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July 24, 2018 (Updated: March 2, 2020)
Today we live in a golden age of mass communication. Instant access to anywhere around the globe means that massive amounts of nearly limitless information can be transmitted for practically no cost other than an internet-connected device. This is the reason that social media marketing has become so much more than a hot trend — it’s becoming an almost essential need for small and large businesses alike.
As easy as it is to market online, how can you be certain what you are getting out of it? Is it worth the effort, and can you determine your return on investment (ROI)? The answer to both these questions is a resounding “yes.”
The first step in determining your social media ROI is to set a baseline. Often times social media accounts will give you analytics telling you information like demographics and which posts do the best. It is also important to know things like how much a customer spends in a lifetime and how much it costs to get a new customer.
If you already have an online presence, you should record statistics such as user engagement, clicks per day, and followers on social media. Knowing where you stand before you begin recording your online marketing crusade helps you to determine what’s working and where you should invest your resources in the future.
Once you know where you currently stand, think about your goals. Do you want more followers in the hopes of getting more lifetime customers? Or do you want more shares to increase free publicity? Your goal doesn’t have to be limited to just one thing, and you can choose to strengthen a part of your online marketing that is doing poorly or invest in a tactic that is doing well.
The most important thing to remember is that your goals must be trackable. Social media platforms, like Facebook and Twitter, often give in-depth detail into follower statistics, but programs like Google Analytics that help to set goals and track progress are an excellent way to know where you stand.
After you know what goals you are going to track, it’s time to assign real-world numbers to them. These numbers should be concrete, such as the lifetime spending of a customer or how much they are willing to spend on your website in one visit. It is important to assign accurate and realistic numbers, as these will reflect your ROI and will determine your conversion rate. For instance, if every 10 shares on a post get you a new customer, and a customer will spend $100 when they shop on your site, that means that every share is worth $10.
Finally, you will want to determine how much you want to spend on your online marketing. Frequently online marketing is free, which means that whatever your return, you are automatically in the green. However, it is important to consider time spent advertising, as that is time that can be put into something else.
Very often, platforms will allow you to pay a small fee to promote a post, which is something else to consider. Paying a company to do online marketing for you is a smart step, as they will allocate their time and resources toward marketing, and you can concentrate on running your business. However, the cost of that will also have to be factored in.
Image via Flickr by SEOPlanter
Once you have all of the data, preferably organized in a spreadsheet or application, you can determine your net return easily by subtracting the total costs from the amount you earn per your determined metric.
If you spend $100 per month to hire someone to do your online marketing, and they get you 1,000 clicks worth 20 cents each, then ($0.20 x 1,000) – $100 = $100. That means you are making money.
You can calculate your ROI with this formula: (Benefits – Costs) x 100/Costs = ROI. So in our example, you’re making $200 per month from clicks, and spending $100 per month, so your ROI is ($200 – $100) x 100/$100 = 100 percent.
Let’s put it all together and use the example of a fictional small business, Jane’s Soap Dispensers. Jane has been selling soap dispensers online for a few years and already has a presence, but she wants to know if it’s even worth the effort. First, Jane keeps careful records of all the data she can find on her social media accounts to establish a baseline. She learns that her biggest strength is people sharing her funny homemade advertisements online, so she decides to concentrate on that.
Because Jane did her research and knows how potential clients react to her videos, she knows that for every 20 shares she gets on Facebook, she’ll get a customer. She learns that every 50 retweets on Twitter turn into a customer, and every 1,000 views on YouTube also creates a customer. A customer will typically spend $100 dollars per visit. She hires a marketing team to market her videos online, which costs her $1,000 a month.
Her videos this month have gotten 100 shares on Facebook, 500 retweets, and 10,000 views on YouTube. This means she has five new customers from Facebook, 10 from Twitter, and 10 from YouTube, totaling 25 new customers who will spend $2,500 altogether. She only spent $1,000 on marketing, so she has made a profit of $1,500, and an ROI of 150 percent.
If you’d like to read more about ROIs, there are plenty of online resources available. If you are a visual learner, there are other sources that can help you determine your social media worth. If you are an older company, it may be difficult to make the switch from traditional print and television ads to tablets and laptops. But online advertising is assuredly becoming the future of marketing. Since online marketing is so easy to use and track, there’s no reason not to take the plunge.