One thing I hear time and time again is that there is no ROI on social media or that it is hard to track the ROI of social media. It's true. Without the right tools in place, tracking the ROI of social media is very difficult. With social media, not everything can be tracked. Things like word of mouth and branding just can't be measured. Add in the fact that social media is a long term strategy and ROI becomes even further away to manage. It's not a fly by night, let's put a post up and expect the sales to start rolling in. Social media is all about building the relationship with your online customers and potential customers. Once you earn their trust, then you can expect to see increased sales. Yes, it's a tricky thing.
But that doesn't means there is no way to measure ROI for social media. You just need to change the way you look at the whole equation and it will make a lot more sense. Here's what you need to think about.
Track leads first, then sales.
When it comes to social media it is a lot easier to get them in your system as a lead and then turn them into a sale. Because of the relationship building nature of social media the odds are higher to sell them once they are already a fan, on your newsletter and reading your blog than just posting something on social media and expecting them to buy. That's a really big mistake that many businesses make. I don't want you to make that mistake.
If they came into your system by a link from LinkedIn but didn't buy until you sent a few emails, they should still be looked at as a lead from that particular source but the conversion point was email. (By the way, email is the most likely conversion point when it comes to sales.) The lead source can help you manage your social media budget over time.
Look at sales over the lifetime of that customer.
The lifetime value of that customer let's you know what they bought and where they came from. It's important because you need to know where your resources are paying off. You may be getting a lot of leads on Facebook but few of them turn into sales and LinkedIn might send you fewer leads but the amount of money they spend is higher overtime. It really shows you a bigger picture and allows you to gain insight on what works and what doesn't.
With that said, social media ROI is all about lifetime value and lead sources. When you know where your sales come from, you know where to spend your money, time and resources. It's that simple.
2 Major Reasons To Track Lifetime Value & Lead Sources
1. To Measure ROI of Specific Campaigns & Events
A few weeks ago I worked a trade show for a client. Our first goal was to sell product. If they didn't buy it on the spot, our next goal was to get their email so we can still measure the success of the event. If they buy tomorrow or a year from now, we know that the event is what started the relationship with this particular customer.
If you don't have the ability to track the leads from campaigns or event you will never know if they are worth the initial investment. You'd probably only be looking at the short term sales and that's short sided.
2. To Measure Overall Social Media ROI
When you know where people came from and what they buy you can measure your social media ROI. If you know that a lot of your leads come from Facebook and they convert into sales overtime then it makes sense to spend your resources there. If you get a lot of leads from Twitter but they don't covert, perhaps it is time to change your strategy there.
If you spend any money on social advertising you will also know exactly how much business your ads brought to you over time. Obviously this is super important to know so you don't just waste your money.
Are you tracking these two metrics? You should, it's the best way to measure ROI.