Social Media: More than Just Sales
For-profit firms often struggle to measure the ROI of their social media efforts using traditional financial calculations. While sales figures directly represent the results of a company's investment, social media is often an arena where organizations participate based on a vague sense that they should be doing something, but are unable to quantify their efforts beyond the bare minimum metrics related to reach and frequency.
In their book The Social Media ROI Equation: How to Measure and Improve the Business Value of Your Social Media Investments, Almquist and Wyner (2014) argue that instead of looking at social media solely through the lens of the company's bottom line, seeing it as a reflection of customer motivations and analyzing metrics related to engagement and sentiment can lead to increased sales, reduced costs, and long-term brand engagement.
For example, a company might track how often customers share their content, comment on their posts, or use their social media handles in customer service interactions. These metrics can provide insights into how customers are interacting with the brand and what kind of content they find most engaging. This information can then be used to improve the company's social media strategy and create more effective content.
Another way to measure the ROI of social media is to use experimental design. This involves pre-defining and testing different variables before sending them to market, so that budgets can be focused on only the most successful test cases. For example, a company might test different social media ad campaigns to see which ones generate the most leads or sales.
Experimental design can be a powerful tool for organizations with a large volume of customers operating in complex environments. However, it is important to note that it can be time-consuming and expensive to implement, and it may not be feasible for all businesses.
For smaller businesses, a more practical approach to measuring the ROI of social media may be to simply track website traffic and sales data. While this may not provide as much insight as experimental design, it can still be useful in determining whether social media efforts are paying off.
Here are a few tips for measuring the ROI of social media for for-profit firms:
Set specific goals for your social media campaigns. What do you want to achieve with social media? Do you want to increase brand awareness, generate leads, or drive sales? Once you know your goals, you can start to track the metrics that matter most.
Use a variety of metrics to track your progress. Don't just focus on reach and frequency. Track other metrics such as engagement, sentiment, and website traffic.
Use analytics tools to track your results. Most social media platforms offer built-in analytics tools that can provide you with valuable insights into your performance.
Compare your results to your goals. Once you have been tracking your results for a while, you can start to compare them to your goals. This will help you to determine whether your social media efforts are successful.
Measuring the ROI of social media can be challenging, but it is important to do so in order to optimize your campaigns and ensure that you are getting the most out of your investment.