Understanding Digital Marketing ROI Metrics for Social Media Marketing

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When you make an investment, you expect a return on it, wouldn’t you? The money that you spend on digital media marketing is an investment and not a spend. Why you ask? That’s because you are spending to get increased sales or more returns. Therefore, it is not considered a spend but an investment.

Digital marketing has numerous mediums like social media marketing, email marketing, content marketing, affiliate marketing and many more. However, while you have a plethora of options to choose from for digital media marketing, it can prove to be challenging to determine the return on investment for them.

And that’s because each platform has a different metric and there is no straightforward method to calculate the returns. In addition, you may not need to use all of the metrics either if they do not seem to be aligned with your business.

Let us focus on social media marketing metrics and see how return on investment can be calculated for it.

What is Social Media Marketing or SMM?

The first question that arises is – what do you mean by social media marketing? Basically, social media marketing (SMM) is defined as the use of social media platforms and networks to promote your brand. You can show off your products or advertise your services to an audience to increase sales as well as drive traffic to your website.

Social media is a great way to create brand awareness and help you with your digital marketing or branding goals. Social media and networks offer effervescent marketing platforms and are a favorite among digital marketers.

What are the Spends on SMM?

The ultimate aim is to make a sale. However, a share on your Facebook post does not directly convert to a sale but it might be responsible for triggering more likes and shares which may result in traffic to your website and subsequent sales

Before we start to determine what returns you are receiving from social media marketing spending, here are some of the areas where you would be expected to invest in:

Tools and platforms: To measure your return on investment, you will require certain tools and platforms. The tools also help you to manage your posts, ads and overall content. Tools are important as they give your deep insights into user behavior on the social media platform.

Social media ads: Social media platforms offer advertising options at a cost which might be beneficial to your business. Be prepared to shell out for post promotions and online ads. With promotion options, you can choose the target group based on age, demographics, etc. and help you reach your intended customer pool.

Content Creation cost: Content is king. Without content, your promotions might fall flat and not hit the right note. Therefore, you may need to hire content creators working either in-house or on contract. That means you would have to pay salaries or pay on a contractual basis for the work that they do for you.

Social Media Team: You will have to incur costs for training and hiring social media teams who will design campaigns for promoting your brand. This is important as you need to have a plan to keep your online presence strong to create brand awareness.

What are the ROI Metrics for SMM?

Unlike stocks and shares where you can immediately know if you are earning or losing money on your investment, there is no one kind of calculation to determine the return on investment for the spend on social media.

One of the formulas that you can use is – (Profits/Investment) * 100 will give you the percentage return you get. While it is not possible to attach a dollar value to every metric, there is a way to estimate it roughly. Let us try to understand how the return on investment can be measured for SMM and what parameters must you keep tracking over time for the same.

Reach: This is one way to understand how many people have seen your post or have liked or shared it or have become your subscribers or followers. The higher the reach, the greater will be the ROI.

Audience engagement: This translates to the number of comments that your post has received or if any brochures have been downloaded or newsletters have been signed up for. You can keep a track of the engagement with the corresponding posts to understand which posts are garnering more attention from your audience

Traffic: One of the best metrics to measure, this relates to the number of visits to your website. You can know which pages on your website attract more visitors than others and how much time do visitors spend on the pages that are important to you.

Click-through-rate or CTR: This refers to the ratio of users who click on your social media ad versus the total number of users who have viewed your ad. This is an extremely important metric to measure how effective your content is to lure potential customers to your business website.

Conversion Rate: The percentage of visitors to your website through social media promotions who buy your product or services.

The analytics tools that you may have invested in can help you track the cost incurred, for instance, to gain a subscriber.  For example, if you had to spend 100 dollars to get 1000 followers, the cost for one follower is 100/1000 = 0.1 dollar or 10 cents. Another important parameter that you must track is the customer lifetime value or CLV which refers to the profits that the customer brings while he stays loyal to your brand.

The Takeaway

It is not necessary for you to use all the metrics to keep track of your ROI. For example, if you are an influencer but do not sell any products, you may not need to keep track of CLV. All you need to do is to track is the number of views and subscribers to your channel to understand the ROI on your investment. However, if you are selling products or offering services, you may require more than one metric to accurately determine your ROI. Thus, use the right combination of metrics to understand the ROI on your social media marketing.

Author Bio:

Sachin Agrawal is an Enterprise Architect and heads up Business & Technology at Tarika Technologies. He carries expertise and a flair for writing on Management Consulting, Software & Analytics and Digital Media. Apart from distilling his technical ideas into creating innovative solutions, he is a practitioner of Haidong Gumdo and at his leisure, taps the Cajon and strums his Guitar!

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