What if I told you that I had the easiest, foolproof way to shut the social media naysayers down?
Well it’s true. ROI is the easiest, foolproof way to shut down the negative social media buzz. ROI stands for return on investment and is a term commonly used in the business world. According to Lynda, ROI can be defined as “a performance measure used to evaluate the efficiency of an investment” and also as, “the “value an organization derives from investing in a piece of marketing activity” (Wise (Links to an external site.)). In basic terms, ROI shows what is working and what is not working, and in the social media world that is major. It seems easy enough, but “55% of social marketers (Links to an external site.) cited measuring ROI as their number one challenge in 2018.”
So how does one track ROI? First, you need to know what you are measuring in order to measure investment. This is where KPIs come into play. KPI stands for key performance indicator. A KPI “measures performance deemed valuable to the business. And, it’s tracked over time to measure progress (or lack of)” (Clarke (Links to an external site.)). Different goals have different KPIs. For example, if my goal is to have more conversions, then a KPI I would focus on measuring would be sales. Another example is having a goal of increasing engagement. A KPI to track this could include shares, link clicks, and/or mentions.
Tracking ROI can be simplified into four steps:
-Step 1 is identifying the goal. This includes having a conversation about overall strategy.
-Step 2 is tracking the KPI. Remember, “A KPI should measure the success of achieving that target,” or goal (Clarke (Links to an external site.)).
-Step 3 is assigning monetary value. This includes how much you earn per customer, the average purchase on your site, etc.
-Step 4 is calculating your investment. This includes time, tools, and money spent on paid advertising. The basic ROI formula to use is: Revenue/Investment x 100 = ROI % (Clarke (Links to an external site.)). Remember, if your goal is awareness that “you would measure success against metrics such as audience reach and engagement, not profit” (Dawley and Aynsley).
A great example of ROI and KPI in application comes from Jimmy Choo. They recently “used Twitter to geo-locate upscale stores featuring their shoes. Result: 33% increase in sneaker sales, 40% increase in positive tweets and mentions about the brand” (Patel (Links to an external site.)). As you can see, measuring ROI proved their campaign to be successful. This gives Jimmy Choo direction for their next advertising venture. Overall, in order to “understand the big picture to know where to go with tactics” ROI is crucial (Wise (Links to an external site.)). When you can offer your company, client, or business measurable results, people take social media seriously.
