If you asked me a decade ago whether or not companies should invest in social media marketing, I would have resoundingly stated yes. When social media first skyrocketed in popularity, there weren’t complex algorithms and aggressive advertising programs on the platforms. Social media was an equalizer between competitors with massive budgets and small businesses that served their clients well.
Social media was simple… provide guidance and expertise to your followers, and they both shared it and pursued opportunities with your brand. Your followers amplified your assistance, and WOM drove additional awareness and acquisition of your products and services.
Fast forward to today, and, in my opinion, every company is viewed as a spammer or an advertiser by the large social media platforms. Regardless of the quality of your message and the size of your following, social media platforms don’t want your company to succeed without them getting a piece of the action. It’s unfortunate, as I think much of the magic is now gone. My corporate pages are nearly invisible across all platforms, despite a large following and very popular content. I don’t have the budget to promote my content, while many competitors do.
As a result, evaluating social media’s Return on Investment (ROI) is both crucial and challenging. Understanding the effectiveness of marketing efforts on platforms like Facebook, Instagram, and Twitter is a common hurdle, with only a fraction of businesses being able to quantify the impact of social media on their business outcomes.
Table of Contents
Challenges in Measuring Social Media ROIWhat is Being Measured?Organic Social Media vs. Social Media AdvertisingOrganic Social MediaPaid Social MediaInvestment in Social Media MarketingBest Practices for Maximizing Social Media ROIAutomation and Artificial Intelligence in Social MediaEnhanced Measurement and AnalyticsAutomation for Efficiency and ScaleImproved Targeting and PersonalizationROI Optimization ToolsChallenges and Considerations
Challenges in Measuring Social Media ROI
While most marketing mediums, channels, and strategies are somewhat siloed to awareness, acquisition, upsell, and retention, social media extends well beyond. Brands provide customer service, customer support, social commerce, and much more through social channels. As a result, there are quite a few challenges.
Inability to Link to Business Outcomes: Many marketers struggle to connect social media efforts with tangible business goals, complicating ROI measurement.
Lack of Analytics Expertise: A significant barrier is the lack of analytics expertise or resources to effectively delve into the data, especially as platforms like GA4 have overhauled how they capture, attribute, and store that data.
Poor Measurement Tools and Platforms: The inadequacy of tools and platforms can lead to inaccurate tracking of social media’s impact. Most social media platforms are guarded about the data they capture because it’s used to advance growth of their own advertising platforms.
Inconsistent Analytical Approaches: The absence of standardized methods for measurement leads to unpredictable results and strategies. One example is the lack of campaign URLs to accurately attribute both organic and paid efforts.
Unreliable Data: Decision-making is often hindered by data that is either incomplete or of poor quality.
Despite these challenges, 28% of marketing agencies report success in measuring social ROI, and 55% say they can measure social ROI to some extent, which signifies progress in the field.
What is Being Measured?
Businesses are keeping track of a variety of metrics, but not all are directly tied to ROI:
58% of firms measure engagement (likes, comments, shares, etc.).
21% measure conversions (goal completions, purchases).
16% measure amplification (shares, etc.).
12% measure customer service metrics.
For paid social campaigns, the most-tracked metrics are:
Audience reach and growth
Clicks to site/page
Engagement
Conversion rate
While independent KPIs like this can speak to the popularity of your social media efforts, they don’t necessarily mean that they add dollars to the bottom line. Key to measuring the ROI of your social media efforts is:
Is there a direct correlation between the engagement of social media efforts and building brand awareness?
Is there a direct correlation between likes, comments, and shares to actual purchase behavior? Have your social media efforts increased your customers’ lifetime value (CLV)?
Is there a direct correlation between the effort you’re making to service your community and the upsell and retention of your customers?
A funny meme shared on your social media channel may go viral and drive all of your engagement statistics up… but if they don’t actually drive leads and business to your company, they’re simply vanity metrics.
Organic Social Media vs. Social Media Advertising
Efforts in social media may be organic, paid, or a combination there of.
Organic Social Media
Building an organic audience and community is about fostering long-term relationships. While this strategy may not have immediate ROI, it’s instrumental for indirect revenue streams like customer loyalty and lifetime value. The key here is to measure engagement and growth, which can lead to increased sales and partnerships, as indicated by more than half of marketers.
Paid Social Media
On the flip side, paid social media campaigns are designed for immediate impact and are more straightforward to measure. The focus here is on clicks to the site/page, engagement, and most importantly, conversion rates. Advertising is an area where companies see a direct correlation with ROI, as these campaigns are easily trackable and can be optimized for better performance.
Investment in Social Media Marketing
On average, companies spend 17% of their total marketing budgets on social media, and they expect to spend 26.4% of their budgets on social media within five years.
Despite the challenges in measurement, businesses continue to recognize the importance of social media marketing and are willing to invest in it.
Best Practices for Maximizing Social Media ROI
The ROI of social media marketing is multifaceted, integrating both organic and paid strategies to drive business growth. Here are some best practices:
Align Social Media Goals with Business Objectives: Clearly defined business goals aid in creating focused social media strategies that are easier to measure.
Invest in Analytics Expertise: Having the right analytics skills on board or partnering with agencies can help make sense of data and derive actionable insights.
Choose the Right Tools: Invest in reliable social media analytics tools that can accurately measure the KPIs important for your business.
Standardize Measurement Approaches: Develop a consistent analytical framework to measure social media ROI effectively across campaigns.
Ensure Data Quality: Prioritize collecting and utilizing high-quality data to make informed decisions.
Despite the measurement challenges, businesses are gradually becoming adept at linking social media efforts to tangible outcomes.
Automation and Artificial Intelligence in Social Media
Advancements in social media marketing and advertising platforms, along with the adoption of Artificial Intelligence (AI), are revolutionizing how businesses measure, automate, and improve the ROI of their social media efforts. Here’s how these technologies are making a significant impact:
Enhanced Measurement and Analytics
Predictive Analytics: AI algorithms can predict the future performance of social media campaigns by analyzing past consumer behavior patterns. This helps in forecasting ROI and making informed budget allocations.
Real-Time Analytics: Advanced platforms offer real-time tracking of engagement metrics, allowing marketers to adjust their strategies to optimize ROI quickly.
Customer Sentiment Analysis: AI-powered tools can interpret the sentiment behind social interactions, providing deeper insights into consumer perception and brand health.
Automation for Efficiency and Scale
Programmatic Advertising: AI enables programmatic ad buying, targeting users more precisely and at times when they are most likely to engage, thus improving potential ROI.
Chatbots and Virtual Assistants: These AI-driven tools can automate customer service on social platforms, ensuring quick responses to queries and improving customer satisfaction and retention.
Content Optimization: AI tools can suggest optimal posting times, formats, and content types, automating the process of content distribution to enhance engagement.
Improved Targeting and Personalization
Advanced Segmentation: AI algorithms segment audiences based on many factors, including behavior and demographics, for more targeted marketing efforts.
Personalized Experience: AI can personalize content and recommendations at an individual level, increasing the chances of conversion and improving ad spend efficiency.
Lookalike Audiences: Social platforms use AI to find and target new users who resemble a brand’s existing customers, expanding reach with a higher probability of positive ROI.
ROI Optimization Tools
A/B Testing Automation: AI systems can automatically A/B test different ad elements, from imagery to copy, and determine which combinations perform best to drive ROI.
Budget Allocation: AI-powered tools can dynamically adjust ad spending across social media platforms and campaigns to maximize ROI.
Conversion Rate Optimization: By analyzing which user interactions are most likely to lead to conversions, AI can help refine calls to action and other content elements.
Challenges and Considerations
Data Privacy: With stricter data privacy regulations, marketers must balance personalization with consumer privacy.
AI Transparency: Understanding how AI makes decisions is crucial to ensure automated actions align with brand values and goals.
Human Oversight: While AI can handle many tasks, human oversight remains critical to provide creative direction and ethical considerations.
Integrating AI into social media platforms enables more precise targeting, efficient ad spend, and actionable insights, all of which contribute to an improved ROI. However, successful deployment requires a blend of these advanced technologies with strategic human oversight. By focusing on the right metrics, investing in analytics, and using robust tools, companies can enhance their ROI and justify their growing investment in social media marketing.
©2023 DK New Media, LLC, All rights reserved.
Originally Published on Martech Zone: Measuring the ROI of Social Media: Insights and Approaches