Businesses love to calculate ROI, the fundamental and tested metric for any new activity that takes up resources. Social Media, however, seems to be in a different league altogether. While it has been used much in business promotion and sales, Social Media itself is hard to quantify. Unless you have thought it all out carefully, that is.
Measuring ROI for Social Media can be the most challenging task you ever took up. Part of the reason is that Social Media is relatively new, while the other part is that it is inherently protean. What works today is dead wood tomorrow. Here’s how to go about it in a systematic way.
ROI, the traditional way
In the crudest, most traditional—and useless for our purposes—sense, ROI is calculated as the percentage change in revenue. In other words:
ROI = (Revenue – Investment) / (Investment)
Essentially, this measures the extent to which you have earned through the latest “value add.”
ROI in Social Media
In Social Media, the challenge is bigger.
First, it is essential to define a baseline, against which you can calculate your returns. For this purpose, some of the basic metrics that can be used are: number of followers, total fans, total number of comments, traffic measurement, etc. If there is a positive change in one/more of these, we can say that Social Media has brought some rewards to the business.
There are some great tools available to measure these and other metrics. Here are some of them:
- Google Analytics: The dominant choice, of course, is Analytics by Google, which measures the various key metrics of your website. Links, traffic, page views – all these and much more can be tracked through it.
- HootSuite: This is an impressive tool for managing and tracking your tweets. If you are focused on Twitter marketing, this can be a great help for the analytics.
- PostRank: Securing a page rank is one thing; being a popular destination, quite another. It has now become clear that SEO is not the silver bullet of web promotion. PostRank measures the effect your content or service is having on the people.
There are many different tools and software available that measure different types of metrics and give you a detailed assessment and report.
Making sense of data
All collected data can quickly become useless if you are unable to extract meaningful indicators out of it. And, that can only happen if you have identified and measured the baseline for your business.
For instance, if you are interested in selling only, then that becomes your baseline. You track the number of sales made, and let the overall sentiment swing to whatever direction. On the other hand, if you are an information portal, sentiment will rate highly on your agenda, and sales can take a back seat.
If you are complaining that it is still unclear and that doing all this is going to be very demanding, you are right. To this, we can only say- welcome to Social Media!