Most of you are probably doing social media because you feel you have to – “Everyone else is doing it so I should be too.” We know there are a few of you who take it seriously and have worked really hard to build your fan base, but for most of our clients, being on social is about covering your bases.
Believe it or not, social media can actually generate revenue for your business. But it takes some planning and a good amount of effort to make that happen. The hardest work is in building your social audience and keeping them connected with engaging content. That’s the day-in, day-out struggle in social media. If you do a good job with this, you’ll see social engagement and interaction, leading to your social followers taking actions that bring you new business.
So how how much of a return are you earning on your social media investment? That’s where tracking comes in.
How to Track and Analyze
- Decide what you want to track – What do you want your social followers to do? Make a purchase? Fill out a form? Click through to your website? Sign up for your newsletter? Share, follow, or like? These are all distinct goals and you need to decide first what actions are most important to you. For instance, we have a client who has a few hundred thousand followers on Facebook. Their immediate goal is to convert some of those eyeballs to more website traffic.
- Start tracking it – If you want to track actions on your website, Google Analytics is the easiest place to set this up. You can measure visits, leads, and conversion rate by social channel. You also may want to consider a trackable phone number you use only on your social platforms. If your goal is more interaction on a particular platform, most social channels have analytics that can help you see your engagement. The bottom line is that you want to know if the work you are doing is paying off in some way.
- Assign a value to what you are tracking – If your goal is more purchases from social followers, this can be as straightforward as plugging in an average purchase price. But in many cases, your goals may not be as straightforward. For instance, what is the average value of a new Facebook fan? A new Twitter follower? How much is each newsletter subscriber worth? Assigning values here can be much more challenging. In this situation, you may want to look at historical Analytics stats if you have them to see if you can find some reliable values per channel. If all else fails, you can guesstimate.
- Measure the value – Once you know what you want to track and how much each action is worth to you, then it’s just a matter of putting the pieces together. For example, if you’ve determined that each new Facebook fan is worth $10 on average, and you gained 50 new fans over the month, then your efforts on Facebook generated $500 that month.
- Determine your costs – Now that you have a better sense of the revenue social media is bringing in, it’s time to work on the other side of the equation. Add up the costs of your social effort. For example, factor in how much you pay your web team to do social posts on your behalf, or pay an employee to do it for you. Are you offering a special discount to social followers? Don’t forget to include that in your costs.
- Calculate ROI – Your total costs minus the total value generated shows you whether you have a positive or negative return on your social media investment. The ROI calculation is as simple as this: ROI = [(Revenue-Investment)/Investment] X 100.
What If My ROI Is Negative?
It’s just a reality that most people are not getting rich off of social media. If you find that you are spending more on social media than you are getting back, ask yourself a few questions. Are you tracking the right things? Maybe you are only looking at direct revenue from each platform. But what about the value of keeping top of mind with your fans, who you are interacting with regularly? What about the positive word of mouth and legitimacy that comes from having a healthy social presence? These are harder to assign value to but very few people would say they are worthless.
If you feel that you have captured the value fairly well and you are still sinking more money into social than you are getting out, you have three options:
- Increase Value – If the tactics you employ right now on social aren’t generating revenue, are there others worth trying that might do better? Have you tried a contest? Have you looked at your most popular posts and specifically developed more content like those? Have you bugged your web vendor or colleagues to find out if they’ve seen more success with a particular approach?
- Cut Costs – This one can be pretty difficult. If you stop paying someone else to do social and try to do it yourself, you may save money on paper but there is the opportunity cost of you having to be involved rather than working on other things to build your business. It may be that you are spending on social ads or campaigns that could be scaled back. But cutting back on posts and/or the quality of posts is only likely to make your social media ROI worse.
- Get Out – Abandoning a social media channel can be a tough decision. But sometimes it’s the right move. Remember all the hype about Pinterest in 2012? It’s still a great platform for some businesses, but if your product or service isn’t very visual, you’re probably not seeing success there. So maybe it’s time to leave and redirect your efforts. The same could be said for many other social platforms. Our advice for most clients is to focus on Facebook and Twitter first, and make sure you are comfortable with the investment on those platforms before continuing on with any more.
While it takes a bit of effort, it is possible to establish an ROI from your social media activity. Make sure first and foremost that you understand your goals for social media and what you feel is most important to track. Always keep in mind the bigger picture that social media for the most part is not meant to be a direct revenue source. It is a place where you can interact with fans of your brand and persuade them over time to continue doing business with you.