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January 17, 2012

How To Measure The Return On Investment For Social Media In Marketing

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“ROI on Social Media? What bloody ROI?”

It’s only the first week of January 2012 and already I’m hearing the same refrain as 2011! “How do we calculate the ROI on social media in marketing?”

When you begin using social media in your marketing strategy or as a stand alone campaign, it is hard to determine how those numbers of followers and ‘likers’ stack up against delivery of a return on investment.

We have clients who ask us this regularly so here’s some clarity for you.

Measuring social media ROI is very difficult for a few reasons. The first is that it is very hard to use social media trackers for individual sales and the second is that social media is not a direct sales channel, it’s a relationship marketing tool.

Although difficult it can be done using a combination of direct marketing stratagems like offer codes linked to specific landing pages in your ‘hub’ (a blog or website to run all your social media activity through.)

This, however comes after you have built an audience or community to ‘market’ to. It’s no good running a specific offer or promotion until you have a loyal following and that takes a while.

For any social media agency to offer ROI they will need parameters which you all agree at the outset eg: a % increase in audience month on month.

You may also assign other parameters like: percentage traffic driven to a specific landing page.

Monitor online visibility by looking at the number of mentions (share) of your brand and links to your site using tools like SocialMention. Put Google Analytics on your ‘hub’ and measure traffic source. Use social media monitors like KLOUT to determine your brands popularity via social media. Check your Facebook insights to see ‘share’ figures and ‘post views’ When you have an audience or community worth marketing to, remember to apply the same rules you would in traditional marketing: have a strategy – Determine content – Reward loyalty – Engage regularly and relevantly.

Track your results and learn from them. For a social media consultant or agency to do this for you they need to have a relationship with your website/blogsite manager and designer or full access to the site, access to all your online profiles, a copy of your marketing strategy and a ‘point’ person to get material from eg: videos, photos, posts, tips. In fact your social media agency becomes part of your marketing department.

If you’re choosing a social media agency, look for one that has its roots in marketing and advertising and understands that synergy. They also need to understand search engine optimization.

Running individual campaigns within social media is easier to measure in terms of ROI. For example.

Let’s say you have 40 000 Facebook ‘fans’ on your business page and 25,000 on your Twitter Profile. You have an email database of 12,000. You want to tell them all about a special offer you’re running to buy XX at a discount of 20% and you want to record the click-throughs and the take-up of the offer.

The first thing you do is build a landing page on your ‘hub’. Why? It’s the only way to track results.

Your ‘hub’ should have analytics on it so that page can be monitored in terms of where the traffic is coming from and whether or not a sale is made or a visitor is sent on to a purchase page.

You can assign a ‘special offer’ code to your ‘tweet’, ‘post’ or ‘update’ that is specific to that tool, a time limit, an offer. You can also add a link that takes the recipient to that landing page. It may be that you only use one social media tool per campaign but remember to measure apples with apples!

The difference is this is a specific social media driven offer campaign not a generic visibility campaign.

We think it is this lack of understanding that causes a lot of problems when clients think about proving ROI in sales terms.

In terms of generic social media in marketing to build an audience, you can use recent research that tells you that increased online visibility through engagement on social media tools like Twitter, Facebook and bookmarks will give you increased sales.

Bain and Company recently declared that “Customers who engage with companies over social media are more loyal and they spend up to 40 percent more with those companies than other customers” in their study “Putting Social Media to Work.”

Wendy Clark is the senior vice president of integrated marketing communications and capabilities at Coca-Cola Inc. where she stated that an independent group verified that Coca-Cola fans on Facebook (36 million +) were twice as likely to consume coke and 10 times more likely to purchase.

I’d like to know that about my audience. Wouldn’t you?

James Caan of Dragon’s Den fame looks at it purely from a financial gain point of view.

This is why we use social media for our clients.


Jane van Velsen is the founder of the Social Media Shop Ltd. Jane still uses the principles of direct marketing and relationship marketing that she was taught at O&M Direct over 16 years ago. This social media agency offers online training through video tutorials, full service social media management and set up as well as full day workshops.

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