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How to calculate Social Media Return on Investment

Although social media sites do not charge anything for online profiles, it would still cost a business money in creating and handling an online profile with these sites. Productive time needs to be spent on updating these profiles and interacting with customers. If the task has been assigned to a separate person, then he/she would need to be paid for his/her services. So how then would the business be able to effectively calculate the return of investment in this area to make sure that the social media venture is benefiting it or not? Here is a simple way to do that.


Formula for Return of Investment (ROI)

In simple terms, ROI is calculated to find out whether the money you put in for a particular effort was worth it or not. ROI is essential for a business to know whether the investment it made in a particular sector would benefit it in any way possible. The classic formula for ROI is:

(Return-Investment)/Investment %

When calculated, an increase in returns with the same investment amount would mean the ROI is positive and the investment, worthwhile. However, if the returns decrease with the same investment amount, the ROI is negative and the investment, not worthwhile. Hence, every business out there would definitely want to aim for a positive ROI with every new venture it decides to undertake.

Applying ROI to Social Media

Applying the existing ROI formula for the social media would not give correct results, as even though the investment in such a venture can be clearly defined, the returns can neither be defined nor measured. This would clearly make it impossible to calculate the social media return on investment using traditional methods, thereby creating the necessity for another appropriate method to calculate the same.

Defining Social Media Returns

Calculating social media returns can be a complicated task that can be made easier if one comes to know how to define and assume social media returns for a particular venture. In any case, social media returnsof different ventures would be directly linked to their respective goals, and can be tweaked according to different goals. Simply put, a social media return of a particular venture would need to define whether the venture has gained anything from the former. For instance, if the focus is on improve sales, then the social media return on that particular goal would be equal to the number of sales that have sprung up after investing in social media.


Quantifying the Social Media ROI

Even though defining social media return is easy, associating with a quantifiable value is not, especially in case where the social media return deals with factors like increasing brand awareness or building relationships. As such, one would need to find alternate ways to quantify the social media return on these factors.

A basic example involves interacting with new clients on a daily basis to find out how they heard about the company. Keeping track of the answers can display the number of new customers to the business, which can then be transformed into a value for the calculation.The methods in which you quantify the social media return would vary with the goals you calculate them for.

Comparing different Social Media ROIs

Once a quantifiable value is given to the social media return of a particular investment, the social media ROI for that venture can be easily calculated and compared with the social media ROIs of other ventures aimed at the same central goal, promoting business. It would also enable you to draw comparisons with other ROIs and determine whether the investment was worth it or not.

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