Why would you be in business if you didn’t get a return on your investment? ROI is how the return on an investment is measured. Therefore, ROI for social media is the return on the investments you make in your social media initiatives, campaigns, and programs.
Social media marketing creates value, and the ROI is the tangible return for the company.
ROI must remain above 0 to be profitable. A negative ROI means more was invested than was returned thus losing value. A simple formula for a return on investment is:
(Value gained minus Investment made) divided by the Investment made times 100.
Measuring ROI is based on marketing objectives such as revenue, engagement, or brand awareness. Once the objective is determined, marketers calculate their overall spending on social media including ad budgets, tools, human resources, and content creation.
Now that the costs are understood, marketers define how the specific social media goals create value. These could be measured through awareness, sentiment, conversions, or loyalty programs. It is important to examine metrics that align with specific objectives like reach, traffic, engagement, or revenue. And they must be examined on a regular basis.
Once specific goals and metrics are established and measured regularly, ROI reports can be created to show how social media programs can create value and optimize relevant KPIs to reach business objectives.
Marketers can create processes and procedures that help follow these steps consistently to create more valuable social media marketing programs that maximize ROI and allow businesses to increase budgets for programs that demonstrate profitability and reach strategic goals.