Convincing your CEO to implement or continue a social media campaign isn’t an easy task. Just like any marketing initiative, you must be able to identify its benefits and illustrate how the investment will ultimately generate profit. What your boss is looking for is a high return on investment ratio, or ROI. You need to be able to show that the money (or benefit) gained from your social media campaign outweighs the amount of money invested in the campaign.
What is ROI?
ROI can be manipulated and can mean several different things, however, the fundamental formula is:
ROI= (Money gained (or loss) on investment/ amount of money invested)
ROI can measure how effective a campaign is, how much profit it is generating, and can be used as a tool to compare different marketing campaigns with each other. When calculating social media ROI, it can be difficult to put a monetary value on the campaign since the return can be measured in so many ways.
Social Media ROI
Since the objective for social media campaigns vary between businesses, it is hard to define a single formula for social media ROI. Many businesses utilize social media to increase brand awareness, generate sales, increase customer service, or acquire new accounts; all these goals can be used to define the return of the investment.
Picking what you believe best defines the return of the investment is the easy part, defining it however, is much trickier and can be a challenging process. Giving brand awareness, consumer insights, or other benefits gained through social media monetary value is tough and requires different techniques for each goal.
For example, one way to quantify the value of acquiring new accounts is to figure out the average profit generated by existing accounts and multiplying that amount with the number of new accounts acquired through the social media campaign. Another option is to justify the ROI as the amount of new accounts gained or the benefit gained itself and not convert it into a monetary value; however this will be more difficult to compare campaigns as the metrics will be different for each campaign.
Compare ROI of social media campaigns
As stated above, ROI can be used to compare two or more marketing campaigns and their effectiveness. This is important when figuring out how to spend marketing budget, especially when you only have enough funds for one campaign. It is possible to compare social media campaigns against each other, such as whether to implement a Facebook or Twitter campaign; as well as to compare a social media campaign with other marketing campaigns, such as television or print.
