What’s the return on investment (ROI) of social media marketing? The answer isn’t always straightforward.
- You could answer with data on engagement rates, lead generation, click-through rates, web traffic, and revenue-driving ad campaigns.
- Or you could be like 58% of companies and dish out vanity metrics such as views, likes, follower count, etc.
Social media metrics like views, followers, and comments are necessary to gauge your social media performance. The problem is that 44% of CMOs cannot quantify the impact of social media on their business. As your organization's marketing maestro, you must dig deeper and connect your social media strategy to monetary values.
Let’s explore practical strategies to move beyond surface-level metrics and dive into ROI-defining data. By understanding why social media ROI matters, which metrics to track, and how to track them, you can convey how social media contributes to your organization's bottom line.
Why Social Media ROI Matters
If your friend Joe told you he was a savvy investor but couldn’t provide data on his returns, would you trust his stock picks?
I doubt you would, and the same holds for your social media strategy.
Some good news before we get into the why – Social media delivers the highest ROI as a marketing channel, second only to SEO.
Empowers Your Budgeting
Recent data from Deloitte’s Annual CMO Survey shows digital marketing spend dropped 47.3% from 2022 to 2023. With constrained budgets, you need a clear understanding of your returns to avoid inefficiencies and wasted resources.
Say you’re in the process of updating your social media strategy. You intend to launch more Instagram ad campaigns, but after calculating the ROI of your social media activities, you find Facebook ads delivered the highest ROI. This data-driven approach optimizes social media budget allocation based on real business impact
Demonstrates Your Value
Executives and stakeholders demand accountability. Your ability to showcase tangible and measurable results bolsters your credibility and ensures that your social media marketing plan align with organizational goals.
Whether it be lead generation, website traffic, or conversion rates, quantifiable metrics show social media impact. For example, attribution models help you show how a large portion of your online sales came from specific social media campaigns and highlights their contribution to your bottom line.
Enables You to Build Competitive Strategies
Your social media ROI isn't only about financial gains; it includes assessing engagement, brand awareness, and customer satisfaction. When you evaluate these metrics, you customize your social media strategies to connect more effectively with your target audience.
Take the case of BT, a British telecommunications company. Through a deliberate shift of customer interactions to social media, BT saved £2 million ($2.5 million) in customer service operation costs and experienced a substantial boost in customer satisfaction.
This move reduced customer churn and improved their competitive edge, as customers were more satisfied, loyal, and less likely to turn to competitors.
Key Metrics You Need To Measure Social Media ROI
No one metric will prove your social media success. It depends on your social media objectives and broader content marketing strategy.
For CMOs looking to quantify their social media ROI, connecting social media metrics to broader key performance indicators (KPIs) is essential. Consider the customer journey and how the metrics you track align with goals at each stage:
|Stage of Funnel
|Awareness: Introduce and build your brand recognition.
|Reach and impressions for organic posts, website visits, traffic sources, Cost per thousand impressions (CPM) for paid social.
|Interest: Capture and maintain the attention of potential customers.
|Likes, shares, follows, link clicks for organic social posts, Cost per click (CPC) or Click-Through Rate (CTR) for paid social.
|Evaluation: Help potential customers assess your product or service.
|Demo requests, free trial sign-ups, Marketing Qualified Leads (MQL).
|Purchase: Convert interested leads into paying customers.
|Conversion rates, revenue generated, “Add to cart” actions.
|Retention: Foster loyalty and satisfaction among existing customers.
|Customer Lifetime Value (CLV), referrals.
You’ll need to use social media analytics to monitor several metrics and calculate your social media ROI, so separate them into cost and return metrics. In other words, what is taking money out and driving revenue back in?
Also, consider your paid and organic social media activities when measuring the ROI of your social efforts. While organic is “free” to a degree, costs are still associated with producing and managing content, such as hiring creators or social media managers.
Paid Social Costs You’ll Need to Monitor
For paid social campaigns, monitor Customer Acquisition Cost (CAC), Cost per Click (CPC), and Cost per Thousand Impressions (CPM) to define your costs:
- Customer Acquisition Cost (CAC): CAC represents the cost of acquiring a new customer. You track CAC by dividing your total marketing expenses by the number of new customers acquired within a specific period.
- Cost per Click (CPC): CPC measures the cost for each click on your ad. To track CPC, divide the total cost of your campaign by the number of clicks it generates.
- Cost per Thousand Impressions (CPM): CPM calculates the cost for a thousand impressions. Track CPM by dividing the total cost of your campaign by the number of impressions, then multiplying by 1,000.
Return on Investment Metrics You’ll Need to Monitor
Return metrics may vary based on your business goals. But you’ll often need to monitor your engagement rates, web traffic, reach, impressions, conversion rates, and click-through rates (CTR).
- Engagement rate: Your engagement rate gauges the level of interaction with your content. Track it by dividing the total engagements (likes, comments, shares) by the total reach and then multiplying by 100 for a percentage.
- Web traffic: Web traffic represents the number of users visiting your website. There are many tools that can measure this, the most popular being Google Analytics, HubSpot, and Hootsuite. To enable tracking, use these tools to insert unique tracking codes in your website link, known as UTM tags.
- Reach: Reach indicates the unique users exposed to your content. This can be monitored through in-platform analytics, like Instagram Insights, or through external social media management tools, like Hootsuite or Sprout Social.
- Impressions: Impressions measure the total views of your content. Track impressions via platform analytics or using social media management tools. Impressions provide insights into overall content visibility.
- Conversion Rate: Conversion Rate reflects the percentage of users taking a desired action. Track it by dividing the number of conversions (e.g., sign-ups or purchases) by the total number of visitors and multiplying by 100.
- Click-Through Rate (CTR): CTR calculates the percentage of users clicking on a link. Track it by dividing the number of clicks by the number of impressions, then multiplying by 100 for a percentage.
- Marketing Qualified Leads (MQL): MQL refers to leads that are ready to be passed off to sales. Track MQL by monitoring bottom-of-funnel activities such as form submissions, demo requests, or specific offers that indicate strong intent to engage with your product or service.
Pro tip: Create benchmark reports on your social media performance to get clear on where you stand in your industry. Hootsuite Analytics includes a benchmarking feature that automates this for you, providing a quick and easy overview of your competitive standing.
How To Calculate Social Media ROI
Once you’ve outlined your business objectives and determined the metrics to track them, you can calculate your ROI. Before you move forward, ask yourself:
- Do I have well-defined goals?
- Do I have analytics and data on my key metrics?
- Do I have a specific time frame?
These questions act as boundaries for your ROI calculations.
Pro tip: Find out your average sales cycle. Align the data you pull for the reporting period with your sales cycle to get a better reflection of how social media affects your business results.
Here’s the Social Media ROI Formula I Use
Social Media ROI = [(return-investment)/investment*100]
The “return” refers to the total value of your social media efforts, while “investment” refers to all social media costs.
In the previous section, we outlined the metrics that best reflect your returns and costs, and that data plays an important role here. What you input as returns or costs will reflect the metrics you track, such as web traffic, generated leads, or costs-per-click (CPC).
Show and Tell: A Social Media ROI Calculation Using Fictional Numbers
Imagine you're a small B2B business with tight budgets and limited resources. For you, the focus is on direct sales generated through a specific social media marketing campaign.
For returns, you’re tracking conversions from a paid campaign. On the costs side, you’ve hired the help of a freelance content creator in addition to the total costs-per-click for the campaign.
For your calculation, we can assume the following data:
- Cost of freelance content creator: $1500
- Number of clicks generated by the campaign: 2,000
- Cost per click (CPC): $2.50
- Number of conversions (actual sales): 50
- Average revenue generated per conversion: $200
Using this data, let's calculate your return:
Return = Number of conversions * Avg. revenue of conversion
Return = 50 * $200 = $10,000
Now, we must add up the costs:
Investment = Freelancer costs + CPC * Clicks generated
Investment = 1500 + 2.50 * 2000 = 6500
Plug this data into the formula:
Social Media ROI = [(10,000-6500)/6500*100]
Social Media ROI = 53.85%
With a total investment of $6,500, your Social Media ROI would be approximately 53.85%.
This means that for every dollar you invested in the social media marketing campaign, you generated a positive return of $1.54.
If you work at a larger corporation with more resources and a larger social media presence, the same formula applies. But the data used should include the total returns and investments across all channels and campaigns.
Pro tip: Use tools like Sprout Social or Hootsuite to generate performance reports (weekly or monthly) and get into the habit of calculating ROI once per quarter. This saves you from sifting through a mountain of data each time.
Challenges of Measuring Social Media ROI and How to Overcome Them
Yes, measuring the ROI of your social campaigns can be challenging. Here are some common challenges and how I get around them:
Understanding Your True Costs
Over the years, I’ve worked as a social media specialist, social media manager, and freelance content creator for B2B organizations large and small. And I have learned that most organizations underestimate their ongoing social media costs.
According to estimates by Sprout Social, social media content creation costs $7,950 per month on average. On top of that, you must factor in the average ad spend ($5000 per month) and management costs ($1500-3000 per month).
In total, that brings us to $15,950. This number will be shocking to some, given that social media channels are often positioned as a “free” marketing channel.
Pro tip: Take the time to break out your complete social media costs, from strategy development through to ongoing management. This is the only way to understand your true ROI.
Keeping Track of all Returns
Don’t let tunnel vision blind you from the true value of social media marketing because it’s more than just sales and profit. You must also consider brand awareness, customer relationships, and retention. Neglecting these dimensions can lead to an incomplete understanding of social media's impact.
Falling into the trap of tracking vanity metrics or those unrelated to business objectives is also prevalent. While likes and shares might seem promising, their translation into tangible SaaS outcomes is limited.
Pro tip: Expand your metrics tracking beyond sales data and vanity metrics. Remember to measure brand awareness, customer retention rates, and community engagement to get the full picture.
Aligning Your Data with Business Goals
Your social media ROI should reflect broader business goals and the steps you take to achieve them. For example, if revenue growth is a primary concern, align your metrics reporting to showcase the impact on sales and conversions.
If brand awareness is your focus, monitor engagement rates or website visits.
Aligning your goals across the board strengthens your ROI conversations because you can pinpoint which actions support the company. This is especially important when presenting the final data to stakeholders and senior leadership.
Pro tip: Align your metrics with your business objectives. Tailor your approach to match your specific goals rather than chasing metrics that look impressive but hold little relevance to your business outcomes.
How To Improve Your Social Media ROI: Strategies + Industry Secrets
Once you’ve calculated the returns of your social media strategy, you may find it isn’t what you’d hoped. If so, it’s time to re-evaluate your strategy by looking into content optimization, audience research, and how to leverage tools and trends.
Optimize Your Content
We all know the saying, “Content is king.” It’s true for the most part, but creating content for content's sake is not how you win on social media. As Liana Evans, the author of Social Media Marketing: Strategies for Engaging in Facebook, Twitter & Other Social Media, says:
“Content doesn’t win. Optimized content wins.”
To improve your social media ROI, start optimizing your content with strategies like social media SEO (search engine optimization) and A/B testing.
Improve your social media ads through A/B testing, a strategy that tests variations in different elements. Experiment with post text, CTAs, visual formats, and ad formats across platforms. Assess the impact of hashtags and audience segmentation. Use social media scheduling to push tests live automatically, and diversify your approach based on what resonates with your audience.
Social Media SEO
Social networks like TikTok and Instagram are the preferred search tools for 40% of Millennials and GenZ. Optimize your profile by incorporating relevant keywords into your bio, name, and handle. Craft captions with strategically placed keywords and employ relevant hashtags. Enhance the accessibility and search visibility of your content by using subtitles, in-video, and alt-text.
Listen to your Audience
Social listening involves monitoring and analyzing online conversations for insights into audience sentiments, preferences, and trends.
Tools like Sprout Social and Agorapulse provide features that help you monitor your audience's sentiments, identify trends, and stay in touch with topics your audience loves to chatter about on social media.
Implement Link Tracking
All social media platforms include some form of analytics tracking, but this data must be combined with off-platform analytics to completely understand your ROI.
For example, if you suspect a lift in website traffic is due to your Facebook posts, link tracking through UTM parameters or tracking pixels will provide the data to confirm your suspicions.
You should also check out how you can maximize your marketing analytics by focusing on full-funnel marketing.
UTM parameters, or UTM tags, are short text codes that differentiate between links pointing to the same URL. These codes track the source of web traffic.
For example, the UTM code utm_medium=social indicates traffic came from social media, the medium, while utm_source=facebook shows the source of the visitor, which is Facebook. Both of these codes can be added to a URL to provide information on where your traffic is coming from. I usually use Google Analytics for UTMs.
This option is much more manual, though it offers complete customization. Alternatively, social media management tools like Hootsuite offer built-in link-tracking tools to streamline the process.
Pixels as UTMs
Essential for ad campaign evaluation, tracking pixels captures user actions from social ads, including purchases. These tracking codes are similar to UTM tags in that they share website interactions with social platforms like Meta and TikTok.
This is helpful for tracking your social media marketing ROI, as it reflects how social ads contribute to customer actions off of social media platforms. This data can also be used for strategic retargeting, enhancing conversions, and brand engagement.
Use Social Media Analytics Tools
Forgive me for being cliché, but time is money. The time it takes to analyze your social media performance factors into your ROI, and a manual approach is a waste of time. Please invest in social media analytics tools!
These provide a wealth of time-saving automations, in-depth data reporting, and scheduling features. Let’s take a look at a few of the best:
HubSpot is an all-in-one marketing software with in-depth analytics reporting for organic and paid social media campaigns. You can track engagement, click-through rates, and conversions from a central dashboard. And create automated reports on your performance. HubSpot also supports tracking link creation – a helpful alternative to manually generating UTM codes.
Hootsuite is a fantastic solution for social media management. While similar to Hubspot, Hootsuite provides a more comprehensive and customizable analytics dashboard for social media. It includes post-scheduling features and social listening tools. And enables real-time monitoring of keywords, brand mentions, and industry conversations.
Bonus: Check out Hootsuite’s social media ROI calculator for a helping hand in understanding your social media return on investment.
Understanding Social Media ROI Isn’t Optional!
Mastering the measurement of social media ROI is not a “nice to have” – it's a must for marketing leaders and their teams.
Key metrics, both in costs and returns, provide a holistic view of your social media performance. By embracing strategies like A/B testing, social listening, and leveraging advanced analytics tools, you can optimize your content and enhance your social media ROI.
So, refine your social media marketing strategy, stay informed with the latest industry insights, and continue optimizing your approach.
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Your journey to unlocking the full potential of social media ROI begins now.
What are some advanced metrics for ROI?
Advanced metrics such as Customer Acquisition Cost (CAC), Customer Lifetime Value (CLV), and Customer Retention Rate provide deeper insights on how social media impacts your business.
If you’re ready to dive deeper into advanced metrics and KPIs, read our guide on Key Performance Indicators Every CMO Should Track for a more comprehensive overview.
Which social media has the highest ROI?
For B2B marketers, Facebook drives the highest ROI, with TikTok, YouTube, and Instagram sharing second place. However, take this with a grain of salt, as this will vary from business to business.
Audience analysis is an important step in building a successful social media strategy and will provide the best data on which platform will work best for your business.
What’s a good growth rate for social media?
Growth rates on social media vary widely based on industry and platform. On average, a growth rate between 2-5% is considered good, but this isn’t concrete. For example, here are the average monthly audience growth rates on LinkedIn, Instagram, and TikTok:
This variance in growth rates is why it is important to create your benchmark reports to personalize your growth tracking.
How do I align my social media goals with broader business objectives?
Start by identifying overarching business goals. Then, define specific, measurable social media objectives that contribute directly to those larger aspirations. When goal setting, utilize social listening to understand better your target audience’s needs, desires, and struggles.
Can ROI be negative, and what does it mean?
Yes. Negative ROI indicates a loss on investment, which means you’re putting in more than you’re getting out. Evaluate the cause – whether it’s strategy, targeting, or execution – and adjust your marketing budget accordingly.