How to Calculate Social Media ROI?

In order to know about the efficiency of a social media marketing campaign that we have executed, return on investment(ROI) needs to be calculated.Calculating the return on investment(ROI) is not hard at all. We can make it simple.

ROI=(return-investment)/investment%

Keeping your investment the same, ROI will increase if return increases. If return decreases, then ROI will decrease. The higher the ROI, the better.

As the formula only use return and investment, it is simple to measure and compare the effectiveness of marketing campaigns. The higher the ROI of marketing campaigns, the more efficient it is.

For calculation in the context of social media, the formula will be as following:

Social media ROI=(SM return-SM investment)/SM investment %

SM return= the amount of value that obtained from our social media campaign

SM investment=the amount of money invested for the social media campaign

It is clear and easy to define the the amount of money invested but how about the amount of value obtained or returned? How can we quantify it?

Well,  the way to define return obtained is up to you. You will need to derive the social media return based on goals of objectives of your company. If  the objective of your campaign is to boost sales, then your social media return is the number of sales that you obtained after the campaign is executed. In addition, you can also set your return as brand awareness if your goal is to drive awareness of your brand.

After defining the return, next we will need to quantify the value of return in dollars.

To quantify the sales, we should look at the “last touch” sales, use forecasting techniques or use identifier such as coupon codes if there is any coupons or vouchers given out.

However, quantifying consumer insights is harder. One way of doing it is to compare the quantity and quality of consumer insights from the group which involved in the social media campaign and the group which did not involve in the campaign.

For brand awareness, a way to measure it is to look the average number of messages each social media followers or Facebook fans received and then compare this number to what it would cost to purchase impressions to send the same number of messages to each fan. According to research, average Facebook fan is estimated to be worth \$3.60.

ROI is a very important measurement of efficiency. This is pointed out by Altimeter Group that 48.3%of all corporate social strategies will have social media ROI as their highest focus in 2011.