Cracking the code of social media ROI: Tactics & tools you need to demonstrate value

Marketing | July 3, 2023 | 21 min read

We live in an age of abundant, readily available data, and today’s consumers want to know exactly what they’re getting for their digital marketing dollars. That’s why understanding how to measure and boost social media ROI is a must for agencies offering social media packages.

Be successful with social media on behalf of your clients by downloading “The ultimate guide to effective social media for business” now.

Read on to learn everything you need to know about ROI on social media, including how to measure, analyze, and show the value of your social media tools and services.

Table of Contents

What is ROI on social media?

ROI is a frequently encountered metric in digital marketing and business. While it’s often used to refer strictly to the bottom line—how many dollars did company X generate for every dollar spent on a marketing effort—the definition is a bit more expansive in the context of social media.

Social media ROI does include monetary return on social media spend, but it can also encompass the broader benefits a business gains from its activities and investments in social media.

Sure, the ultimate goal of all marketing efforts is to generate more conversions. But every like, share, or follow is part of a complex customer journey in which each activity or engagement is a stepping stone leading towards that final goal of a sale. Social media ROI can capture these non-monetary but brand equity building benefits.

What exactly is social media ROI?

Social media ROI is the return on investment generated by social media marketing efforts. In practice, it includes the measurement and evaluation of the effectiveness and profitability of all social media marketing activities.

The focus when measuring social media ROI is to measure the outcomes of social media activities for a business. This includes conversions, brand awareness, online reputation, traffic, and more. It’s about interpreting the numbers to gain an accurate picture of which activities align with your client’s goals and which don’t, so you can better deliver services that strategically support their success.

Knowing how to measure social media ROI will provide your agency with valuable insights into the financial impact and tangible benefits of your social media campaigns. This benefits both you and your client by enabling more informed decision-making and better-optimized campaigns. It also allows you to prove your worth to clients, helping you develop profitable, long-lasting client relationships.

Social media marketing ROI: Why it matters

A common mistake made even by experienced marketing pros is getting bogged down in the wrong metrics when it comes to measuring the success of their social media campaigns.

This can provide a misleading picture of how effective a campaign truly is. That’s why it’s so crucial to understand exactly what deserves your attention when it comes to social media ROI metrics. The right data can have a profound effect on your client’s—and your agency’s—success.

Social media ROI for local businesses

Social media is essential for local businesses as it helps them position themselves as leaders within their industry. Social media also offers credibility, as prospective clients may be skeptical of businesses that don’t have a presence on social media.

1. Increased brand awareness

Creating inspirational, helpful, and shareable content is an excellent, low-cost way for businesses to build brand awareness on social media. Creating infographics or informative content and pairing it with a strong call to action will remind followers to share the content on their own channels, compounding content reach.

The more people that see your content, the larger your brand awareness will be on social media, so creating content that garners likes and shares is key. The more engagement a piece of content gets, the more social media algorithms will favor it, meaning it will be pushed out to wider audiences.

2. Enhanced customer engagement

Brands can use social media to resolve customer service issues, share exciting company milestones, or build relationships with top fans by engaging with their comments and questions.

These interactions not only make an impact on the individual the brand engages with but also on the brand’s broader audience as they watch these engagements play out in real-time. Audience members will feel more inclined to trust (and make purchases from) a brand when they see that they value their customers.

3. Cost-effective marketing

Social media offers a cost-effective marketing channel for local businesses, allowing them to reach their target audience without investing heavily in traditional advertising methods. Brands can capitalize on social media’s organic reach by creating memorable content that their audience is inclined to share.

Informative, empowering, or inspiring content is more likely to receive interactions and shares. Capitalizing on current trends is another great way to ensure content receives many interactions and garners a strong social media ROI.

4. Targeted advertising

One of the most important aspects of social media is that each platform provides sophisticated targeting options that enable local businesses to reach their ideal customers based on demographics, interests, and behaviors.

Consumers make purchases through social apps more frequently than from brand websites or third-party resellers (Hubspot). Plus, Nearly 30% of social media users in Gex or younger say their top reason for using social media is to find products to purchase (Global Web Index).

Every brand’s ideal audience is present on social media, and targeted advertising can help get products and services right in front of them.

5. Increased website traffic

Social media can drive traffic to a local business's website, leading to increased online visibility and potential conversions. Where SEO can be a long-term traffic-generating strategy, brands can immediately begin driving traffic with social media.

By building an engaged social media audience, creating strategic content, and incorporating strong calls to action, brands will surely see strong click-throughs from social media content.

Social media ROI for agencies with local business clients

Marketing agencies that embrace the power of social media can set themselves apart from competitors by providing social media marketing services to their clients. The following are just a few of the benefits of offering social media marketing services.

1. Client retention and satisfaction

Social media services enhance the overall value proposition of marketing agencies, allowing them to provide comprehensive marketing solutions and retain clients by delivering measurable results.

Rather than forcing clients to seek out a separate service provider for social media marketing, agencies can provide a full suite of services to ensure their clients’ marketing strategies are robust and cohesive. This approach is bound to result in a positive ROI from social media, as the approach will be integrated into the overall marketing strategy.

2. Revenue growth

Social media services provide an additional revenue stream for marketing agencies, allowing them to expand their service offerings and generate more revenue from existing clients. Educating clients on social media’s importance will have them demanding that the agency incorporate social media into their marketing strategy.

To ensure strong results, marketing agencies should add social media experts to their team or spend time brushing up on the latest trends and best practices.

3. Competitive advantage

By offering social media services, marketing agencies can differentiate themselves from competitors and attract local business clients seeking comprehensive marketing solutions.

Because social media algorithms move so quickly, it’s easy for marketing professionals to fall behind on the current trends. Keeping informed on the latest growth strategies and tactics and developing a portfolio of case studies will set any marketing agency apart from the pack.

4. Data-driven insights

Marketing agencies can use the insights gained from social media campaigns to inform other areas of their client’s marketing strategy.

For instance, if a brand’s audience responds favorably to video content and less favorably to images or written content, the marketing team knows that doubling down on video will likely achieve better results on other platforms, too.

5. Collaboration and cross-promotion

Social media campaigns offer opportunities for marketing agencies to collaborate with influencers, partners, and other local businesses, fostering cross-promotion and expanding their network.

50% of Millennials state that they trust product recommendations from influencers, so developing strategic influencer partnerships is worth the effort for brands with millennial audiences (Morning Consult). Influencer partnerships can increase brand awareness and drive sales.

The big picture: Aligning social media goals and business objectives

Each client will have unique, distinct business objectives, and your services should support those objectives. Measuring social media ROI gives your agency the tools and insights to do just that. By aligning social media goals with broader objectives, and making sure those goals are being met, businesses can save themselves the time, effort, and cost of working toward the wrong goals.

For example, a lower-margin ecommerce client may be all about boosting sales in the short-term. They require a steady stream of online conversions to keep the business humming. Meanwhile, a high-end service-based business may have a limited capacity to take on clients, so they need to get the word out among the right clientele—a very different focus from the e-commerce client.

By knowing how to measure social media ROI, it’s easier to define the correct goals and make sure you’re on track to help your clients succeed. For the ecommerce example, you might track social media ROI metrics related to sales and conversions, while for the service-based example, your focus might be more on brand awareness.

Making better decisions through data

By analyzing the right metrics and performance indicators associated with social media efforts, agencies and their clients can optimize their strategies, allocate resources more effectively, and make improved marketing decisions.

In the simplest terms, social media marketing ROI reveals what works and what doesn’t. It has the power to reveal successful platforms, content types, and messaging that resonate with the target audience. It also helps marketers understand what isn’t working, so they can avoid sinking money into fruitless efforts.

Empowered with these insights, businesses can confidently refine their approach, replicate successful campaigns, and generate even higher returns on their efforts. This is of paramount importance to your clients, who are motivated to allocate limited resources wisely. By identifying cost-effective and revenue-generating channels and campaigns, you can optimize your client’s budget for maximum impact.

Demonstrating impact and proving value to clients

Measuring ROI on social media enables you to quantify the financial and brand-building outcomes of your marketing services, providing water-tight evidence of the value you bring clients.

Metrics like increased website traffic, improved conversion rates, or higher customer engagement can all be directly attributed to social media activities with the right tools, showcasing the impact of social media efforts and strengthening client relationships.

When you can back up your claims with proof, you’ll build trust and credibility with your clients, giving them the confidence to continue working with your agency over the competition.

How to measure social media ROI: A step-by-step guide

While each client will have unique goals, business objectives, and budget constraints, the basic social marketing guidelines for how to measure social media ROI remain the same. Here’s how it’s done.

1. Know the costs

The social media ROI formula assesses revenue and other benefits against costs, so the crucial first step of measuring social media ROI is having a solid handle on the costs associated with your strategy.

These costs include direct spending on social media tools, services, and advertising, but should also take into account the human resources, time, and any other inputs. It’s important to quantify these elements to gain a complete picture of how much investment is required to produce a given result.

Costs might include:

2. Define clear, measurable goals

It’s impossible to know if you’re heading in the right direction when you haven’t defined where you’re trying to go. To accurately gauge social media ROI, well-defined and measurable goals are needed. These provide a clear, agreed-upon direction and a benchmark for success. Whether your goal is to increase visitors to a website, ramp up lead generation, boost sales, or amplify the buzz around a brand, it’s essential to set SMART goals defining the objective. These specific, measurable, achievable, relevant, and time-bound goal-posts simplify the process of measuring success  down the line by giving you an appropriate and realistic target against which to measure performance.

Once your goals are in place, the next task is to identify the key metrics or key performance indicators (KPIs) that align with these goals. The purpose here is to determine which yardsticks you’ll use to track your progress towards a goal.

For example, if your campaign objective is to increase brand awareness, you’ll likely want to track social media ROI metrics like reach, shares, and engagement.

If your campaign goal is to boost profitability, then conversions, customer acquisition cost (CAC), and customer lifetime value (LTV) would likely be more relevant.

4. Assign monetary values to actions and events

As you may have noticed by now, it’s possible for the desired outcome of a social media campaign to be untied to a specific monetary outcome. Sure, the ultimate goal may be to profitably grow your client’s business, but the SMART goal of a social media campaign might be a stepping stone toward that goal, like boosting the reach of their posts.

To arrive at a value for these outcomes, you’ll need to assign a monetary price tag to the social media ROI metrics and KPIs established in the previous step. This is necessarily going to be an estimate, but it can be an accurate and informed one by keeping these tips in mind:

  • Use recent data: For example, calculate the ratio of new customers generated by a social media platform to the number of likes or follows over the same time period to gauge the monetary impact of each action.
  • Continually test and refine estimates: Reassess your estimates regularly to have the most accurate estimate available.
  • Understand current CAC and customer LTV: These metrics help you understand that each lead and conversion is worth to your client.

5. Set up a system for data-gathering and analysis

This is the meat of your social media ROI measuring efforts. Until now, we’ve been laying the groundwork for effectively tracking B2B social media ROI.

Social media analytics tools like Google Analytics, in-app analytics, and third-party platforms can all be used as social media ROI calculators to gauge the impact and success of your campaigns.

Use them to monitor your chosen metrics in real-time. This way, you’ll have a continuously updating picture of what’s working, what isn’t, and how you can optimize for better results.

For example, if you’re tracking conversions, you can use your tool of choice to see which posts drove the most website traffic, then how much of that traffic resulted in a conversion. This will reveal which types of posts help your client generate the most conversions.

6. Craft a compelling ROI narrative for your clients

Data talks, but your job is to present that data in a clear, compelling way, so your clients can easily interpret it. For example, this might take the form of a monthly call, presentation, or report.

Your aim should be to link your client’s spend and other inputs with the resulting outcomes, painting a vivid picture of your social media success and its contribution to their  business growth. Keep these tips in mind as you put together your presentations:

  • Use visuals: Incorporate infographics and other visual elements to make the data more digestible.
  • Emphasize key achievements: Draw attention to the key outcomes that were achieved by your social media efforts over the period being covered.
  • Make forward-looking suggestions: Suggest areas for ongoing improvement and make present ideas for how results can continue to be improved moving forward.
  • Connect the dots: Always connect back to your client’s initial goals, demonstrating how your social media efforts have contributed to reaching these business objectives.

Tips for supercharging ROI on social media

Social media management is anything but static: even if a strategy is producing awesome results today, an algorithm change, new trend, or mercury in retrograde can throw things off-kilter. Taking ROI to new heights requires an ongoing commitment to making adjustments, fine-tuning, and going with the flow. Here’s how to do just that.

Fine-tune your audience targeting

Understanding your target audience is the foundation stone of an effective social media strategy and, in turn, a substantial social media ROI. When social content mirrors their interests, needs, and values, you’re likely to spark engagement, encourage conversions, and maximize your ROI.

Use social media analytics to deepen your understanding of your client’s followers: their demographics, interests, preferences, and online behavior. Then, tailor your content and social media strategy to mirror these insights.

The more refined you can get, the better. It’s also important to remember that this isn’t a one-time exercise. Instead, regularly check in and reassess to see if new, updated audience insights can be gleaned.

Create engagement-boosting content

To improve your social media ROI, your content should be more than just attractive. It should be compelling, shareable, and interactive, inviting the audience to engage.

High engagement translates to wider reach, higher conversion rates, and a deeper relationship between the business and its clients.

 So, how do you create this kind of irresistible content? Try these tips:

  • Use scroll-stopping visuals: Attention-grabbing visuals are the foundation of an engaging social media strategy, since these are what cause browsers to stop in their tracks and check out what the post is about. Stick to a distinctive brand style, and make sure visuals are high-quality.
  • Write on-brand copy: Craft engaging copy in your client’s brand voice that speaks their audience’s language.
  • Incorporate a call to action: Every single post doesn’t need a CTA, but don’t hesitate to use them regularly. This might be an invitation to sign up to a newsletter, visit a website, or answer a question in the comments.
  • Use interactive post types: Certain post types, like polls or contests, almost guarantee engagement. Throw these fun types of posts into the mix to generate regular interactions from the audience.

Iterate, iterate, iterate

Improving social media ROI isn’t a set-it-and-forget-it process. It requires continuous experimentation, testing, and refining. If you get too comfortable, chances are engagement will drop off.

Regularly experiment on different fronts:

  • Test different content formats, from informative blog posts and entertaining videos to eye-catching infographics and inspirational quotes.
  • Experiment with your posting schedules to identify when your audience is most active.
  • Play around with ad targeting to find the most responsive demographics.

 

The key here is to use data and analytics to identify what works and what doesn’t. This cycle of testing, learning, and iterating helps you refine your approach over time, boosting ROI on social media.

Cultivate relationships

The “social” aspect of social media is its most distinctive, paradigm-changing feature.

Building relationships with the audience fosters loyalty, fuels word-of-mouth marketing, and creates a community around your client’s brand. Doing this requires engaging in a two-way conversation with customers.

Respond to comments, answer questions, and acknowledge feedback: these actions demonstrate to followers that they’re heard and valued. Engage with user-generated content to make the audience feel part of the brand’s narrative. The more a business interacts with its audience, the more likely those audience members are to engage further, feel loyal, and champion the brand.

Tips for demonstrating and measuring social media ROI to clients

The easiest way to prove the social media ROI is by setting goals and tracking analytics. Here are some tips for showcasing the ROI of social media marketing efforts to clients.

1. Set Clear Goals and Objectives

Defining specific and measurable goals for social media campaigns is paramount for gauging whether they are successful. Common goals include increasing brand awareness, driving website traffic, or generating leads. These goals will inform the type of content needed to support the social media campaign's success, as it won’t be the same for every campaign.

Every campaign should have a defined start and end date to make it easy to measure social media ROI. The recommended length for most social media campaigns is three months, as it can take time to build a presence on social media, and efforts tend to compound over time.

2. Track Key Performance Indicators (KPIs)

Identify relevant KPIs for each social media campaign, such as engagement rate, reach, click-through rate, conversion rate, and customer acquisition cost. Tracking this KPI data makes it easy to demonstrate the ROI of social media efforts.

Record KPI data before the campaign begins and check the numbers periodically throughout the campaign to see how it is performing. It may be tempting to change the campaign if the numbers aren’t where you expected, but remember that social media campaigns take time to ramp up. Making changes to content is fine, but don’t change the campaign strategy until it’s over.

3. Utilize analytics tools

Make use of social media analytics tools to gather data and track performance metrics, providing insights into the effectiveness of social media efforts. These metrics make it easy to see which content pieces perform best and which aren’t resonating. Analytics can also tell you about audience demographics, including gender and location, when the audience is typically most engaged, and the best days to post.

Each social media platform has its own built-in analytics tool, but using a third-party social analytics tool makes it easier to see all social media insights in one convenient platform. From there, use these insights to capitalize on high-performing content types and boost the ROI of the social media campaign.

4. Provide monthly reporting

Provide clients with regular reports that showcase the progress and results of social media campaigns, including key metrics, performance trends, and actionable recommendations. With this information, clients can understand what is working well and what needs adjusting, which will help them determine how best to allocate their marketing budget moving forward.

Monthly reports give clients confidence that their social media efforts are being managed thoughtfully and can help spur ideas and input to bolster social media ROI.

5. Demonstrate ROI

Use data and metrics to demonstrate the tangible benefits and value they receive from social media marketing. While increasing reach or followers is great, clients must understand how this ultimately benefits their brand.

Social media strategies should account for how a social media campaign correlates with the company’s overall marketing goals. If a brand is working to increase sales, the social media efforts should support that goal, and any social media reporting should demonstrate this.

While social media marketing may only sometimes result in direct sales, it could drive clicks to the company website, increase email subscribers, or build brand awareness. Each of these metrics has the potential to increase sales.

Tools and resources for tracking social media ROI

As important as tracking social media ROI metrics is, it’s easy to do with the right tools. You might already have some of these at your disposal.

Social media analytics platforms

Analytics platforms will be your go-to tools tracking ROI on social media.

Google Analytics, for example, provides robust insights into traffic sources, user behavior, and conversions, helping you understand how your social media efforts contribute to on-site activity.

Specific social media platforms, like Facebook and Twitter, offer their own platform-specific data, like demographic information, peak activity times, and post performance. While these can be very useful, tracking multiple platforms separately can be time-consuming and fragmented.

That’s where using an all-in-one solution like Vendasta’s Social Marketing can help. It consolidates data from all your client’s most important social media platforms in one intuitive dashboard, saving time and providing a holistic view of performances on ROI. Plus, you can schedule and publish posts and manage customer interactions from the same interface.

The result? Streamlined, simplified B2B social media ROI tracking.

Social listening tools

Beyond numerical metrics, there’s a wealth of qualitative data in the conversations, sentiment, and brand mentions that take place on social media platforms. Social listening tools give you the power to eavesdrop, giving insights into the audience’s thoughts and feels about a brand.

In Vendasta’s Social Marketing, you can monitor brand mentions, follow industry keywords through a custom RSS feed, and track trending topics in real time. This empowers you to stay in tune with your client’s audience, adjust your strategy based on feedback, and ultimately enhance ROI.

Social media ROI calculators

ROI calculators are templates or formulas that businesses can use to track their social media metrics and calculate ROI accurately.

Free tools like Hootsuite’s Social ROI Calculator offer a good start for businesses that want to quickly generate a good estimate of their present ROI. While these social media ROI calculators are helpful, it’s worth noting that they often lack the integration and simplicity of a full-featured social media marketing tool.

Industry benchmarks and case studies

Industry benchmarks and case studies provide some much-needed real-world grounding to contextualize social media goals. It can be easy to get carried away with massive targets, but it’s generally more productive to be realistic—but ambitions—about what can be achieved.

Benchmarks and case studies can be used to gauge performance, identify gaps, and derive inspiration. These can provide real-world examples of successful social media ROI strategies and measurable outcomes. They also help businesses avoid reinventing the wheel when it comes to developing strategies. Why not learn from the successes of comparable businesses and apply those social media ideas to your clients’ strategies?

Frequently asked questions

What are some common metrics used to measure social media ROI?

There are several common metrics you can use to measure social media ROI. Reach and engagement are key for understanding how many people see and interact with a piece of content. Click-through rate (CTR) indicates the percentage of viewers clicking on links, while conversion rate tracks those who complete a specific action, like making a purchase or navigating to a sales page. Additional metrics that can be useful for measuring social media ROI include the cost per click (CPC), cost per acquisition (CPA), and customer lifetime value (LTV).

What are some examples of successful social media campaigns with high ROI?

An example of a successful social media campaign with high ROI is the “Share a Coke” campaign by Coca-Cola. By personalizing Coke bottles with people’s names and prompting them to share their experiences on social media, the brand created impressive online engagement and boosted sales. Social media campaigns that tap into the consumer’s desire for personalization and self-expression can be scaled for different business sizes, giving smaller brands the opportunity to generate online buzz and sales.

Turn your digital agency into a scalable power house with Vendasta

About the Author

Lawrence Dy is the SEO Strategy Manager at Vendasta. His career spans from starting as a Jr. Copywriter in the automotive industry to becoming a Senior Editorial Content Manager in various digital marketing niches. Outside of work, Lawrence moonlights as a music producer/beatmaker and spends time with friends and family.

Shares
Share This