The confusion over social media ROI happens when we design faulty campaigns, ask the wrong questions and obsess over meaningless data points. Social media can deliver business value, but you can’t create a social presence and then try to figure out its value after the fact. You have to build ROI into the core of everything you do online.

1. The quest for return on investment is
an old problem. John Wanamaker once
famously complained, “Half the money
I spend on advertising is wasted; the
trouble is, I don’t know which half.”
Social media marketing was supposed
to fix the ROI problem by making
interactions with brands easy to track.
In practice, it has just given companies
more data than they know what to do
with. Don’t blame social media for what
are essentially business problems.
The confusion over social media ROI
happens when we design faulty campaigns,
ask the wrong questions and obsess over
meaningless data points. Social media
can deliver business value, but you can’t
create a social presence and then try
to figure out its value after the fact.
You have to build ROI into the core of
everything you do online.
JUMP TO A PAGE
Step 1:
Define your terms 3
The SmartBrief Guide to Step 2:
Establish goals and benchmarks 4
Social Media Return on Investment
Step 3:
Implement and experiment 5
Step 4:
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SmartBrief on Social Media The 5 big lies of social media ROI 6
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2. SmartStat
Step 1: Step 2: SmartStat
Define your terms Establish goals and benchmarks
Return on investment is the Having a great social media for your chosen goal? If you’re
measure of an activity’s results presence is a means to an end. looking at sales, for example,
relative to its cost. The equation Engagement is worthwhile, don’t just look at your total sales revenue
42% for determining ROI, in its most but it’s important to remember for the quarter ­ you may also want
— 57%
simplistic form, looks like this: that such communication has to to take into account the number of
serve a larger purpose: transactions, the average order size,
Percentage of (Results - costs) ÷ costs = ROI the cost per acquisition, etc. Percentage of
readers who say Businesses engage to make a sale, Don’t forget to look at ways you readers who
they have trouble say they feel
comparing the cost
The equation takes two things into account: provide customer service, alter could measure potential cost savings. pressure from
difference between Money spent (that’s the investment) and the way a brand is perceived, If you’re not sure what to management to
social media the resulting revenue/savings (that’s the hire new workers or achieve measure, ask yourself quantify the ROI
and traditional of their social
return). Anything that isn’t money (such some other business goal. which aspects of your
marketing. media efforts.
as the time you spend maintaining your The rise of social media busines you want
social presence) must be converted into > Training costs: Did you attend a social did not create any new to improve and then
Poll of Poll of
SmartBrief on dollars and cents before it can be factored media conference? Buy a book or two on business objectives; it develop metrics that SmartBrief on
Social Media into your calculations. social media best practices? Bring in an expert just created new ways track that aspect Social Media
readers readers
Results come in two ways: Income and to train your staff? Those costs all count. to reach them. of the business.
cost reductions. > Software costs: There are dozens of Your social media The benchmarking
> Income includes any time your social great free social media clients and tools out presence will never dem- process can break
media presence prompts someone to buy a there. But if you’re serious about determining onstrate positive ROI down over intangibles.
product from you, donate something to you the ROI of your efforts, you’ll want to at until you identify your Take customer influence,
or hire you to perform a service. least consider investing in a premium social goals. Those goals will deter- for example. It’s reasonable
> Cost reductions are savings on existing media client because paid clients offer more mine the shape of your social media to say businesses should influence
business functions that can now be performed robust features and better tracking options efforts, as well as the metrics by which they purchasers or that they should work to create
at a cheaper rate because of social tools. than free programs. can be judged. brand advocates who will influence others
Companies often trumpet social media > Labor costs: This is often the biggest Once you’ve decided what you’d like a given to buy. But there’s no firm metric for
success by announcing results, but outcomes cost associated with a social media campaign social media presence to accomplish, the next influence ­ no way to convert it into a
—
are only half the story. Seeing results from – and it’s also the one most likely to be step is establishing benchmarks. Unless you dollar figure. Brands are better off
your social media efforts is great, but if overlooked. If you’ve hired a dedicated social know where you started, you’ll never be able measuring the effects of inf luence
you’re spending $200,000 a year to generate media staff member or outsourced your social to measure how far you’ve come. throughmore traditional means such as
$100,000 in sales via Twitter, you’re not media efforts to an agency, that cost is easy to What are the key performance indicators customer loyalty programs and referrals.
seeing positive ROI. measure. If you’re doing it yourself or if one or
What do we mean by costs? Anything more employees are working on the company’s
As a SmartBrief on Social Media reader you are in good company. Not a reader?
that goes into the creation of a social social media presence in addition to their
Some of SmartBrief on Social Media’s Advisory Board Members and biggest fans include: Get in the know.
media presence can be considered a cost. other duties, then the calculation becomes
Sign up for
Some common costs include: more difficult. Typically you’ll need to figure
free today.
> Content creation costs: This could out how much time each person spent on
be something as cheap as licensing social media and then multiply that figure by
photos for blog posts or as expensive as their rate. If someone is paid $200 a day and Shiv Singh: Jay Baer: Guy Kawasaki: John Jantsch: Ann Handley: John Bell:
buying audio-visual equipment to create spends half their day on social media, the cost Global Head of
Digital, PepsiCo
Social Media &
Content Strate-
Best selling author,
“Enchantment”
Marketing consultant,
best-selling author,
Co-author of
“Content Rules,”
Global Managing
Director,
videos and podcasts. of their social media efforts is $100 per day. Beverages gist, Speaker,
and Author
speaker and creator
of the Duct Tape
Chief Content Officer
of MarketingProfs
Social@Ogilvy
Marketing System
and Brand

3. What
readers
Step 3: SmartStat Step 4:
are saying Implement and experiment Evolve
or Delta Airlines allow customers to The last element of social ROI for communication. They could be process
buy products on Facebook. has nothing to do with your oriented, as employees adopt new methods
“I love love love
SmartBrief on
This strategy can work well for sales, 38% customers and everything to of training. But the biggest changes have
recruiting, newsletter subscriptions, do with your workers. to do with company culture, as social tools
Social Media - it
has really helped pledge drives, petitions and other tangible can promote the exchange of ideas as part of
me formulate my goals, but it can’t measure more subtle Percentage of Instead of focusing on using social tools to daily office life.
readers who
Social Networking
effects. What if a customer buys from improve marketing or communications, some Companies can benchmark and track
Strategy. Not every- say they consider
one in my company you in a physical store after seeing a cost savings when businesses are striving to fuel innovation, these changes by rolling out social tools
gets why I need to tweet? What if you’re using social media determining the collaboration and improved efficiency. to a single department and then watching
divert resources to for PR — how do you know when you’ve ROI of their social Rather than be content to improve a business how that department evolves, relative to
Social Networking media presence.
changed a person’s mind? process, these companies want to use social the rest of the business. If social tools
and articles from
SmartBrief aid in 3. Track and analyze user sentiment. media to improve their entire business. help that department become more open,
Poll of
driving my point Once you’ve determined your Some of the most successful brands in social SmartBrief on These changes could involve technology, efficient and innovative, then other
home. Thank you.”
goals, identified key metrics media, such as Dell, use premium social Social Media such as the adoption of social media platforms departments can follow.
Stacey Kane, readers
and established performance media monitoring software and social media
Director of
Marketing baselines for those metrics, specialists to record and analyze what is being
California Tortilla you’re almost ready to start said about them.
The 5 big lies of social media ROI
tracking your social media ROI. These systems have their limits ­ —
“I’m a fan. In my
for example, sarcastic comments, idioms,
opinion, this is the
best social media There are three options: and vague language can frustrate them.
1. ROI doesn’t matter. 3. ROI is all about sales. 5. Finding ROI just requires a little
newsletter I’ve seen 1. Measure key performance indicators But for a brand monitoring a high volume
Some people will argue that because If you want to understand the full benefit back-of the envelope math.
so far. Relevant, against a baseline at regular intervals. of social media mentions, it can be the only we don’t know what the exact ROI of a of your social media efforts, you need You can’t just assign a dollar value to
short stories that
keep me up to date.”
This is the easiest option but also the way to track the effectiveness of social media phone book ad is, that lets social media to look at cost savings throughout the each fan and then add them all together.
Christine Morrison, sloppiest. Say you weren’t active on social media marketing and PR efforts. marketers off the hook. The problem organization. If you lower your cost per The process of calculating the costs and
Social Media last year, and you sold 100 widgets. This year you’re Social media customer service efforts with that reasoning is that once you lead, improve the efficiency of your benefits of social media vary depending
Marketing Manager tweeting away and sold 200 widgets. Success! can also benefit from more sophisticated decide ROI doesn’t matter, it opens the customer service or attract qualified on your tactics and goals.
TurboTax door to all kinds of magical thinking. new hires using social tools, you’re
Or maybe not. You’ve run into the ageold clients, as software can make it possible
That doesn’t mean you should ignore generating ROI.
Are you in the problem of advertising: Why did the to track successful resolutions of customer social media if you can’t generate ROI
know? Sign up customer buy? complaints and questions, making it easier immediately. Even if you’re never able 4. ROI can be measured in
for free today. The same problem arises in other to calculate the cost per resolution relative to establish a hard ROI ratio, the very something other than money.
uses of social media ­— if you start to other channels. act of pursuing ROI brings rigor to yourFans aren’t ROI. Neither are retweets
recruiting on LinkedIn and see an increase in marketing as you continually test, or blog comments or any form of social
refine and retest your efforts based on sharing or participation – if only for the
qualified applicants, that’s great. But how do There are still limits to technology’s ability to solid benchmarks and clearly defined simple reason that not all comments are
you know LinkedIn deserves the credit? measure fans’ responses to brands via social business goals. equal. A single social media interaction
2. Use coupons, order codes, loyalty channels. But when a social media presence with a client might create a sale or save
programs or some other mechanism to is aligned with business goals, designed 2. Social media is free. you money – but many more will not. So
identify and track brand interactions. with trackability in mind and compared Social media is time intensive, and it doesn’t make sense to measure all
your time is valuable. As your presence such interactions as equal indicators of
When you offer followers a deal, you with solid performance benchmarks, it’s
grows you may need to pay for tools or success. ROI can only be measured in
can use a tracking code to measure how possible to measure a brand’s effect on the additional staff, but at minimum you currency earned.
many people took advantage of the offer. conversation ­ and the conversation’s effect
— need to account for the value of the
Some brands, such as 1-800 Flowers on the bottom line. time you commit.

4. 5 more social media ROI resources
Want more? Of course you do. 2. The Social Media ROI Pyramid 3. How to Leverage Facebook,
Social media ROI is a complex by Jeremiah Owyang. This blog post Twitter and LinkedIn from HubSpot.
subject that rewards extended lays another framework for the ROI If you want something more tactical
study – especially since, as you’ll question, offering a way of thinking and immediate, this trio of guides from
soon see, not even the brightest about the problem that speaks to many HubSpot is a good starting place. They
minds in social media always agree. kinds of businesses. Be sure to check emphasize practical tips and concrete
out the comments. instructions over conceptual frameworks.
Here are five more resources for
those of you who want to take your 4. ROI of Social Media: Myths,
understanding of social media ROI to Truths and How To Measure from
another level. The first two are blog Radian 6. Different businesses will
posts, the second two are pdf e-books look at the question of how to find
like this guide that require registration the ROI of social media differently,
and the third is on honest-to-goodness depending on their business goals and
book, giving you a range of options for the departments that are using social
furthering your social media education. media. This guide does a great job of
explaining those differences.
1. The ROI Of Social Media
Marketing: More Than Dollars 5. Social Media ROI by Olivier
And Cents by Augie Ray. Social Blanchard. Yes, it’s a book. No, it’s
media can confer a number of indirect not free like these other resources.
benefits. This post advocates creating But Blanchard, who is a long-time
a scorecard that pays attention to SmartBrief on Social Media Advisory
indirect and long-term benefits, as well Board member, is the gold standard for
as immediate cash-in-hand. fearless thinking on the ROI question.
Sometimes you get what you pay for.
About the author About SmartBrief
SmartStat Jesse Stanchak SmartBrief is the leading online publisher
writes and edits of targeted business news and information
SmartBrief news- by industry. By combining technology
letters on marketing, and editorial expertise, SmartBrief filters
social media and thousands of sources daily to deliver the most
other topics. Before relevant industry news in partnership with
18% joining SmartBrief, more than 180 trade associations, professional
he worked as a societies, nonprofits and corporate entities.
Web producer at With an audience of more than 4 million senior
Percentage of Congressional Quarterly. His work has executives, thought leaders and informed
readers who
say their social
also appeared in Slate.com, MSN.com, the industry professionals, SmartBrief is the
media efforts Washington City Paper and other publications. essential resource for “must-read” industry news.
have yielded a You can find him on Twitter at @sbosm. Get in touch with us at bizdev@smartbrief.com.
measurable return
on investment.
Poll of
SmartBrief on
Social Media
readers