Even though social media spending is projected to account for 16% of the digital ad market by 2017, how many of us really understand what we're getting out of it? There's no shortage of metrics to gauge performance -- you could measure in terms of fans, followers, retweets and shares. Others look to referral traffic from social media platforms. Still others quantify success from purchases made from social media referrals.
The fundamental problem with social media marketing is that there is no common denominator to measure its ROI. Because of this, the effectiveness of social media has been measured haphazardly at best, and not at all in some cases.
Research firm TrustRadius recently found that demonstrating ROI is the number one challenge among marketers, with 60% naming this as one of their top three challenges. So how do you tackle this challenge?
Here are five steps to measure the effectiveness of your social media efforts:
1. Identify your key performance indicators (KPIs). Are you looking to drive revenue or build awareness of your brand? This differentiation determines what success looks like for your social marketing efforts.
If your goal is sales, you should measure ROI as a dollar value. By assigning a dollar amount to your conversion goals, it's easy to understand the impact of your social media marketing to your bottom line.
Brand awareness can mean something different to everyone. Your boss might define awareness as getting your brand in front of as many people as possible, while your PR team might want journalists to remember your brand name. Be sure to agree on one specific brand awareness goal with the help of your stakeholders.
2. Align your social media goals with your business objectives. For your campaign to be meaningful and measurable, the big picture must be broken down into smaller, bite-sized goals. Again, these goals differ based on your overarching KPIs. For businesses looking to map revenue to social media, your social media goals might be product purchases, customer signups or free trials.
For businesses wanting to track brand awareness, social media goals might be brand mentions, followers or impressions.
3. Set up Google Analytics to track conversions. Your ability to retain and convert your audience depends on how informed you are about their behavior on your site. Nearly every single goal is measurable if you adopt the right approach. Google Analytics is a free tool that you can use to set up trackable goals and monitor how often visitors complete the actions you define. For help creating and configuring goals in Analytics, read this tutorial. For help configuring Google Analytics for your social team, read this tutorial.
4. Assign values to your KPIs. Once you have chosen your goals and set up your tracking, it's time to tackle the monetary value of these goals. There are several different methods to choose from:
- Lifetime value: How much do you earn from each customer on average?
- Lifetime value multiplied by conversion rate: How much is each potential visit worth to you based on the percentage that converts?
- Average sale: How much is the average purchase through your site?
- PPC valuation: How much would you end up paying if you were to use ads to achieve the same social media results?
Zoomcar, the largest car rental company in India, is an example that helps to illustrate the value of assigning dollar values to KPIs. The company uses social marketing to drive mobile app installs, where users can make a purchase (its key conversion metric). Zoomcar knows that its lifetime value of a customer is $70, and that 40% of its mobile app users make a purchase. Therefore, it knows a mobile app download is worth $28 and can strategize accordingly.
5. Benchmark against your competitors. Compare your social media efforts to your competitors and you can uncover areas of opportunity for your organization to stand out and be heard through the noise. Learn what platforms are most successful in reaching your targeted audience. Learn how many posts competitors are publishing per day so you can see what works.
Don't stress if your brand's results are significantly different from your competition. The important thing is to consistently work to improve your social media ROI. The first step to improving your performance is to understand the results of your actions.