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The Return on Investment (ROI) seems to be a rather financial acronym. However, in a wider scope, ROI can be used to know the return on any investment you make. As the world is moving online, social media campaigns are at the heart of marketing. However, while the reach has increased with social media campaigns, it became an equally challenging task to calculate the returns on them. If you are using social campaigns, then here are some ways to calculate the ROI on your investment. However, we need to first understand Social Campaign ROI.

What is Social Campaign ROI?

Before proceeding with calculating the social campaign ROI, let’s take a simple illustration to understand the same. Suppose you invest Rs. 1500 on an advertisement on Instagram. Thereafter, you generated sales of Rs. 6000. Therefore, the ROI shall be Rs. 6000 / 1500 * 100 = 400%.

Social media campaigns can provide a huge ROI for your investment primarily because of their reach and visibility. Further, it targets your campaign to the right audience, increasing the chances of customer conversion. Therefore, it is important to understand the ways through which ROI for social campaigns can be measured.

The Right Approach to Calculate ROI for Social Campaigns

Calculating social campaign ROI can be tricky. Following is the way to calculate ROI for social campaigns:

1. Set goals for your social campaigns: Each social campaign has a goal attached to it. No one uses social media as a marketing tool without attaching a goal. These goals should align with your overall organizational goals and objectives.

For instance, the goal could be to achieve a particular revenue target, increase the customer base, or successfully launch a new product publicly. The following points might help you understand the value created by social media:

• Increase in supplier confidence: Because of social media visibility, as your social campaign flourishes, it helps gain supplier confidence about your brand and its potential. This can potentially attract new suppliers, which can help you negotiate competitive rates with them.
• Creation of goodwill: Social campaign helps build goodwill for businesses. It creates an impression in the minds of people who develop certain perceptions about your products. For instance, Apple is known for its quality, creativity, and smartness.
• Business conversions: Business conversions simply mean how many people are becoming your customers from those engaging with your social campaign. This is important because the end objective is to attract customers and generate revenue. The higher the conversion ratio, the more the revenue and profitability.
• Brand awareness: This shows how many people are aware of the brand. In other words, how many people are familiar with the products and services of a particular brand is known as brand awareness.
• Customer confidence and loyalty: Customer confidence and loyalty come from a better user experience of the products and services. Social campaigns can help build a particular image of a brand. When the customer gets attracted and uses the product, he can relate to what he has been sold through social campaigns. This helps the brands in gaining customer confidence and loyalty.

2. Define metrics for performance: Once you are clear with your goals, you need to set metrics to track your performance. The metrics help you evaluate whether you are achieving your goals or not. Some of the metrics include:

• Customer Reach: What is the reach of your social campaign? If it’s differentiated enough to stand out from the rest, then chances are it can get viral without requiring any paid advertisement. However, in most cases, to increase the customer reach, brands need to shelve out money to boost their campaigns further.
• Public Engagement: Is the audience engaging with your content and campaigns. In order to achieve that, you need to design your campaigns in such a way that the audience can relate. For instance, there’s a concept of meme marketing where brands use memes as a means to promote and spread their brand narrative. It takes lower efforts to create engaging content with meme marketing as memes are highly shared among the public. There are various tools available to know the public engagement with your content.
• Leads Generated: This shows the number of interest people is showing in your products and services. The metric is an important indicator as it shows the effectiveness of the current social campaigns and what needs to be changed.
• Site Traffic: Once your campaign is out in public, then its effectiveness can be measured by knowing how much traffic is generated on your site. If it’s too low, then you need to change your strategy.
• Sign-ups: Sign-ups in your sites depicts that the customers are getting engaged with your products and services. This is where the conversion begins.
• Amount of Revenue Clocked: The time for generating returns from your investment. How much revenue you are clocking ultimately determines the profitability of your social campaigns and helps decide the roadmap ahead.

• Create an ROI report: Once you have determined the metrics to measure your performance, it’s time to create an ROI report. For these, you will need to measure your metrics in quantifiable value, i.e., in monetary terms. You need to determine the amount of investment and the returns generated from it to determine the ROI.

• Investment: Determine the amount you are going to invest in the social media campaign. This shall include all your costs associated with your advertisement to know the accurate ROI for your investment.

In order to know the revenue, you need to have an understanding of certain terms:

• Pay Per Click (PPC): The fees that a brand or an advertiser pays for each time the ad is clicked is PPC. For instance, if Facebook charges Rs. 2 per click, then if a particular brand’s ad is clicked 100 times, the brand will have to pay Facebook Rs. 200. The primary benefit of using PPC is that it further boosts your advertisement to a larger audience. Facebook revenue will depend upon the number of clicks received on the brand’s advertisement.
• Lifetime Value: This is the amount you can earn from your customers.
• Conversion Rate: This ratio depicts the number of people that got converted to your customer. You will need to determine the conversion ratio for your business.
• Lifetime Value * Conversion Rate: This shows how much each social media visit is worth to you. For instance, your lifetime value is Rs. 1000 and your conversion ratio is 0.20 or 20%, then for each visit, you are earning Rs. 200.

The Illustration

Following is an illustration as to how you can calculate ROI for a paid advertisement:

Suppose you pay Rs. 2 per click to Instagram. You receive 1000 clicks on your advertisement. Therefore, your total cost comes to Rs. 2000. This does not account for other costs like designing your advertisement. Your lifetime value is Rs. 500, and your conversion ratio is 20%. That means, out of 1000 clicks, 200 will get converted to customers, each of whom will pay you Rs. 500. Therefore, your total revenue earned is Rs. 500 * 200 customers = Rs. 1,00,000. This is against the cost of Rs. 2000 spent on your Pay Per Click advertisement. Therefore, if you want to compute ROI for this, then it will be:

Rs. 1,00,000 / Rs. 2000 * 100 = 5000%.

If you consider other costs associated with advertisements like designing, printing, and finalizing the campaign, costs associated with different advertising channels, etc., the ROI will reduce accordingly. This will show you the exact ROI associated with one social campaign from designing to customer conversion.

In a Nutshell

While brands are actively using social media as a tool for their advertisement campaigns, it is important to measure its effectiveness. All the efforts might go in vain if the performance is not measured periodically. Using Return on Investment is one of the most effective ways to get insights into the effectiveness of your campaigns. This allows brands to redraft their strategies and know what the customer is really looking for.

While the campaign strategy is important, knowing the accurate figures to measure the ROI is equally important. Brands cannot automatically know conversion rates, lead generated, public engagement, etc. Various tools and insights are available to analyze all such metrics. A brand can even use Google Forms to know where their customers heard about them. This can help brands determine which platform is able to generate more leads and accordingly make informed decisions.

 

Tags: Digital Marketing, Investment, Return on Investment, ROI