How To Calculate and Optimize Social Media ROI

Today’s business owners know that digital advertising is an effective and important aspect of any marketing and brand awareness strategy. Digital channels can help brands connect with target audiences, raise brand awareness, drum up leads, and close more deals. However, to fully embrace the potential of digital advertising efforts, marketers need to fully understand and measure its utility.

Return on investment (ROI) is a way to get these answers so marketers can make a more informed decision about how and where to spend time and energy to execute a winning marketing strategy. This blog details ROI, key metrics, relevance to social media campaigns, and how you can improve your marketing ROI, to name a few key points.

Understanding Social Media ROI

It’s worth your time and energy to calculate metrics related to ROI in social media advertising campaigns. This way you can have a better idea about whether you should continue on the current path to generate awareness and conversions from social media marketing.

What ROI Is and Why It Matters

ROI is an objective way for business owners to determine the profitability of their social media marketing efforts. By doing the math, business leaders can determine whether digital advertising campaigns are worth the monetary value. The impact of traditional advertising channels can be challenging to quantify. On the other hand, digital advertising offers a more straightforward path to capturing the monetary value of results.

Basic Formula: (Return – Investment) / Investment

The ROI formula doesn’t require advanced math skills. Calculate the total return on your investment and subtract your upfront marketing costs. Then, divide this difference by the first number to get clarity on how your brand awareness and advertising efforts on social media platforms are paying off (or not).

Common Digital Advertising Channels

Digital advertising is not a monolith. You have a few choices in how you invest your money to reach more followers online to support marketing ROI. The most common types include:

Pay-Per-Click (PPC) Advertising: These are display ads that appear at the top of search engine results.

Social Media Advertising: You can dedicate some of your advertising budget to marketing to cohorts of users on social media platforms like Facebook, Instagram, Twitter, and LinkedIn.

Display Advertising: This pertains to banner ads found on websites and apps.

Challenges in Calculating ROI for Digital Ads

It’s fairly simple to determine the ROI of conventional advertising methods using a marketing ROI formula. However, digital media can be more complicated to unpack. For instance, you might face challenges in your consumer marketing strategy related to:

• Attribution: Confirming which marketing touchpoint or paid social placements led to a conversion is not always easy, which is why you need attribution tools.
• Measuring Brand Awareness: Capturing how and to what extent your brand image is relevant can be a tricky matter in social media.
• Long-Term Impact: Measuring long-term impact can be tough. It can take a while before social media marketers can make the connection between brand awareness efforts, social media campaigns, and marketing ROI.

Key Metrics To Track for Social Media ROI

One way to get clarity on how your brand awareness efforts are shaping up is by tracking metrics or key performance indicators (KPIs).

Click-Through Rate (CTR)

This metric tells you the percentage of people who click on your media. A higher CTR tells you that your social media marketing campaign or ad has piqued interest and resonates with your target audience.

Conversion Rate (CR)

This number captures the percentage of people who performed the desired action, such as purchasing your widget or downloading a whitepaper, after clicking on your social media ad.

Cost Per Acquisition (CPA)

CPA reflects the average cost of acquiring a new customer from your advertising efforts.

Customer Lifetime Value (CLV)

CLV is the monetary value tied to specific customers over the course of doing business with your company. CLV is a helpful way to evaluate and calculate the long-term reach of social media marketing campaigns.

Return on Ad Spend (ROAS)

This number tells social media marketers how much money is coming in the door for every dollar spent on social media advertising.

Strategies To Improve Social Media ROI

You can set your business up for success online by embracing the following campaign strategies to improve ROI:

Target Audience Refinement

Importance of Segmentation and Targeting

You can group your audience into smaller clusters based on categories like demographics, social media habits, interests, and buying patterns.

Buyer Personas

Map out your ideal customers and their motivations to fine-tune your paid social messaging to strengthen brand awareness from social media engagement campaigns.

Ad Creative and Messaging Optimization

A/B Testing for Better Performance

Marketers can play around with different versions of social media marketing campaign ads to see which ones are more engaging and generate leads.

Tailoring Content to Audience Preferences

Produce campaign content that speaks to your segment’s interests, frustrations, and goals.

Landing Page Optimization

Ensuring Seamless User Experience (UX) and Relevance

These web experiences should be intuitive, and the reader should know what you’re asking of them.

Importance of Mobile-Friendly Designs

Your website needs to function on phones and tablets to make the buying experience and conversion frictionless.

Budget Allocation

Adjusting Spend Based on Platform and Performance

Use Google Analytics to look at how paid social ads on various social media platforms are performing, so you can invest your dollars where you’re getting the most marketing ROI.

Shifting the Budget Toward Higher-Performing Channels

Conversely, don’t hesitate to dedicate more money in your budget to social media platforms that generate leads.

Retargeting and Remarketing

Capturing Lost Leads Through Strategic Retargeting

Retargeting ads are a way for marketers to motivate users on social media who visited your website but didn’t make a purchase.

Best Practices for Remarketing Campaigns

Your targeted social media ads should be informed by and reflect your buyers’ interests and behaviors.

Tools and Platforms for Tracking ROI

You can’t manage what you don’t measure. To get an idea of how well your brand awareness efforts are shaping up on social media, you might invest in one or more of the following social media marketing tools:

• Google Analytics: Keep tabs on important metrics like website traffic, user behavior, and conversion rates. Google Analytics has a free version, but you can upgrade to a premium account to further support marketing ROI.
• Facebook Ads Manager: Get actionable insights based on your paid social ad performance.
• Marketing Automation Tools: Use platforms like HubSpot and Marketo to follow customer journeys and see how your social media marketing efforts are impacting customer behavior metrics, like conversions.
• Data Analytics Software: Support your data analytics efforts with solutions like Tableau and Power BI. Both can help social media marketers visualize and analyze sums of data.
• Ahrefs: Get clarity on organic search performance and track backlinks and conversion data.
• Hotjar: See how and where users are spending time on your website to help you make meaningful and calculated changes that generate leads from social media campaigns and impact sales numbers.
• Mixpanel: Track user engagement metrics and their relation to sales from social media campaigns.
• Voluum: Get answers to everything you need to know about how to calculate return on investment in digital advertising.

Knowledge is power, and that’s the case for social media ROI. Armed with actionable insights, you can execute winning campaigns that lead to an impressive marketing ROI and longer-term results.

Boost Social Media ROI with Podium

Podium is a versatile platform, and among the ways it helps social media marketers is by enabling them to track social media ROI. The entry point is through managing and improving online reputation metrics. That process can include the following elements:

1. Review Management

Positive reviews can be the catalyst you need to build a solid online reputation based on a thoughtful marketing strategy. This is the means by which to inspire confidence and attract new customers on social media. On the other hand, addressing less flattering reviews head-on can help you limit further reputational damage.

Take, for example, Dane Beazley, owner of Gold Coast Plumbing. He’s found the review management element to pay dividends for his brand. In his words, “People aren’t wowed by average anymore—you need to go beyond that. Podium has helped us wow our customers and share that amazing experience to build a great online reputation.”

2. Customer Engagement

We live in a culture of instant gratification. That can put added pressure on busy business owners and their marketers to generate unattainable results. However, it’s important for brands to strive for prompt action. Quick responses to customer inquiries on your website, via text, and on social media platforms can help you win people over. Podium makes it easy for brands to engage with customers in real time, so you don’t miss out on conversions.

3. Data Insights

Executing a social media marketing campaign without clearly understanding your target market is a recipe for disaster. In contrast, sifting through customer feedback on social media sites and reviews could reveal helpful nuggets related to customer preferences, frustrations, and areas that might need some attention. Specifically, Podium’s analytics tools can arm social media marketers with important data points and metrics related to Facebook campaign performance, customer sentiment, and behavior.

Make every Facebook campaign and every dollar of your marketing strategy investment count. Watch a demo and learn how success in a digital market can be within reach with the right automated marketing strategy tools in your arsenal.