Guest Post by David Deering, Owner of Touch Point

Talk to any business owner today and they will likely admit that being active on social media is very important in today’s digital world.  Most businesses will also regrettably admit that they aren’t as involved with social media as much as they would like to be.  But regardless of the amount of time and money that any business spends on social media, most unfortunately have no idea whether or not the benefits outweigh the costs.  

So can social media marketing be measured in terms of return on investment?  And how can a business truly know if their efforts are producing enough results to justify the investment?


Identifying the Formula

 If we were discussing a typical financial business expense, the formula for calculating return on investment would be relatively straightforward and simple:  ROI = Gain from Investment minus Cost of Investment divided by Cost of Investment.  Unfortunately, we can’t exactly use that formula when calculating the ROI of social media.  Why not?  Because the “gain from investment” isn’t always expressed in dollars and it will vary from business to business.

So in order to measure the ROI of social media, you must first define what your business would like to gain from it (the goals), determine how to measure progress toward those goals, and then calculate the value of reaching those goals. 


Step 1: Define Your Goals for Social Media

There isn’t an ad or TV commercial today that doesn’t include some type of social media marketing, whether it’s asking us to like them on Facebook or follow them on Twitter.  Businesses have come to the realization that social media marketing is important and that it’s also expected of them.  But those should not be the only reasons or even the main reasons to be involved in social media.

In order to make social media work for your business and understand its ROI, you must first define your goals.  Why are you using social media and what do you hope to accomplish with it?

If your first, last, and only goal for social media is to sell sell sell, you will end up being bitterly disappointed and frustrated.  People don’t want to be pitched to 24/7.  While you may be using social media for business, most people use it as a form of entertainment and relaxation, and if all they ever hear from you is a sales pitch, you will quickly be ignored and abandoned.

Your goal for social media should really include 4 separate but unified objectives: 

1. Create brand awareness.  With social media, your business has the ability to reach a target market that extends throughout your local area, all across the country, and even around the world.  By using it wisely, you can become a brand that people enjoy engaging with and one that they can trust.  Let your brand’s personality shine through so that your posts endear others to the brand and the business.

2. Position yourself as the industry expert.  This is where you can really separate yourself from your competition.  You should use social media as a tool to teach and inform and share with your listeners.  Sometimes that will involve sharing links to a new article on your website’s blog.  At other times, it may involve sharing someone else’s content or providing tips.  If your business is a retail location or restaurant, you can use social media to announce your latest products or other news, still being mindful to do more sharing than selling.  If you can become a trusted source of valuable information, people will naturally turn to you when they are ready to buy. 

3. Acquire contacts.  Obtaining new subscribers for your emails or newsletters is tough.  And even if you can get some trickling in, many people won’t actually read what you send them.  But with social media, acquiring new contacts is relatively easy.  With your list of followers, you have the ability to keep in touch with them and even market to them at any time no matter where they are.  In today’s busy world, that is truly a valuable asset.

4. Sales and conversions.  Yes, social media can be a very effective marketing strategy that leads to sales.  But this is usually the result of doing the other 3 things first.  Conversions can come in the form of visitors to either your website or to your brick and mortar location. 

So those are the 4 main objectives that should be included in your social media efforts and that define your goal.  Of course, it’s logical that certain types of businesses will lean in favor of certain objectives such as brand awareness or sales.  But the goal of social media should be to address all 4 objectives at least on some level. 

The next thing that you must figure out when creating a formula for calculating social media ROI is how you are going to measure the results.  In other words, you must define the metrics.


Step 2: Define the Metrics

roi social media

Every marketing strategy should have some sort of system in place to measure it by.  Social media is no different.  We defined the goals above; now you must deter

mine how you will know if your social media efforts are having success.

A few basic metrics that can help you measure the success of your social media include:

1. Reach.  Reach is about more than just having a lot of followers.  It’s about having a lot of listeners.  The beautiful thing about social media is that your reach can extend very quickly.  If someone retweets or posts your message or link to their followers, your reach just instantly multiplied.  Reach, though, must be closely monitored with the next metric, which is…

2. Engagement.  Engagement is about how many of your followers actually comment on your post or retweet your message.  It’s about how many conversations you’re having with your target market.  If you have 1,000 Twitter or Pinterest followers (which anyone can buy for a few bucks) but no one is engaging with you or your messages, then reach means very little.  The more conversations and interactions, the more powerful a marketing tool social media is for your business.

3. Conversions.  Ultimately, you want your social media efforts to lead to conversions.  A conversion might be a visit to your website, an email signup, an online sale, or a visit to your store.

The problem, though, is that unless you are a lover of stats and analytics, you may not know which social media marketing strategy directly influenced your conversions.  You might see an increase in traffic to your website or in sales, but do you know where it all originated?

The good news is that Bizible Marketing Analytics tracks your social media marketing campaigns with UTM parameters inside Salesforce.  They can tell you what leads came from which campaign in minutes. They will record the source, medium, term, content and campaign. This software enables you to stop guessing and start reporting. You can track your results and understand the relationship between your social media efforts and the results.  

Other ways of tracking your social marketing efforts are more traditional. For example, you can simply ask your customers or visitors how they learned about you.  You can offer different specials on different social media platforms and track how many take advantage of each particular one.  And you can also use a URL shortener such as or to create a unique link for each of your social sites and then track those links with your Google Analytics account. 

Regardless of how you do it, you must track both your efforts and the results; otherwise you will never be able to determine if social media is truly paying off for your business.

Finally, the last part of the social media ROI equation is calculating the value.


Step 3: Calculating the Value of Your Social Media Efforts

So now that you hopefully have a good understanding of your goals and objectives and know how to measure progress, the last step is determining the value of social media for your particular business.  Unfortunately, as you probably expected, there is no single fool-proof formula that every business can use.  There are too many variables in the equation, as the goals and metrics will all vary from business to business.  But that does not mean that you can’t calculate the value of social media for you.

We discussed that social media can increase brand awareness and can put you in front of potential customers that you may not otherwise have had the opportunity to meet.  Considering the expense of traditional advertising, that benefit is huge.  Social media can also position your business as the thought leader in your industry.  Think about the value of becoming THE expert in the minds of your target market.  That in itself will no doubt lead to conversions and/or sales.  Consider the value of being able to send a message to your target market anytime and anywhere.  You simply can’t do that with other forms of traditional marketing, and you definitely can’t reach so many at such a low cost. 

You must realize, though, that expecting instant results will just lead to disappointment.  Social media is not about the quick sale; it’s about creating long-lasting relationships.  Those relationships will reap benefits sooner or later.  So perhaps instead of trying to calculate the ROI of social media for your business from day to day, think of it as both a short and long-term investment.  Sure, you can benefit financially from it right now and you will, but the real value will be realized later when people know and admire your brand and want to do business with you and only you. 

Value vs Cost 

Only you can determine how much time and money you want to invest in your business’ social media.  But just remember that while you may not exactly be able to put a number on the ROI, it doesn’t mean that social media is not valuable or measurable.  Do it the right way and social media can be a relatively inexpensive and highly effective and profitable marketing strategy.  Do it the wrong way or sporadically and it will be a waste of your time and money.  

So perhaps instead of focusing on the cost and return on investment of social media, focus on the cost of doing little or nothing at all.  And the cost of that is becoming an irrelevant and invisible business to the thousands or perhaps millions of potential customers who do use social media to connect with businesses just like yours.


About the author:  David Deering is the owner of Touch Point, a full-service digital marketing agency based in New Orleans.  For more tips and advice about marketing in today’s digital world, you can follow them on Twitter @TouchPointD.