When it comes to building effective social media ad campaigns, the biggest question isn’t “how much should I spend?”
It’s “for every dollar I spend, how much do I get back?”
In other words, it’s all about return on investment (ROI) — how are ad spending and customer conversion linked? Understanding this connection makes it less important how much you spend, and instead lets you focus on the impact of your social ads. In this piece, we’re taking Cork Ladies Bicycles Zone a look at how to measure social media marketing ROI and offering a look at eight tools to help streamline the process.
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What is Social Media ROI?
Social media ROI is a measure of the benefits delivered by social media marketing campaigns compared to the total investment on these campaigns — including money, time, and effort.
ROI is a measure of spend versus value: If I spend “X” amount, how much do I get back? The best-case scenario is an ROI greater than one, where companies get back more than they spent on an investment.
Consider a manufacturing company buying a new piece of production line equipment that costs $10,000 but brings in $20,000 worth of revenue each year. The result is a positive ROI and a worthwhile investment. While measuring social media ROI isn’t quite as straightforward since companies need to account for the reach and impact of specific ad campaigns, the underlying concept is the same: Over time, the goal is to get back more than you spend.
While specific measurement timelines and media metrics will differ, the role of ROI remains the same.
How to Measure Social Media Marketing ROI
One of the most popular and data-driven ways to measure social media marketing ROI is through paid advertising. The problem arises, though, when there isn't a sound strategy in place to yield a positive return on investment.
How does this happen? Typically, social media marketers build an AdWords campaign to rank for important search terms. The campaign drives clicks, traffic, and leads, but ultimately the ad spend outweighs the impact of the ads which is bad news for ROI.