How To Measure Social Media ROI

Social Media Marketing Return On InvestmentSocial Media Marketing is to online marketing today what Link Building was to SEO 2 to 3 years ago -- it's probably the #1 online marketing strategy you're most concerned about using most effectively. And yet, the great challenge for Social Media is to demonstrate its weight in gold in terms of ROI (Return On Investment). The reality is Social Marketing is incredibly difficult to measure. Still, I'd like to offer some potential ideas here for how you can measure the return on social programs. First, let's take a step back and look at this issue of "ROI" and figure out why we're looking for it in the first place.

Direct Response, Meet The Internet

If you've spent enough time in the web marketing world, you've encountered "Direct Response Marketing" (whether you're aware of it or not). Direct Response has played a major role over the past 10+ years in shaping the very foundation of what we now know as "Online Marketing." Long before the traditional agencies showed up to sort of institutionalize website marketing, this industry was created by what I'd call Guerrilla Marketers -- marketers who saw the web as a viable marketing tool long before any lectures were given on the topic in universities.

Direct Response Marketing is primarily concerned with strategies that get a response from every marketing message or from every marketing effort.

Direct Response has always been (and continues to be) immensely effective. It's especially powerful because small and medium-sized businesses can use Direct Response methods without a massive marketing budget.

Since Direct Response is so concerned with RESPONSE -- with getting people to take action and with being able to measure that action -- it's naturally concerned with what we're discussing in this post: Return On Investment.

End Of The Gold Rush, Beginning Of The Social Rush

I talk a lot about what I call "The Internet Marketing Gold Rush" because it helps put perspective on how web marketing has evolved over the years. Things move very quickly in this industry, and it's critical that we take time to look back to see how trends are evolving and shaping the online marketing world.

In my web marketing history, we have 3 essential eras:

The Pre Gold Rush Era
The Gold Rush Era
The Post Gold Rush Era (now)

The Gold Rush was characterized by a period of dramatic growth in Web Marketing, but growth still mostly influenced by the industry itself. We might say things were fairly "unregulated." This is where Link Building and gray or black hat strategies had their heyday.

Without getting bogged down too much in looking at the past and where we are now, it's enough to recognize that this Gold Rush ended with Google's Panda and Penguin updates, which effectively built regulation into the marketplace and made certain "borderline" strategies ineffective and risky.

Pick, Shovel, Axe, & Social Media?

internet-marketing-gold-rushWhen we discuss new social marketing strategies with our clients, questions like "What will be the return on my investment?" are at the top of their list. When you look at this history, it makes perfect sense. ROI is a hugely important factor in any marketing campaign, and they're right to look for it.

But sometimes ROI can deceive.

Today, there are more consumers online than ever. And that number grows every day.

Today, there are also more businesses online than ever. And *that* number grows every day.

As competition for your customer's attention grows, it's no longer sufficient to simply rank for a top keyword phrase on Google and then watch the traffic (and the sales) roll in. Link Building, SEO, Article Marketing -- these more traditional strategies are all about ROI.

How many links did we build?
How many hours did we spend on optimization?
How many articles did we submit?

Ok, great. Now what was the result?

How much did our keyword rankings grow?
How much did our natural SEO traffic increase?

And finally, how many sales did we make?

All of this is really simple to calculate. If you have a conversion rate of 5% and you increase traffic from 100 visitors per day to 1000 visitors per day, you've increased sales from 5 per day to 50 per day.

Just like Gold Rush mathematics, this is satisfying stuff.

How much did we spend to travel to California gold mines?
How many picks did we buy?
How many shovels?
How many axes?

And finally, how much gold did we find?

You Can't Pan For Gold On Twitter

Social Media Marketing isn't a pick, an axe, or a shovel. And when you try to use it that way, it hurts you far more than it helps you. (Think: online marketers who simply BLAST out their sales pitch every day on Twitter, or post nothing but "Special Offer" images on Facebook. Fail.)

You simply cannot pan for gold with a status update.

Social Media plays a much more subtle role in web marketing. It's actually a sign that web marketing has evolved and "grown up" as an industry. We're no longer simply banging out simple websites with squeeze pages and long-form sales letters. We're no longer looking at web marketing as a simple X + Y + Z = profits kind of equation.

We're now forced to think more right-brain and begin to focus more on things like creativity, community, and even (gasp!) branding.

Where Did You Come From? Where Did You Go?

It's best to think of Social Media as a supplement to your existing online strategy than to think of it as just another tool in your belt. Remember: with social marketing you're trying to build community, you're trying to build reputation, and you're trying to get more mileage out of all your other tools.

I'm definitely NOT suggesting that you should dismiss Direct Response at all. Quite the contrary. I'm simply suggesting that bringing the same perspective to the table when you think about the VALUE of your Social Media Marketing efforts is a huge mistake.

When social media is effective, it boosts your results in all other categories -- PPC, SEO, Article Marketing, Copywriting, etc etc.

It's the glue that builds a bridge between all of your campaigns and creates stronger relationships with your marketplace across the board.

Effective Lead Source tracking is probably the very best way to directly measure social ROI, but even this approach can be limited. Imagine, for example, a customer who joins your Facebook Fan Page, signs up for your email newsletter, follows you on Twitter, clicks your PPC ad, and ultimately makes a purchase on your website.

Who gets the ROI credit here? Facebook? Email Marketing? PPC? Copywriting?

It's hard to tell. And yet, it's critical to track these relationships between your campaigns in this very way.

Direct Response Marketing left us a powerful set of tools for our online marketing campaigns, but it's not the only lens we need for understanding and measuring the results of our web marketing work.

Jason Clegg

Jason Clegg is the CEO & Founder of Convert With Content. He's on a MISSION to help small businesses convert tire-kickers into lifetime customers & raving fans with #ConvertWithContent marketing systems that work! His secret weapon is Infusionsoft.

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Jason Clegg - February 28, 2013 Reply

It’s exciting that “Social Marketing” has become a recognized method of building business online! As web marketing continues to “grow up” the strategies you need to use to reach your prospects become more interesting and more sophisticated.

How are you using Social Marketing to promote your business?

Stephanie Frasco - February 28, 2013 Reply

Great post, Jason!

Measuring the results of a social media campaign can be very difficult – very true. But just so everyone knows, here are a few ways we track results for our Social Media clients here at Convert With Content —>

1. Lead Source Tracking
As Jason mentioned above, “lead sources” are a critical metric that can help you see how many new clients you’re acquiring from Facebook, Twitter, etc. CRM tools like Infusionsoft are GREAT for this.

2. Referral Tracking
Google Analytics is always there to show you how much TRAFFIC you’re getting from your social efforts.

3. Community Engagement
And, of course, how many NEW followers and NEW engagements are you getting? This is a tad more difficult to measure but still really important.

Really enjoyed this post!

    Jason Clegg - February 28, 2013 Reply

    Yes, these are all excellent strategies for getting a multi-dimensional view of your social media results. Thanks for sharing this list, Stephanie!

dan@deezee.co.il - February 28, 2013 Reply

Great article Jason! SM is the Glue indeed!

    Jason Clegg - February 28, 2013 Reply

    Thanks! It’s definitely the GLUE. Welcome to the new age of online marketing – where building relationships actually matters. This is good news for all of us!

Timo Pentner - February 28, 2013 Reply

Great perspective on the social media ROI topic.
To me social media marketing is for a lack of a better word the top stage of the new definition of the sales funnel. You have passive leads that you are engaging with through providing great content, personal stories that your audience can relate to. Along the lines of Dave Kerpen’s book Likeable Social Media, once you create an engaged audience and you are listing and participating in conversations your fans don’t mind if you include marketing campaigns that present them a reward (e.g. discount, coupon, price) to be your customer and not just your fan. This is the conversation from passive to active leads, to opportunities and then ultimately customers. All of these numbers can now be tracked with the right software solutions. What you get … the new definition of the sales funnel using SMM, CTAs, lead management automation around your brick and mortar business or your web presence and blog.

Our society is changing from a seller to a buyers world and so does our marketing.
Not the one with the deepest pockets succeed necessarily. The little guys that can tell a wonderful story and engage have a chance. Thank you social media 🙂

    Jason Clegg - February 28, 2013 Reply

    Great perspective, Timo! “The little guys that can tell a wonderful story and engage have a chance.” This is very true. Being able to create stories & actually engage with visitors has much greater value than purchasing simple “one-way” advertising space (Pay Per Click, Billboards, etc). Thank you social media, indeed!

kevinp@sweetspotmarketing.com - March 1, 2013 Reply

Nice post Jason. I agree, Social Media should be supplemental to other marketing to amplify its effects. So many people expect social media to stand alone and provide measurable ROI – it’s simply not how it works.

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Matt Doggart - October 4, 2013 Reply

Great post Jason,

The problem is, whatever ROI tool people purely focus on (with effectiveness or not) the less SOCIAL marketing becomes for that company. It could be argued that if something works keep going with it although, is this beneficial for the future of marketing and a company brand?

I think marketing strategies are incredibly hard to concrete in to figures due to the external variables affecting them i.e time of posts, how media tools are worded etc… there just there really to satisfy the ‘head’ above. for this reason, I always adopt a very SOCIAL approach which covers many areas. This approach gains less regimented links and more of a social community.

Always a topic for discussion isn’t it 🙂

Thanks for the opportunity to have a say, it’s very social of you 🙂

Jason Clegg - October 4, 2013 Reply

Hi Matt,
Yes, a point well taken.

Still there should be an over-riding objective lurking behind your “social purpose.” After all, you should be in business to make money — not to put on cocktail parties. 😉

Then again, I think now more than ever the very best businesses will be those that CAN put on great cocktail parties.

-Jason

Matt Doggart - January 28, 2014 Reply

Hi Jason,

Yes, ultimately the focus is being a business and social media is a tool to do that however, the more focus you place on social media being sales driven, the less broad your community becomes. I suppose it depends on your target audience…
I completely agree, social media is the front door of a business & the nicer it looks, the more people want to enter 🙂

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