One problem with tracking social media ROI is that people often start with a flawed definition. If the words engagement, traffic, bounce rate, retweets, comments, Diggs, Stumble’s, etc are included in your definition you are already off track.
I’m not saying that you should not track or measure these items. Some of these measurements may be defined as key performance indicators and indicate whether or not you are on the right path. They just don’t belong in the ROI equation.
ROI = Return on INVESTMENT. So lets look at the definition of “investment”.
in·vest·ment : Property or another possession acquired for future financial return or benefit.
You’ll notice that in the definition I have underlined the words “financial return or benefit”. If you’re into social media for “social reasons” then you are spending time, not investing.
As a business person you only spend (waste) or invest dollars (time is money), which will result in more or less dollars being returned to you. Dollars out vs. dollars in.
ROI = (Gain from Investment – Cost of Investment) / Cost of Investment
The components of the ROI formula are all dollar based. Suppose at the end of the day I made $10 by investing $7, I would have an ROI of 42.8%. It doesn’t matter whether I had 100 visitors to my website or 1,000. Traffic has nothing to do determining ROI. Now if I paid $1 to drive the 100 site visitors then that would factor into ROI as a component of cost.
Cost of Investment
If you’re looking to track the cost of your social media initiatives it should not be that difficult. If you are paying someone else to do the work for you then whatever you pay them is your cost.
If you are doing it yourself then you need to calculate the value of your time (opportunity cost). While you can guesstimate these numbers the more accurate they are the better your decision making capability will be.
Gain From Investment
Tracking social media related sales is a difficult and in some cases impossible task. You will never be able to directly attribute every sale that resulted from social media initiatives back to social media. So what?
If you ran a television or radio ad could you track every sale that they generated? No. So what do you do? You track what you can and move on.
Its easy to add a specific url, drive people to a landing page page, or use coupon/promotional codes to track sales. The same techniques that have been used in online marketing and email marketing will work.
Where most people get bogged down is worrying about the value of social mentions, retweets, comments etc. If you’re tracking ROI then these are currently irrelevant because from an ROI perspective their value is $0 until they translate into a sale.
I’m not saying that these social engagement metrics are worthless, in fact they could be extremely valuable. They just are not part of our ROI conversation
When I look at a new campaign my initial focus isn’t on ROI. I’m more concerned with are our communities growing, is traffic increasing, are more people engaging with the brand, are we starting to generate leads, and are we driving revenue. These are the stepping stones to driving ROI.
Positive trends here do not guarantee a positive ROI but based on experience they are key indicators of whether or not we are moving in the right direction.
So, “Can you track social media ROI?” The answer is a little more black and white if you start with the right definition?
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