How to Measure Social Media ROI

ROI for social media

A question I’m often asked is “how do I know if my social media activity is useful for my business or not?”. What we’re talking about here is social media Return On Investment (ROI). You are committing resources, usually scarce resources, to social media activity and you want to be certain that it’s paying off for you. So how do you calculate this? 

Well for those of you waiting to hear the magic formula for calculating social media return on investment let me give you some bad news – it doesn’t exist! There isn’t a single formula that you can use to calculate social media ROI. But don’t panic! There are actually a couple of ways to calculate ROI: One will give you a good, quick overview of what it is, and the second way is painful, but detailed.

Calculating Social Media ROI – Overview Method

What you can do is create several different ROI calculations based on your underlying goals. 

The calculation you use to show the value of social media to your business in order to generate leads is different from the calculation you would use to show the return on using it to generate sales. Let’s look at a couple of examples. 

Sales Value of Social Media 

Let’s say that you are running a campaign to drive a targeted audience to a sales page for a one-off product. To calculate your social media value, you need to measure the number of purchases resulting from social media contact. The simplest way to do this is to create a landing page dedicated to social media sales, and only use this landing page URL in your social media activity. You can then take the total order value from this page as your social media value. You can also estimate conversion rates by cross-referencing with Google Analytics.

If you have an ongoing relationship with your customer, you may want to calculate the return based on lifetime values. The lifetime value of the customer is the total revenue you can expect to receive from a single customer over the lifetime of your relationship with them. In this case, let’s assume that social media leads are captured on an enquiry form and passed to your sales team. To calculate the value of this, you simply multiply the number of leads passed to your sales team by the average lead conversion rate and then multiply the result by the typical lifetime value of a customer.  

For example, let’s say social media generates 500 clicks through to your lead capture page and 100 visitors complete the enquiry form. Then with a sales conversion rate of 50% and a lifetime value of $5000, the potential value generated by social media is a simple multiplication of 100 visitors × 50% conversion x $5000 lifetime value = $250,000. 

Advertising Value of Social Media 

If your goal is to drive more traffic to your website you need to measure the number of social media referrals to your website and multiply by the equivalent cost of running a cost per click campaign on say Google AdSense.  

So for example, if you were to achieve 500 clicks from social media through to your website and for your given industry keywords the typical CPC is $4.10, then the return on your investment in the social media campaign is 500 x $4.10 = $2050. This is what you would have had to spend on a CPC campaign if you hadn’t used social media instead. 

Calculating Social Media ROI – Detailed Method

This second method of calculation social media ROI is quite painful – so be warned. Unless you need to know very accurate figures, go with the Overview Method!

The detailed method of calculation involves using UTM codes – snippets of text added to the end of a URL to help you track where website traffic comes from.

Some Examples…

To create a tracking code for a specific campaign, you could use something like utm_campaign=holidaydiscountpromo

To create a tracking code for a specific traffic medium, use something like utm_medium=socialmedia

Or, to be more specific about the source, you could use something like utm_source=Twitter

And you can combine these to give you a very accurate picture of what traffic is originating where.

There are, however, two problems with using UTM codes. The first is that you will need to use them for each piece of content you want to track. The more content, the more work involved. So if you do go down this route, don’t make your life miserable by trying to track every single item of content you publish!

The second problem with UTM codes is that it can make your content URL a tad long –

The obvious way around this particular problem is to use a link shortener – Bitly. This will actually have an added benefit of giving you some additional data to use, as Bitly provides click and referral data.

How to generate UTM codes

Good old Google to the rescue. They have a Campaign URL Builder you can use to generate UTMs.

Generating UTM Codes
Google Campaign Tool

Complete the form with the fields you need and Google will generate a new URL for you, complete with the UTM codes inserted.

Calculating Social Media ROI - URL using UTM Codes
URL using UTM Codes

You gotta admit, the URL isn’t pretty, so run it through Bitly to make it a tad more elegant.

Now as far as measuring traffic generated by Social Media, you are done. But wouldn’t it be super if you could measure the value of any conversions you have generated by Social Media?

Calculating the value of social media traffic to your business

You guessed it. Back to Google, this time Google Analytics.

First step is to open up the Acquisition > Social Media > Conversions screen

Measuring Social Media Conversions
Measuring Social Media Conversions

If this is your first visit to the Conversions page you will get an introductory message.

Measuring Social Media Conversions - step 2
Measuring Social Media Conversions – step 2

Click the button to set up your goals and click on the ‘Custom’ button at the bottom, then ‘Continue’.

Measuring Social Media Conversions - step 3
Measuring Social Media Conversions – step 3

Next, give a description of your goal, in this example I am measuring signup conversions for my Million Dollar Hackers Club business newsletter.

Next, select ‘Destination’, and ‘Continue’.

The final step is where you get clever. For the destination you should enter the url of the ‘thank you’ page. So in the case of a newsletter, the visitor fills out the subscription form and hits send. They are then directed to a thank you page. This is the page you need to enter (or the purchase confirmation page, or discount code page, free training page, etc.

You also have an option to assign a dollar value for each conversion. If you don’t know the lifetime value of your customers, either estimate it or switch it off.

measuring goals
measuring goals

And that my friend is it – phew! You can now measure the social media origins of your traffic and know the value of that specific traffic to your business. Nothing in what I have described is difficult to do, and as you see, you can make it as easy or as hard as you want, depending on the time and resources you have available.

Calculating social media value and return is simply a case of knowing what it is you want to achieve through social media, measuring the outcome, and assigning an equivalent monetary value to it. Don’t drive yourself crazy with it, don’t obsess over it, and just focus on what is meaningful for your business.

Share on facebook
Share on google
Share on twitter
Share on linkedin
Share on pinterest
Andy Wood

Andy Wood

My mission is to guide and empower you with the tools, resources, strategies, and tactics to help you succeed in your online business, and (of course) EXPLODE your income so you can live life on your own terms.

Leave a Comment

Your email address will not be published. Required fields are marked *

This site is protected by reCAPTCHA and the Google Privacy Policy and Terms of Service apply.

Scroll to Top