What Is Social Media ROI And How To Calculate It?

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Social Media Marketing

Well, social media ROI is a detailed metric showing the figure of the investment. The Social Media marketing agency makes use of these channels and enjoys a great ROI. It is very important to manage and monitor the investment to achieve an estimated return of the efforts. The ROI is measured in either monetary or non-monetary terms depending on many factors.

So, this article will discuss everything about social media ROI and the ways to calculate it. Let’s get started.

All About Social Media 

Social media is a platform that is used extensively by every individual. Whether for personal usage or business purposes, social media channels are preferred greatly. Some of the platforms are Facebook, Instagram, Twitter, Linkedin, etc.

There are a number of companies in digital marketing in Singapore that totally rely on and make use of social media platforms to interact with people. The channels are effective to build trust and credibility for the businesses among the users.

Understand the ROI in Social media

The Social media ROI is a metric that displays all the details of the money you invest in social media for the advertisement. In simple terms, it is a return on the investment that you make on the platforms like Facebook, instagram, etc to interact with the people and promote the services. 

Significantly, the ROI also depends on many factors and has a certain way to calculate it. The companies well known for Social media marketing in Singapore take every aspect into consideration while evaluating profit. For instance; one usually looks at the cost invested and profit. This is calculated when there is conversion. But, not forget, the businesses pay for the labor, paid tools, and external assistance also. So, these should also be considered while calculating the social media ROI. 

Learn to calculate the ROI step by step

Step 1: Set a goal

Undoubtedly, the goals will always differ for companies. The goals are driven by the requirement and nature of the business. For instance, many firms wish for high traffic on their website. Whereas others want to boost their sales. So, take your time to set the objective of social media marketing to evaluate the ROI efficiently.  Here are common objectives that businesses target:

  • Enhance their business online presence
  • Invite the user to visit the site
  • Interact with the users
  • Target potential customers
  • Increase CTR
  • Lead generation 

So, it is very crucial to be aware of the objective. It will help you to run effective campaigns and measure the results.

Step 2: Time to track the set goal

Do you know that one can easily track their goals at any time? Yes, you can keep a check on all the activities on social media campaigns with the help of the built-in tracker. Insights are the feature that regularly keeps track of all that is happening on social media. For example, From the insights, you can monitor the views, clicks, etc. based on your goal. 

Step 3: Determine the monetary profit of your campaign

Moving further, you should be cautious of the money being spent on the set goals. You can determine the social media ROI on the basis of two categories.

lifetime Value ( LV )

You can calculate the LV of every user through this method. It makes use of historical stored data for evaluating the LV. For instance; if the average lifetime value is $200. There are chances of getting at least 1 conversion from 10 people who view your content. This indicates that the average cost of conversion is $20 (i.e $200 divided by 10).

There is an alternative as well if you lack the old data. Though, it is merely an estimate but can give you an idea of the ROI. Compare the cost with that of the PPC set budget or the frequent purchases from the website.

Step 4: Calculate the return on investment

After you have analyzed all the goals and tracked the activities, it is time for revealing the actual ROI. Indeed, the simple and obvious method of calculating the profit is by dividing it by the total expenditure( investment). So the formula to measure the profit is mentioned below:

Percentage of Social Media ROI = the profit / the total cost( investment) *100

Additionally, the ROI also depends on many other factors. Though everyone is aware of the simple trick of calculation but often forget other efforts and manpower that is invested in the social media campaigns. So take a look at them:

  • Marketing team’s valuable time and effort to create the campaigns.
  • Invested amount on paid software or tools. 
  • Consider the expenditure on social media ads and the monthly or weekly budget.
  • Content creating a team who provided eye catchy and intriguing content for user engagement.
  • The cost of the hired agencies for social media marketing.

So when you are calculating the final ROI with the help of certain tools it just uses a mathematical approach to divide profit by investment. But you very well know how much more has contributed to it. So consider all the labor and external expenses that have a significant role in making your social media advertisement successful to earn leads and upscale the sales.

Overall Takeaway

It is evident that social media is a great platform to fetch leads in return for the investment. But, it is very crucial to know the goals of the business to create the campaigns. Then only you will be able to justify and evaluate the money spent. Moreover, every company has different objectives like many wishes for traffic to the website, many want the conversion, etc. So these goals guide you to set the campaign setting accordingly and achieve the ROI.

Therefore, consider every contributing factor in your social media advertisement to get the exact figures of ROI.

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