below, which explains this tool in great detail.

Next Steps…

Social media ROI is real and measurable, but it takes a good deal of work to extricate meaningful information from the raw data. Some of the tools, like analytics software, are already in your possession, and a few of the formulas can be found in our whitepaper . Put them together, and you’ll be able to show everyone in your company exactly what social media marketing is doing, or could be doing, for your business.

Results that aren’t measured are hardly results at all. Be the leading marketer you want to be by implementing these ROI-tracking techniques.

Download our White Paper

Learn More About These Six Models

roi-pdfTo read about these models in greater depth, submit the form below. All of these models are explained in detail, including examples in practice, case studies, actual formulas and answers to many of the questions you may have about the models.