Introduction

Although social media provides valuable and free tools to marketers, effective marketing is still driven by the money and effort marketers put into it. Determining return on investment (ROI, or ROMI — return on marketing investment) is vital for understanding where money is going and if it’s resulting in new leads. Return on investment is defined as “a measure of the profit earned from each investment.”¹ The term originated in the finance industry, and has now found a place in the marketing lexicon. In marketing, ROI specifically refers to how much a company makes, or how many leads it receives, after investing in marketing efforts like advertisements or campaigns such as a newsletter signup, sweepstakes or giveaway, or social media contest. However, according to a 2015 study by SimplyMeasured², 60 percent of marketers struggle with measuring ROI.

 60 percent of marketers struggle with measuring ROI

While ROI is undeniably — and primarily — about numbers, quantity should not be the sole factor you measure. Understanding your ROI also helps evaluate the quality of the return. For instance, if you’re spending more than you’re getting back, you can use this data to improve your strategy going forward. Digital strategist Matthew Strelitz argues that focusing solely on ROI, especially in terms of social media Likes, fans, followers, etc., means that marketers are asking the wrong questions and getting stuck on one tiny part of a bigger picture³. Marketers succeed when the focus is less about Likes and follows, as these aren’t the most accurate indicators of true engagement. Instead, marketers should look at the way people are talking about their brand and sharing it with others.

Marketers should look at the way people are talking about their brand and sharing it with others.

Marketing researchers Donna L. Hoffman and Marek Fodor, in an MIT Sloan Management Review Study⁴, agree with Strelitz. “Effective social media measurement should start by turning the traditional ROI approach on its head. That is, instead of emphasizing their own marketing investments and calculating the returns in terms of customer response, managers should begin by considering consumer motivations to use social media and then measure the social media investments [time and money] customers make as they engage with their marketers’ brands.” What this means is that marketers need to understand what draws people to social platforms in the first place — the desire to connect with others who share similar interests or lifestyles. Knowing this, brands on social platforms can engage with users in a more direct, meaningful way.

A user’s conversion trajectory isn’t always as straightforward as going from point A to point B

In 2014, popular social media scheduling and management tool Buffer announced that they stopped calculating direct social media ROI, encouraging marketers to take a different approach to how ROI can be evaluated⁵. What this means is that the Buffer team “stopped focusing on conversions as a key metric” for their blog. This choice was made because Buffer understands that a user’s conversion trajectory isn’t always as straightforward as going from point A to point B. Users discover and convert to brands in a multitude of ways, and trying to understand that process is a better use of time than assigning one equation to all users.

Investor and social media expert Gary Vaynerchuk touches on this same concept in his memorable and brutally honest Inc. 500 talk, “What’s the ROI of your mom?”⁶ In his talk, he argues that measuring the ROI of social media isn’t black and white. “It doesn’t matter how many fans or Twitter followers you have — it’s how many of them are going to buy something.”

Vaynerchuk uses the metaphor of his mother to demonstrate that real impact, real engagement, isn’t simply a numbers game. Vaynerchuk says, “I can’t show you in data the ROI of my mother.” He “calculates” her impact on him through tangible experiences and specific memories.

"It doesn’t matter how many fans or Twitter followers you have — it’s how many of them are going to buy something.”
~ Gary Vaynerchuk

Shifting the focus away from numbers is intended to get marketers to think more creatively about the relationships they’re forming between brand and user. After all, no one wants to feel like they’re just a number, a name on a list or a dollar sign. However, it’s important to remember that marketers don’t have to write off metrics altogether. But rather than trying to quantify every interaction, focus instead on key metrics.  For Buffer, as just one example, the key metric is email signups; this is how they measure impact, and using email signups as a goal lets them track specific conversions and focus their efforts into creating top-notch content.

According to Hoffman and Fodor, there are three metrics that impact how marketers evaluate ROI

Brand awareness:
number of views, visits, hashtags, bookmarks

Brand engagement:
number of followers, sign-ups, account creations, reviews, comments

word of mouth:
number of retweets, reblogs, likes, responses to comments, embeds

Some additional metrics to prioritize:

• Time on site
• Engagement with content
• New visitors vs. returning visitors
• Bounce rate
• Pages per visit

These metrics allow marketers to use a specific variable to measure their efforts. It’s a good practice so marketers don’t set budgets without insight. There’s more to measuring ROI than simply placing a numerical value on a Like or lead. Social media research requires a mixed-methods approach. Data should drive all decisions, but it’s easy to forget that data is not always strictly numerical. Measuring ROI is about asking the right questions and using the right formula to best track and analyze marketing efforts.